Return on Investment (ROI) explained
Return on Investment (ROI) expresses your total financial gain from solar as a percentage of what you spent. It gives a clearer long-term picture than payback period alone.
Simple ROI formula:
ROI = (Total lifetime savings − Upfront cost) ÷ Upfront cost × 100%
Example: £8,000 installation generating £1,400/year in savings and export income over 25 years = £35,000 total return. ROI = (35,000 − 8,000) ÷ 8,000 = 337%.
For a more rigorous analysis, use an annualised ROI or IRR (Internal Rate of Return) which accounts for the time value of money. Solar IRRs typically range from 8–15% per year for well-sized UK systems with good self-consumption — comparing favourably to savings accounts and most investment portfolios.
Factors that improve ROI:
- High household electricity consumption (more to self-consume)
- Daytime electricity usage patterns (home during the day, EV charger)
- Rising electricity prices (every penny increase in tariff boosts your savings)
- Good roof orientation and minimal shading
Solar is also unusual as an investment in that it adds value to your property: research suggests solar panels add 1–4% to UK home values, providing a non-energy financial return as well.