Solar payback calculations | Switch to Octopus

Solar panels are a significant upfront investment, so it’s reasonable to ask: how long until they’ve paid for themselves? Here’s the honest maths, with real numbers and no sugarcoating. The answer depends on what you install (see sizing your system), how you use it and which tariff you’re on.

What solar costs right now

Prices have come down considerably over the past decade, though they have ticked up slightly from their 2023 lows. Here are typical fully installed costs for a domestic system in early 2026:

3 kW solar-only system: £5,000-6,500
4 kW solar-only system: £6,000-8,000
5 kW solar-only system: £7,000-9,000

Adding a battery when installed alongside panels:

5 kWh battery: adds £3,500-4,500
10 kWh battery: adds £5,500-7,000
13.5 kWh battery (e.g. Tesla Powerwall 3): adds £8,500-11,000

So a typical 4 kW solar + 10 kWh battery system comes to roughly £11,500-15,000 all in. There’s a wide range because installation complexity, equipment brand and regional pricing all play a role. Octopus now offers their own solar and battery installation service if you want a single point of contact.

One important note: residential solar and battery installations currently attract 0% VAT, reduced from 5% in April 2022. This applies to panels, batteries (including standalone retrofits since February 2024) and is in effect until March 2027, when the rate is scheduled to rise to 5%.

The savings calculation: solar only

Let’s work through a concrete example. Take a 4 kW system generating 3,500 kWh per year, with a household on a standard import rate of 27.7p/kWh (the Q1 2026 price cap rate) and Outgoing Octopus export at 12p/kWh (the rate from March 2026).

At 40% self-consumption (no battery):

Self-consumed: 1,400 kWh x 27.7p = £388 saved on import
Exported: 2,100 kWh x 12p = £252 earned from export
Total annual benefit: £640

Against an installation cost of £6,000-8,000, that gives a payback period of roughly 9-12 years.

At 50% self-consumption (working from home or high daytime use):

Self-consumed: 1,750 kWh x 27.7p = £485 saved
Exported: 1,750 kWh x 12p = £210 earned
Total annual benefit: £695

Payback: roughly 9-11 years.

The difference between 40% and 50% self-consumption adds about £55 per year. That gap has actually widened compared to previous years because import rates have risen while export rates have come down. Self-consumption matters more than ever.

The savings calculation: solar + battery

Adding a battery increases self-consumption dramatically. Let’s take the same 4 kW system but with a 10 kWh battery pushing self-consumption to 75%.

At 75% self-consumption (with 10 kWh battery):

Self-consumed: 2,625 kWh x 27.7p = £727 saved
Exported: 875 kWh x 12p = £105 earned
Total annual benefit: £832

Against a combined cost of £11,500-15,000, payback is roughly 14-18 years. The battery improves self-consumption and total savings, but its own cost stretches the payback period.

This is the central tension with batteries: they improve the economics of the solar panels but struggle to justify their own cost on a standard flat tariff. The situation changes significantly with time-of-use tariffs.

How Octopus tariffs change the maths

On Flux, the picture improves substantially. Instead of a flat export rate, you’re earning around 29p per kWh for evening peak exports (4pm-7pm) and paying just 16p per kWh for overnight imports (2am-5am). A battery owner on Flux can capture the spread between cheap import and premium export rates on top of the solar self-consumption savings.

On Flux, a 4 kW solar + 10 kWh battery system might deliver:

Solar self-consumption savings: ~£720
Peak export premium (above flat Outgoing rate): ~£150-250 extra
Import tariff savings (cheaper overnight rate for remaining grid usage): ~£50-100
Total annual benefit: £920-1,070

Payback with Flux: roughly 11-16 years for a combined system. That’s a meaningful improvement over a flat tariff, and it is where batteries start to earn their keep.

On Intelligent Octopus Flux, where Octopus automatically optimises your battery, the returns can be slightly higher still because the system responds to real-time grid signals rather than fixed schedules.

On Agile, the numbers can be even better in a good year because the peak export rates and the import/export spreads can be larger. The trade-off is less predictability.

What shifts the payback period

Several factors can make payback faster or slower:

Electricity prices: Higher import rates make self-consumption more valuable. The Q1 2026 price cap rate is 27.7p/kWh; if that rises towards 30p or beyond, payback periods shorten by a year or more. Conversely, falling rates extend the payback.

Export rates: Octopus’s Outgoing Fixed rate is dropping from 15p to 12p per kWh in March 2026, which is still among the best available. If you’re with a supplier paying just the basic SEG rate (often 3-5p/kWh), your return drops significantly. Our export rates explained page compares the options in full.

Your self-consumption percentage: This is partly within your control. Running the washing machine, dishwasher and tumble dryer during sunny hours instead of overnight increases self-consumption. A battery does this automatically by storing daytime generation for evening use.

Your location and roof: A south-facing roof in southern England generates more than a west-facing roof in northern Scotland. The difference can be 20-30% in annual output.

System cost: Prices vary by region and installer. Getting three quotes is standard advice. The cheapest isn’t always the best (quality of installation matters for long-term reliability), but there’s no reason to overpay either.

Whether you’re home during the day: If the house sits empty from 9 to 5, most solar generation gets exported. Working from home or having a heat pump, EV or other daytime loads means more self-consumption without needing a battery.

Should you wait for prices to drop?

It’s a fair question. Solar panel prices have fallen dramatically over the past 15 years, and battery prices continue to decrease. Waiting another year or two might save you 10-15% on equipment costs.

The counter-argument is opportunity cost. Every year you wait is a year of savings you’re not making. If your system would save £700 per year, waiting 12 months to save £500 on the purchase price actually costs you £200 net. The maths generally favour installing now unless a major price drop is imminent.

Battery technology is evolving faster than panel technology. If you’re on the fence about a battery specifically, installing solar now and adding a battery in a year or two is a perfectly sensible approach. Most inverters are battery-ready, so you won’t need to redo any of the main installation work.

The 25-year view

Solar panels are warrantied for 25 years and typically last 30+. Most manufacturers guarantee at least 80% of original output after 25 years, so degradation is gradual.

Over a 25-year lifespan, a 4 kW system generating around £640-695 per year in value (at current rates, no inflation adjustment) returns £16,000-17,400 on a £6,000-8,000 investment. Even allowing for an inverter replacement at year 12-15 (roughly £800-1,200), the lifetime return is strong.

Factor in even modest electricity price inflation (prices have historically risen 3-5% per year on average) and the later years of the system become disproportionately valuable. The panels on your roof effectively become a hedge against future energy price rises. You can check current rates for your area with the tariff comparison tool.