Solar#13: 12 months ROI

Introduction

I have discovered that calculating the Return on Investment (ROI) for a solar system is easier said than done.

 

The first question is how much electricity would I have used without a solar system? The GivEnergy app does give a home consumption figure, but in my view it overstates this as it clearly includes some losses from the solar inverter. I explain below my method for estimating what I would have paid without the solar system.

 

Then we need a comparison with an alternative investment - typical comparison parameters are listed below:

 

	Financial investments	Solar System Investment
Interest Rate	Most give an annual rate	This requires calculation - see below for my approach
Risk	Often give a premium for high risk (& often confuse risk with volatility)	Solar systems come with their own risk - see Solar#2: Solar Panels Investment Case for my view of these risks
Volatility	often give a premium for high volatility	My view is that volatility is low, but I will need to wait a few years to have data to demonstrate this.
Liquidity	Good liquidity often gets a lower rate of return	As discussed in Solar#2: Solar Panels Investment Case, this is poor.
Tax	There are a range of tax incentives (eg in the UK with SIPPs and ISAs)	For UK domestic solar system, the savings on a utility bill are not taxed (May-25)

 

Often a solar investment analysis gives ROI as 'payback time' - I will discuss if this is a reasonable approach.

 

Health Warning:  this post is just my views on investments and is not intended as investment advice.

 

But first - how much have we saved in the first 12 months?

 

How many £s have we saved by having our solar system installed?

 

This was harder to work out that I would have thought. It is easy to see our electricity bill for 12 months:

• Imported electricity: £819 (3888kWh)
• Exported electricity: -£765 (3891kWh); I used the "-" to show that we were 'paid' by Octopus

So the net electricity bill was £54 (ie a net cost to us over the year). I will repeat this analysis in September when our smart meter will have been working for 12 months (I hope - see post SmartMeter #3: My Smart Meter Journey Part 2). My suspicion is that this will show a lower net cost for 12 months (and perhaps even negative ie Octopus pay us!).

 

But what would our consumption have been (kWh) without the solar system and what would be the charge (£) be for this consumption? I used the same methodology as for the post InterimROI Figures - 1st 6 months:

• I assumed that we would have used 10.18kWh/day*
• I used the rate quoted by Octopus when I asked for the regular (flat) tariff each quarter (standing charge and price per kWh)
• I added 5% VAT onto this calculation
• This came to £1,107 - my estimate for what we would have paid without a solar system.

 

So the total saving, over the period 1st April 2024 to 31st March 2025 was:

 

£1,107 - £54 = £1,053

 

*This is 3,715kWh/year, the average consumption for a few years before the solar system was installed when our electricity consumption was pretty stable. This is  a little less that the home consumption given by the GivEnergy App for the same period (3,967kWh - see post Solar#8: 12 Months Review), as the home consumption includes losses from the inverter that are not shown (as opposed to losses from the battery that can be calculated from the numbers given by the GivEnergy app)

 

Payback Time - an Absurd Example.

Our investment (excluding the new roof) was £13,647 and this has earnt us £1,053 in the last year. If I assume that this payback goes up with inflation (ie the cost of electricity rises with inflation) at 2.5%/year, then we will have paid back £13,647 during year 12.

 

However, my view is that this type of analysis has limited value.

 

If our objective was simply to get our money back then a building society would be a better place to keep our money - we can have our money back at any time that we like, eg you might quote payback as "1 day" with a building society.

 

However, our objective is to make a profit from our investment. We understand that it is a long term investment and that there is only a limited ability to get the original capital invested back (even if we sell our house then this is not certain - see post Solar#2:Solar Panels Investment Case). While the investment in solar does give us a warm fuzzy feeling of helping the environment, we do want it to be reasonably profitable as a primary objective.

 

Comparing Investments

So a more reasonable (& usual) comparison between investments is interest rate. Business investments will typically look at Net Present Value (NPV) or Internal Rate ofReturn (IRR) - in effect what interest rate would we need to get the same return over the same period. We can do something similar/simpler here - what rate of interest would we need to earn if we invested the money (eg in an ISA) so that we match the return we get with a solar system.

 

How I have Calculated the Equivalent Rate of Return

I want to understand the %age rate of return that I need from a financial product that will match a solar system. For this case I will assume that the returns of the financial product are also tax free (eg a UK ISA or SIPP)

 

I set up two columns in a spreadsheet:

1. Invest £13,647 in a solar system & this saves £1,053/year. I have assumed that:
1. The saving increases by inflation at 2.5% each year
2. At year #12 the battery and inverter breakdown and that I invest a further £5,050 in replacements and their installation.
3. The solar system ceases to function/has £zero value at 25years
2. Invest £13,647 in a <financial product>:
1. I use this investment to pay the additional electricity bill each year (ie the saving that I get with the solar system)
2. At year #12 I add £5,050 into the investment fund (ie the amount I assumed is required to repair/replace the inverter & battery at year #12
3. The investment grows at a fixed annual %age rate that gives it £zero value at 25 year.
4. I assume that there is no tax to pay on this interest (eg a UK ISA or SIPP).

 

By trial and error I set the %age return on the <financial product> so that the value at 25 years £zero.

 

This gives a return of 6.6% for the <financial product> to match the solar system ROI/savings.

 

Discussion

I have most of my pension invested in a SIPP in various funds and bonds. My sense is that 6.6% is in the spectrum of long term returns that I might expect elsewhere, eg

 

• low risk gilts UK 0.875% government bond, maturing in 2029, I calculate a yield of 4.6% to
• A more sporty indexed fund based on the US S&P 500, where I calculate an average 13.3%/yr over the last 10 years.

 

Both of these have their downsides, eg the S&P 500 has been quite volatile in the early months of the new US presidency in 2025 (some might say that it had the 'yips') and while the gilt is low risk if I hold it to maturity in 2029, if I want to cash it in earlier then the market decides our return.

 

The risk for solar is different. It is not impacted by the stock market nor the vagaries of the UK gilt market, but if we had to sell our house (eg due to a new job, ill-health or death) then we would likely lose much of the capital invested. In my view, our solar investment adds more diversity to our investment risk (& the literature says that this is good)  and has a reasonable, mid-range, rate of return.

 

Other Comments:

While there is some effort involved in setting up and managing a pension/SIPP, for me, the effort involved in installing a solar system and then learning how to operate it efficiently was far greater. 

 

On the plus side the solar system does give us a the warm and fuzzy feeling of helping the environment and with the battery addon has me feeling that we am doing our bit to minimise peak demand and so reducing the need for new grid and power station infrastructure.

 

Is it Possible to Split out the ROI from the Battery Vs the Solar Panels?

It is reasonably easy to get a 1st pass estimate from the GivEnergy app. If I had the same system, but no battery then I would have 3 energy figures for the year:

 

Solar only Energy flow	Estimate from solar with battery data	My estimate of Energy for the last 12 months
Solar to Home	Solar to Home	1153kWh
Solar to Grid	Solar to Grid + Solar to Battery	3355kWh
Grid to Home	Grid to Home + Battery to Home	2814kWh

 

Note: there are some errors in this:

• The above assumes the GivEnergy ECO mode and so may not be true during the Octopus Flux peak rates when the battery is discharging (eg in the summer when we are still generating solar power in  the evening).
• While the calculation does remove the battery round trip losses, it maybe that a solar only inverter would have different losses that a solar + battery hybrid inverter.

 

I can also convert this to £'s using the Octopus flat rate tariff - again this is an estimate as I do not have the tariff costs recorded for all quarters:

• Solar to Grid: 15p/kWh (source: Octopus website 14 May 25 https://octopus.energy/smart/outgoing/)
• Grid to Home: average of 24p/kWh and a standing charge of 47p/day plus 5% VAT (source averages of figures that I recorded over the 4 quarters)
• Savings from 'Solar to Home' calculated as Grid to Home above

 

Note: there are some additional errors here:

• I do not have perfect records of Octopus flat rate tariffs for all quarters

 

This gives the following:

	Energy (kWh)	Energy Cost (£) (ie what I would expect to see on an Octopus bill)	Saving (£)	Energy Cost(£) with no solar
Generation to home	1153		+£287	+£287
Generation to grid	3355	-£503	+£503
Grid to Home	2814	+£882		+£882
Total		£379	£790	£1,169

 

However, given all the errors in this calculation I am pleased that the estimated bill, with no solar comes within £62 (6%) of the £1,107 from my estimate above (derived from average consumption prior to the installation of our solar system). My assumption is that much of this error is down to inverter losses that I have not been able to derive from the data provided by the GivEnergy app.

 

I pro-rated this error across solar and battery savings, so that the solar only system saving reduces from £790 to £748.

 

So, in summary, my estimate of the split between ROI of battery and ROI of the solar panels and inverter is:

 

	1st year saving	Initial investment	Assumed repair cost at year #12	Assumed capital value at year #25	%age equivalent pension annual growth (after charges)
Battery + solar	£1,053	£13,647	£5,050	£0	6.6%
Solar only	£748	£10,047	£1,450	£0	7.3%
Battery add on	£305	£3,600	£3,600	£0	4.8%

 

Note: As well as the errors noted above, there are further errors here:

• Repair costs at year #12 may be high for the battery (I used the full addon at installation cost and I understand that battery prices are likely to come down)
• The initial investment for a solar only system may be high - I would not need a fancy hybrid inverter capable of supporting a battery.
• This still factors in a 6 month period where our smart meter was only intermittently functioning and so does not include the full benefit of the battery - this should raise both the ROI of the 'Battery + Solar' but will have no impact on the Solar only line and, so, a disproportionate impact on the 'Battery Add On' line. I hope to correct this error in October with a full 12 months of a working smart meter - see post Smart Meter #3: My Smart Meter Journey Part 2)
• Over the first 6 months of use I was still some experimenting/fine tuning and making errors in the scheduling.

 

Discussion: Battery & Solar ROI Split

Initially it surprised me that the battery addon ROI is, in effect, dragging down the system ROI, ie from a pure ROI perspective, based on this 1st 12 months of operation, it would be better to have bought a solar only system with no battery.

 

I can see two reasons for this result:

• The mid-life 'repair' cost of the battery is proportionately much higher. This all depends on battery performance over 25 years, but if I do need a new battery at 12 years, and battery prices have not reduced (which they might do), then this makes sense.
• The non-functioning smart meter meant that we were not fully charging the battery last summer - buying energy from the grid and then re-selling it makes no sense on a flat rate. So I do expect the £1,053 ('Solar + Battery saving') number to increase a little in October, an I expect that this would mostly transfer to the  'Battery Add on' saving/ROI  - we will see!

 

Based on the last point, only a £60 additional saving would raise the battery add on ROI from 4.8% to above 7.25%, so I suspect that any concern that the battery ROI is not 'pulling its weight' is premature.

 

I also have another theory, that value of a battery storage will increase over time:

• More solar installations will mean lower prices for (sunny) daytime electricity.
• Installing electric (heat pump) heating means that we will want to consume more electricity when the sun is not shining (evening/winter), so buying at cheap rates becomes more important...

...just a theory, but maybe we will be extending our battery capacity in the future.

Solar #8: 12 Months Review

 Introduction:

• The system has continued to work reliably and needed no intervention from me
• All the points in the 6 months review still hold
• The system production is broadly in line with the quote
• The GivEnergy battery disabled software issue results in non-optimum scheduling
• Some of my discoveries may be of interest to someone specifying a new system:
• Battery charges at a slower rate when cold
• Battery losses are around 10% of the 'round trip'.
• ROI based on the 1st 12  months of data is...

I will expand on these points below.

 

Solar Production Through the Year:

I Used the Period 1-Apr-24 to 31-Mar-25 for Analysis in this Post.

It meant that I had a set of 12 complete months of graphs and it misses the 1st 2 weeks or so when I was working out the scheduling. It does mean that the rather gloomy Mar-24 was replaced by Mar-25 that was pretty much wall to wall sunshine!

 

Seasonal Variation in Solar Production

When I was sold my solar system I was given vague assurances that I would still produce solar power in the winter. While this is true, in winter production is much less and, of course, this is the time of year when you probably want it the most.

 

I thought that a comparison of solar production around the summer and winter solstices and around the spring and autumn equinoxes would be useful for others, for example in sizing a solar system. By way of refence our system has 14 x 400W panels and faces SSE (See these posts on Solar#1:Our House is Not Suited to Solar Panels? and Solar#3: Supplier Selection for more details on our installation)

 

Summer: June 2024   Max: 36.2kWh   Min: 8.8kWh   Ave: 23.0kWh	Autumn: Sept 2024 Max: 24.5 kWh Min: 1.5kWh Ave: 13.0kWh	Winter: Dec 2024 Max: 5.18kWh Min: 0.65kWh Ave: 1.86kWh	Spring: Mar 2025 Max: 24.3kWh Min: 5.0kWh Ave: 16.0kWh

 

My conclusion to this is that, with a battery and flexible tariff, the scheduling needs to be robust to cope with varying weather/solar production, unless you are OK with adjusting the schedule each day in line with the weather forecast. In the summer, when/if most days production is higher than consumption (for us this is true between the spring and autumn equinoxes) then this issue is much reduced (do minimal top up of the battery at cheap rate, to last until the sun rises, and then power the house + fill the battery from solar power and still have excess to export before getting to peak rate with the battery at 100% charge).

 

Variation in Consumption:

 

Consumption across the Year.

variation was around +/-40kWh (excluding months when we were away on holiday). During the winter months the grid replaces solar production as the energy source. The variation in battery as a source is as much to do with adjustments to the schedule as to solar production (eg when my smart meter was not functioning and I worried that I would be on a  fixed tariff).

 

Consumption varied much less than solar production over the year, with the highest in December (403kWh) and the lowest in November (250kWh). In May, July, November and January we had holidays lasting a week or so. The seasonal variation is around 360kWh/month +/-40kWh, for months when we were not away for more than the odd day. There is actually more variation in consumption day to day, depending on our activity, than across the seasons:

 

Winter Month's Consumption: Includes a 7 day holiday	Winter Typical Day's Consumption: At home Dishwasher runs at cheap rate from ~2am. Minimal solar production Scheduling conundrum - how much battery charge to you need to keep for evening peak rate consumption?	Winter Holiday  24hr Consumption: Away from home Battery activity: charging at cheap rate and discharging at evening peak rate - clearly causes a rise in what the inverter counts as 'home consumption', but must, in reality, be inverter/battery losses.
Summer Month's Consumption: Includes a 7 day holiday	Summer Typical Day's Consumption: At home Dishwasher runs at cheap rate from ~2am. Minimal solar production No scheduling conundrum - battery is full for evening peak rate	Summer Holiday  24hr Consumption:   Away from home

 

Production Vs Consumption

It seems rather elegant that consumption and solar production (after losses) for the year roughly match at around 4,000kWh. Of course this is for just one size of house (4-bedroom detached) and one lifestyle (retired couple).

 

While autumn and spring solar average production roughly match consumption, this equivalence does not survive further scrutiny:

• Summer production averages 23kWh, well above average summer consumption of about 10kWh
• Winter production averages 1.8kWh, only just enough to make up the average battery losses of 1.1kWh (see details below) and well below average consumption of 13kWh.
• Daily variation is significant - minimum daily summer production (8.8kWh) can go a little below average consumption, but winter maximum production of 5kWh is still not enough for a day's consumption.

 

Consumption changes with the weather as well:

Dark (cold) days: more lighting, tumble drying and cooking

Bright (hot) days: less lighting, more clothes washing/less tumble drying and less cooking (more salads), more time spent outdoors...

...so a mixed bag, but in general we consume around 25% more electricity in winter. I am intrigued that, in the above charts, an empty house consumes more in the in winter than in the summer. I have no explanation for this!

 

Battery Disabled Issue

I have a post on scheduling brewing and I will cover this topic in more detail there. The issue is still not resolved in the latest GivEnergy software update. It does mean that we pay a little more for electricity each year than we need to and it makes setting up a robust discharge schedule difficult, eg it might be worth adjusting the discharge schedule with the seasons and, where practical, to change it with daily usage (eg holidays).

 

Typical Winter Day Consumption and Battery

This shows the problem of trying to build one schedule that is robustly optimised for all winter days - given the variation in solar production and home consumption

Note Chinese date format (yyyy-mm-dd) - the same 'typical' winter day as in the set of 6 graphs further up the page.

 

The issue can be seen in the 'Winter Typical Day Consumption' graph above.

1. The battery has been (almost) fully charged at night (cheap rate).
2. During the day the GivEnergy ECO mode kicks in and uses what solar energy there is (2.3kWh on that day),
3. but has to augment this with the battery - using over 7kWh - most of the battery's capacity.
4. After 4pm (peak rate start) we manage to export 0.6kWh to the grid before the battery is exhausted by 5-30pm
5. and we start to use the grid (before 7pm and the end of peak rate). The battery then finds a bit more power at around 7-30pm when it looks like we are cooking.

 

The issue is that, in winter, the ideal schedule, is very dependent on the timing of any in house consumption and the amount of solar production:

• If we are out all day until after peak rate ends and there is lots of sunshine (eg a winter walk ending with dinner by the fireside, in a pub) then exporting at peak rate is a good thing to do.
• If we stay in all day (eg a wet and cold day when we get jobs done and cook dinner for friends) then solar production is low and peak rate consumption is high.

How do you design a schedule that is robust to these eventualities, and does not rely on daily human intervention?...

 

...see up coming post coming on scheduling (currently brewing).

 

Battery charges slower in winter/when cold

I noticed in the winter that my battery did not reach 100% charge during the 3hour Octopus Flux cheap rate period (2am to 5am). The specification of the battery/inverter is a maximum charge power of 3.3kW and the battery capacity is 9.5kWh, so it would seem logical that full charge could be reached, starting from 4%, between 2am and 5am. In the summer this is true, but in the winter and spring it does not fully charge. There seems to be a slow charge rate of ~2.6kW that will sometimes rise later to around the specified rate:

 

Summer: 100% charge is reached at 5am - gradient is 3.4kW	Winter:88% charge is reached by 5am - gradient is 2.6kW	Spring: the gradient rises from 2.6kW to 3.44kW at 3-25am

Note: GivEnergy app dates are in Chinese format of yyyy-mm-dd

 

I contacted the GivEnergy Support desk about this and got this response:

 

"Our firmware will restrict the battery if the cells are below 20 degrees, what you might see from the temp sensor is the BMS board temperature not the cells. The cells are often a few degrees lower than the board so I would just judge off the temp we give as there are 5 sensors at play. One for the board and 4 for each packs quadrant of the cell housing.

 

The battery will restrict for numerous reasons, but they can all be classed as stopping efficiency loss and long term degradation of the battery. As a cold battery cannot hold as much or efficiency charge so its best to restrict the rates"

 

This fits with the temperatures seen in the app: on the 'spring' (12 March 2025) battery temperature chart there is a rise in temperature and then an inflection point at 3-25am about 38.6degC and another rise in temperature. I assume due to the faster charging rate.

 

Battery temperature chart while charging at cheap rate on 12-Mar-25 (same date as right hand graph above): Note temperature inflection point at around 3-30am when charge rate increases

 

So what is the impact of this? With Octopus Flux tariff I have 3 hours to charge the battery at cheap rate. In the summer it is not too critical if I reach 100% as the sun can do the rest - I end up exporting solar energy later in the day at about the same rate that I pay for cheap rate (~15p/kWh). In the winter the cheap rate charge is more valuable; I often never reach 100% battery charge as by the time the (weak winter) sun has risen the battery has been discharging to run the house, breakfast, kettle, etc. In winter the 88% charge achieved effectively misses the opportunity to store about 1kWh of energy bought at cheap rate (~15p/kWh) and means that I have to buy this at the regular rate (~25p/kWh) a loss of about 10p/day or £3/month.

 

Note: my battery is installed in the garage, so a bit warmer than outside in the winter. The garage is part of the house - with 2 walls and the ceiling connected to other rooms in the house.

 

Solar production Vs quote:

The annual solar production was 7.0% higher then the installer quotation (actual: 4508kWh Vs quoted: 4212kWh). However, losses were over 100% higher than quoted (actual: 403kWh Vs quoted 181kWh). The actual net production after losses is 1.9% higher than quoted (actual 4106kWh Vs 4019 kWh).

While it is encouraging that solar production, after losses, is a little more than the quote I think that:

• The difference is in the noise - eg I expect that the variation due to weather, year to year, is greater.
• The quotation was not explicit about the operating conditions; for example, my take is that it assumes that the battery is only charged from solar power. If that is the case then I am working my battery harder (to profit from the Octopus Flux tariff) and so perhaps should expect greater losses.
• The GivEnergy app data is just the battery losses (ie the difference between what you put into the battery and what you get out); I cannot find any data on solar production losses (& perhaps this does not matter - I am only interested in the output power and the app gives me this)
• The quotation implies that the losses are solar power production losses, so perhaps the quotation completely ignores battery losses.

 

Battery Losses:

The losses in the battery amount to 403kWh over the year, or 1.1kWh per day or round trip. 10.9% of the power that was put into the battery in the last year (3673kWh) was lost.

 

The cost of 1kWh (either cost to buy from Octopus or lost opportunity to sell to Octopus) is, on average, between ~15p and ~25p. So over a year these losses amount to around £80 of electricity purchased / could not be sold (note: this is already accounted for in my ROI calculation).

 

I assume that all of these losses go into heat energy. For me this is all lost in warming the garage. Perhaps it is worth considering having the battery and inverter mounted in the house and actually using the heat energy:

• 1kWh is worth around, say, 7p (gas an 90% efficient boiler) - so over, say, 8 months when the heating is on, would be ~£17/year
• It would be uncontrolled heat - looking at the app you get most of the temperature rise during charge and discharge - so cheap rate and peak rate.
• The inverter and battery are nicely made, but not so beautiful that I would want them in my house - the custom cupboard to put them in would need decent ventilation and the cost would negate some/all of the £17/year saving.
• Some users comment on their worries about high operating temperatures limiting the life of the inverter/batteries. I have no idea if this is true, but it does sound reasonable. In the house, in a cupboard would significantly raise the summer operating temperature, compared to my garage.

 

Return on Investment (ROI), based on the 1st 12 months of data:

...This will have to wait for another post when I have received my April bill from Octopus!

 

Conclusions:

The system has worked reliably and performed pretty much in line with the quotation.

 

If I were buying again then there would be aspects that I would ask more questions about when selecting a system:

• How do I set up a charge/discharge schedule for my selected tariff?
• How does this schedule cope with variation in supply (eg winter/short gloomy days Vs summer/ long bright days) and demand (eg cooking and washing at peak rate)?
• What is the slowest charge rate (eg in cold weather) and is this fast enough to fully charge the battery in the cheap rate period?
• What is the loss in kWh that I should expect if I fully charge and fully discharge the battery every day.

 

UK (North of England) seasonal variation means that:

• Solar power is not a serious consideration for home heating in winter (conversely, it should be considered for air conditioning/cooling in summer, but not a North of England issue, yet)
• Battery storage of cheap rate electricity should be a serious consideration for winter home heating, but should account for slower (lower power, or lower rate of energy, storage) battery charging in the cold.
• Year round solar production on our (a typical?) 4-bed detached house roughly matches consumption (lighting, cooking and washing) for a retired couple, but this masks large daily divergence between consumption and solar production.

 

The garage seems like a good location to install the system - minimising both summer and winter extremes in temperature, but does waste the, not insignificant, energy loss as heat.