Commercial Solar ROI UK by System Size: 3kW to 20kW Compared
Which solar system size actually delivers the best return for your business? And how much difference does going from 5kW to 10kW—or 10kW to 20kW— really make in terms of cost and payback?
- 1. When Is Electricity Cheapest in the UK?
- 2. Why Does Electricity Cost Change Throughout the Day?
- 3. What Are Peak and Off-Peak Electricity Times?
- 4. How Do Time-of-Use Tariffs Work?
- 5. How Can You Use Electricity More Efficiently at Home?
- 6. How Do Solar Panels and Battery Storage Change the Picture?
- 7. Is Shifting Your Usage Actually Enough — Or Do You Need Solar?
- 8. Conclusion
- 9. FAQs
Summary
Key facts about commercial solar system ROI across different sizes:
For most UK small businesses, systems between 5kW and 15kW deliver the strongest balance of cost and return
A 3kW system typically pays back in 8–9 years, while a 15kW or 20kW system can fall into the 4–5 year range for businesses with strong daytime energy use
The difference isn’t just system size, it’s how effectively that energy is used on-site. A system that exports most of its output earns less per kWh than one where most generation is consumed directly
The Annual Investment Allowance (AIA) allows the full system cost to be deducted from taxable profit in Year 1, which changes the effective cost of scaling up significantly
Commercial solar installations are subject to 20% VAT. VAT-registered businesses can reclaim this as input tax; non-registered businesses should factor it into their budget
What Actually Determines Solar ROI for a Business
Two businesses can install the same-sized system and see completely different returns. The difference isn’t the panels — it’s how the energy is used once it’s generated. There are four factors that matter most:
Self-consumption: the more solar energy used directly on-site, the higher the value. Electricity used on-site replaces power you’d otherwise buy at full commercial rates. Exported energy still has value, but at a lower rate
Operating hours: businesses that run during the day (offices, retail, workshops) naturally align with solar generation and see stronger returns. Evening-heavy businesses rely more on batteries to capture that value
Electricity rate: this guide uses 27p/kWh, reflecting typical SME pricing. Every unit of solar energy used on-site avoids buying at that rate — this is what drives most of the savings
Tax relief (AIA): the Annual Investment Allowance reduces the effective cost of the system in Year 1, shortening payback especially on larger systems. See our commercial solar grants guide for a full breakdown
These factors stay the same across every system size. What changes is how well each system can take advantage of them.
3kW: The Micro-Business System
A 3kW system sits at the very edge of what can be considered commercial solar. It’s not designed to transform energy costs, it’s designed to reduce them in a controlled, low-risk way. This size typically suits businesses with very low and stable daytime demand: home offices, freelancers, or small single-room operations.
Metric | Without battery | With battery |
|---|---|---|
Annual generation | ~2,550 kWh | ~2,550 kWh |
Self-consumption | ~70% | ~85% |
Total annual benefit | ~£536 | ~£612 |
Net cost (after AIA) | ~£4,500 | ~£6,750–£8,250 |
Payback | ~8–9 years | ~11–13 years |
At this level, the system is small enough that most of the energy is used directly during the day, keeping returns stable. Installation is straightforward; a 3kW system falls under G98 and does not require pre-approval from the DNO.
The limitation is clear. Once daily usage increases beyond a modest level, the system quickly becomes undersized. The cost difference between 3kW and 5kW is relatively small, but the increase in generation is significant. Battery storage at this size rarely improves the financial outcome; it adds enough cost to extend the payback period beyond what most businesses would consider attractive.
5kW: The Entry Point for Most Small Businesses
A 5kW system is where solar begins to align properly with typical small business usage, moving beyond marginal savings and starting to deliver a meaningful reduction in electricity costs. This size works well for small offices, salons, retail shops and professional services where energy use is steady throughout the day.
Metric | Without battery | With battery |
|---|---|---|
Annual generation | ~4,250 kWh | ~4,250 kWh |
Total annual benefit | ~£935 | ~£1,019 |
Net cost (after AIA) | ~£6,000 | ~£8,625–£10,500 |
Payback | ~6–7 years | ~8–10 years |
Moving from 3kW to 5kW increases generation by around two-thirds, but the additional cost is relatively modest. Because most of that extra energy is still used on-site, the value per kWh remains high. For many businesses, this is the point where solar starts to feel like a practical operational decision rather than a small efficiency upgrade.
Battery storage becomes more relevant at this level, particularly for businesses with mixed usage patterns. FoxESS or GivEnergy suit moderate demand, while larger options like Sigenergy or Tesla are typically considered where EV charging or extended usage is expected.
7kW: The High-Performer for Daytime-Intensive Operations
A 7kW system is particularly effective for businesses with consistent, equipment-heavy daytime demand, cafés, medical practices and busy retail environments. In these settings, electricity use overlaps strongly with solar generation, allowing the system to operate at high self-consumption levels.
Metric | Without battery | With battery |
|---|---|---|
Annual generation | ~5,950 kWh | ~5,950 kWh |
Total annual benefit | ~£1,368 | ~£1,488 |
Net cost (after AIA) | ~£8,250 | ~£11,250–£13,500 |
Payback | ~6 years | ~8–9 years |
At this scale, the system makes a visible impact on operating costs. However, usage patterns become more important. For businesses that operate into the evening, such as restaurants, a larger share of energy may be exported unless storage is included. Because this system exceeds the export threshold, it requires a G99 application before installation, which adds lead time but does not affect viability.
10kW: Entry-Level Commercial With Strong ROI per £
A 10kW system marks the transition into true commercial solar, no longer just reducing costs, but actively reshaping how much electricity the business needs to buy. For a full guide to 10kW system economics, see our dedicated 10kW commercial solar system guide.
Metric | Daytime-heavy | With battery |
|---|---|---|
Annual generation | ~8,500 kWh | ~8,500 kWh |
Total annual benefit | ~£1,785 | ~£2,040 |
Net cost (after AIA) | ~£10,125 | ~£13,500–£16,125 |
Payback | ~5–6 years | ~7–8 years |
The most important shift at 10kW is scale efficiency. The cost per kW begins to stabilise while total savings increase significantly. This is also where the AIA tax benefit becomes a major factor, reducing the effective cost before the system generates any electricity. For many businesses, this is the point where solar moves from an efficiency improvement to a strategic cost decision.
15kW: Where Economies of Scale Begin
At 15kW, the economics change in a way that often surprises business owners. Despite the higher upfront cost, payback periods become shorter than those of smaller systems. The installation cost per kW drops, while the total volume of energy generated, and therefore the savings, increases substantially.
Metric | Without battery | With battery |
|---|---|---|
Annual generation | ~12,750 kWh | ~12,750 kWh |
Total annual benefit | ~£2,932 | ~£3,187 |
Net cost (after AIA) | ~£12,375 | ~£16,125–£19,125 |
Payback | ~4–5 years | ~5–6 years |
This size is well-suited to medium offices, gyms and high-usage retail environments where electricity demand is both high and consistent. Larger systems can outperform smaller ones financially, not just in total savings but in how quickly they recover their cost.
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20kW: Full SME Commercial Systems
A 20kW system represents the upper end of what most SMEs can realistically install within standard roof space. At this level, solar becomes a significant part of the business’s energy infrastructure, capable of offsetting a large proportion of annual demand.
Metric | Daytime-heavy | With battery |
|---|---|---|
Annual generation | ~17,000 kWh | ~17,000 kWh |
Total annual benefit | ~£3,910 | ~£4,158 |
Net cost (after AIA) | ~£16,500 | ~£21,000–£24,750 |
Payback | ~4–5 years | ~5–6 years |
This size suits larger restaurants, hotels, manufacturing and multi-site operations where electricity use is high throughout the day and into the evening. At this scale, solar is no longer a supplementary system; it becomes a core part of how energy is managed.
Which System Size Is Right for Your Business?
The right system size is determined by how much electricity you use during the day, not how much roof space you have. For a broader introduction to what businesses need to know about commercial solar panels, including how they differ from residential systems, see our overview guide.
Business type | Daily kWh | System | Key reason |
|---|---|---|---|
Small office | 25–50 kWh | 5–7kW | Consistent daytime usage |
Café | 40–70 kWh | 7kW | Equipment-heavy during trading hours |
Gym | 55–110 kWh | 10–15kW | Long operating hours, mixed demand |
Restaurant | 80–137 kWh | 15–20kW | High demand, extended hours |
As a rough guide: below ~40 kWh/day, a 5–7 kW system is usually sufficient; for 50–80 kWh/day, moving into 7–10 kW improves returns noticeably; for 100+ kWh/day, larger systems (15 kW+) become more effective.
The mistake to avoid is sizing based on what fits the roof. The better approach is to size based on what the business will actually use, because that’s what determines ROI.
💡 Did you know?
A well-configured battery storage system can improve ROI on smaller commercial installations by capturing surplus daytime generation for evening use — particularly valuable for gyms, restaurants and businesses with consistent usage beyond solar generation hours. See our Sigenergy battery review for a detailed look at one of the leading options for commercial installations.
The AIA Tax Benefit in Real Terms
The reason system size matters more than most businesses expect isn’t just energy generation; it’s how tax relief changes the real cost of scaling up. AIA allows you to deduct the full system cost from taxable profit in Year 1. For a comprehensive guide to all available schemes, see our commercial solar panel grants guide.
|
System |
Installed cost |
Net cost after AIA (25% corp tax) |
|---|---|---|
|
5kW |
£8,000 |
£6,000 |
|
10kW |
£13,500 |
£10,125 |
|
15kW |
£16,500 |
£12,375 |
|
20kW |
£22,000 |
£16,500 |
Moving from 5kW to 10kW adds £5,500 on paper, but in reality it’s closer to £4,125 after tax relief while almost doubling the energy the system generates. That’s why larger systems often outperform smaller ones financially: you’re increasing output at a lower effective cost per kW, which is what drives faster payback. Note: solar installations qualify under AIA, not full expensing. These are often confused, but AIA is the correct mechanism for solar.
DNO Approval: What Larger Systems Require
The grid approval process is one of the most commonly overlooked factors in commercial solar planning, and it has a direct impact on project timelines. Understanding it before committing to a system size helps avoid delays.
G98 vs G99: which applies to your system?
The threshold is based on inverter output per phase, not panel capacity:
-
G98 (smaller systems): if the inverter output is ≤3.68kW per phase, the system can be installed and the DNO notified within 28 days afterwards. No pre-approval required. This applies to most 3kW systems and some 5kW configurations
-
G99 (larger systems): if the inverter output exceeds 3.68kW per phase, a G99 application must be submitted to the local DNO before installation can begin. This applies to 7kW systems and above in most configurations
What G99 approval involves in practice
A G99 application includes property and connection details, system specifications, the export management approach and installer certification. The DNO has up to 45 working days to process it — in practice, most SME applications are complete within 4–12 weeks, though some commercial DNOs have longer backlogs that can extend to 3–6 months.
In some cases, the DNO will approve the system but place a limit on how much electricity can be exported. This typically does not significantly change day-to-day performance — because most solar energy in a well-matched commercial installation is consumed on-site or stored in a battery, rather than exported at peak levels where limits apply.
For a full breakdown of commercial solar panel regulations in the UK, including planning permission, building control, and grid approval requirements, see our dedicated commercial regulation guide.
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Conclusion
Choosing the right commercial solar system size isn’t about installing as much as the roof can fit; it’s about matching generation to how the business actually uses energy. At the smaller end, 3kW and 5kW systems are fast to install and work well where demand is low and stable. Moving into 7kW and 10kW, solar starts to cover a much larger share of daily usage, which is where returns become genuinely noticeable.
Beyond that, at 15kW and 20kW, the conversation changes again. Lower cost per kW and stronger total savings mean payback can actually be faster for larger systems, provided the business has the demand to use that energy effectively. Once AIA tax relief is applied, the effective cost of scaling up is significantly lower than the headline price suggests.
The question that matters is simple: how much of your electricity can you realistically use during the day? If that’s clear, the right system size usually becomes obvious. Get a tailored commercial solar quote from Solar4Good to see exactly how each system size from 3kW to 20kW would perform for your business, based on your actual usage, roof space and future plans.
8. FAQs
Electricity is usually cheapest between midnight and 6am, when demand on the national grid is at its lowest. However, exact off-peak windows vary by supplier and tariff type — always check the specific hours for your tariff rather than assuming a standard window.
The most expensive window is typically 5pm to 8pm, when residential and commercial demand overlap. Cooking, heating, and charging all happen simultaneously, creating the highest load on the grid and the highest prices on time-of-use tariffs.
No. Standard flat-rate tariffs charge the same unit price all day. Cheaper overnight electricity is only available on time-of-use tariffs such as Economy 7, Economy 10, or smart dynamic tariffs like Octopus Agile.
Savings vary by household, but typical estimates for Economy 7 users who diligently shift usage range from £80–£200 per year. The actual saving depends on how much of your total electricity consumption you can realistically move to off-peak hours.
Yes. Solar panels generate electricity during daylight hours, replacing grid electricity with free self-generated power. For a typical 4–5 kW residential system, this translates to approximately £300–£500 in annual savings without a battery — rising to £650–£1,050 with battery storage to cover evening usage.
Not necessarily. Economy 7 tariffs typically charge a higher day rate than standard tariffs to offset the cheaper overnight window. If you cannot genuinely shift a substantial proportion of your usage overnight, the higher daytime rate may cancel out the overnight savings. An honest assessment of your household’s routines is essential before switching.
Generating your own. Solar panels reduce your grid dependency during the day. Battery storage extends that to evenings. Combined with smart EV charging on an off-peak tariff, households can reduce their grid electricity consumption by 60–80%, making the cost of imported electricity largely irrelevant for day-to-day usage.
