Financial Modelling: Solar vs Staying on the Grid Over 25 Years
Author: Steve Fairless
Originally Published: 7th March 2026 · Updated: 29th August 2026
The honest way to compare solar with staying fully grid-dependent is to model assumptions, not pretend anyone can know electricity prices for the next 25 years. A useful model shows today's evidence, makes future assumptions explicit, tests several scenarios and separates forecast savings from guaranteed outcomes.
At Sustainable Energy Engineering, that means starting with the household's actual annual kWh use, roof and shading, expected generation, import tariff, export tariff and capital cost. We then show how the result changes if electricity prices, self-consumption or equipment costs move away from the base case.
Updated: 29th August 2026 using current Ofgem price data and TDCVs, Energy Saving Trust system-cost/payback benchmarks, MCS performance requirements, Ofgem SEG rules and HMRC VAT guidance.
What the Current Evidence Says Before We Forecast Anything
- Ofgem's medium single-rate electricity TDCV is now 2,500 kWh/year from 1 July 2026.
- The Ofgem average direct-debit electricity unit-rate benchmark is 26.32p/kWh for October–December 2026.
- Energy Saving Trust currently puts a typical domestic system at around 4.5 kWp and around £7,600 installed.
- Its July 2026 payback examples with export payments are around 9–12 years across the locations and occupancy patterns shown.
- Qualifying residential solar installation is currently zero-rated for VAT until 31 March 2027 under existing rules.
Why a 25-Year Model Must Be Scenario-Based
Electricity prices do not rise in a straight line. Ofgem resets the default-tariff cap every three months and wholesale, network and policy costs all move. A model that simply applies “5% inflation forever” can make solar look artificially strong; a model that freezes energy prices for 25 years can understate future grid exposure.
Our preferred approach is to show several price paths. These are not forecasts. They are sensitivity tests that answer a more useful question: if grid prices behaved like this, what would that do to the long-term value?
A Transparent 25-Year Worked Example
The following model is deliberately simple so every assumption can be challenged. It is not a quote, not a promised return and not a substitute for a property-specific MCS performance estimate.
Illustrative Base Assumptions
| Household electricity use | 2,500 kWh/year — Ofgem 2026 medium single-rate TDCV |
| Solar system | 4.5 kWp |
| Installed cost | £7,600 — current Energy Saving Trust reference |
| Year-one solar generation | 4,000 kWh — illustrative, not a national guarantee |
| Year-one self-consumption | 1,500 kWh — illustrative |
| Year-one export | 2,500 kWh — illustrative |
| Starting import value | 26.32p/kWh — Ofgem Oct–Dec 2026 benchmark |
| Export value | 15p/kWh — illustrative constant assumption |
| PV output reduction | 0.35%/year — modelling assumption, not a universal module guarantee |
| Inverter allowance | £1,200 in year 13 — illustrative future cost |
| Standing charge | Excluded because the model assumes the grid connection remains in both scenarios |
What the Example Produces
| Grid unit-price assumption | 25-year grid energy cost for 2,500 kWh/year* | 25-year solar electricity value** | Net solar value after £7,600 system + £1,200 inverter allowance |
|---|---|---|---|
| 0% annual change | ~£16,450 | ~£18,458 | ~£9,658 |
| 2% annual increase | ~£21,076 | ~£21,076 | ~£12,276 |
| 4% annual increase | ~£27,403 | ~£24,650 | ~£15,850 |
*Energy-unit cost only; standing charges excluded. **Illustrative avoided-import value plus assumed export income, with the stated generation-reduction assumption. Numbers are rounded and are not a forecast.
The example is useful because it shows why a single “25-year saving” headline is weak evidence. Change the export tariff, self-consumption, generation, roof yield, replacement cost or future unit-rate path and the answer changes materially.
Why We Do Not Add the Standing Charge to Solar Savings
A grid-connected solar home normally continues paying the electricity standing charge. Solar reduces imported units; it does not usually eliminate the grid connection. Including the full standing charge as a “cost avoided by solar” would therefore exaggerate the benefit unless the model genuinely assumes a different connection arrangement.
Generation Must Come From the Site, Not a National Average
Energy Saving Trust's 4.5 kWp figure is a useful system-size benchmark, but annual generation depends on location, orientation, pitch, shading and system losses. MCS MIS 3002 requires an annual generation estimate and technical information before contract. That site-specific estimate should replace our illustrative 4,000 kWh figure in a real proposal.
This is also why two properties with the same number of panels can have different economics. A well-positioned array with strong daytime demand may create more avoided-import value than a larger system with significant shading or low on-site usage.
Self-Consumption and Export Need Separate Values
Every solar unit does not have the same financial value. Electricity used in the property can avoid the live import tariff; electricity exported earns the live export tariff. Ofgem's SEG rules allow suppliers to set different rates and terms, so a financial model should show these two streams separately.
If you want to understand that distinction before looking at the full 25-year model, our solar and battery storage advice focuses on matching generation to household demand rather than maximising one headline percentage.
What About a Battery?
A battery changes the timing of imports, exports and self-consumption, but it also adds capital cost, conversion losses and a component that may not last as long as the PV modules. Energy Saving Trust currently says battery storage tends to cost around £5,000–£8,000 and gives a typical battery lifespan of about 10–12 years.
That means a 25-year battery model may need at least one replacement assumption. On some time-of-use tariffs the battery can create additional value by charging cheaply and discharging during expensive periods; on high export tariffs, the incremental saving from retaining solar can be smaller. We therefore model storage as a separate decision rather than assuming it always shortens payback.
Do Not Treat a 25-Year Model as a Guaranteed Investment Return
Solar savings depend on weather, equipment performance, occupancy, tariffs, export terms, maintenance, future regulation and energy prices. A responsible model is a decision aid, not a promise. It should be updated when the customer's real tariff or consumption changes.
Maintenance and Replacement Allowances Belong in the Model
A 25-year cash-flow model should not assume that every component lasts untouched for the entire period. PV modules commonly carry long performance warranties, but inverters, monitoring hardware and batteries are separate components with different warranty and service lives. That is why our worked example includes an illustrative inverter allowance rather than presenting installation cost as the only lifetime expenditure.
The correct allowance depends on the equipment selected and the warranty offered at the time of installation. It can also be sensible to include an inspection or servicing allowance where access, commercial insurance or system complexity justifies it. Our solar electric servicing work is kept separate from the generation forecast so customers can see what is a performance assumption and what is an ownership-cost assumption.
What a Good Model Does With Uncertainty
Instead of hiding uncertainty, a good model makes it visible. We normally want to know which assumption changes the answer most. If a 2p change in export rate barely moves the 25-year result but a 20% reduction in generation changes it dramatically, then site yield deserves more scrutiny than export tariff shopping. If a battery only works financially when a very large peak/off-peak spread is assumed, the customer should be able to see that sensitivity before buying it.
This is also why we avoid presenting the highest scenario as the “expected saving”. The base case should be reasonable, the downside case should remain credible, and the upside case should be clearly labelled. A customer can then decide whether the project still makes sense if reality lands somewhere between them.
VAT Changes Can Alter the Upfront Cost
Under current HMRC rules, qualifying installations of solar panels in residential accommodation are zero-rated until 31 March 2027, with the reduced 5% rate scheduled to return from 1 April 2027. A quote accepted after a tax change may therefore have different economics from one priced today.
Payback Is Useful — Lifetime Cash Flow Is Better
Energy Saving Trust's current July 2026 examples show solar payback with export payments at roughly 9–12 years across its sample locations and occupancy patterns. That is a useful independent benchmark, but a homeowner should still look beyond the break-even date. A system can continue generating value for many years after payback, while replacement costs and tariff changes also happen later in life.
What We Put Into a Real Solar Financial Model
Minimum Inputs
- 12 months of actual electricity consumption where available.
- Current import tariff, including time bands where relevant.
- Current export tariff or a clearly stated export assumption.
- Site-specific annual generation and shading assessment.
- Expected self-consumption based on occupancy and flexible loads.
- Installed system price and any battery or EV-charger cost.
- Reasonable allowances for inverter or battery replacement where relevant.
- At least three future energy-price scenarios rather than one asserted forecast.
The Practical Conclusion
Solar can materially reduce long-term exposure to grid electricity, but the strongest case is built with transparent assumptions. The current independent evidence shows typical domestic systems around £7,600 and payback examples around 9–12 years, not a universal six-year return. We would rather give a customer a model they can interrogate than a dramatic 25-year number they cannot reproduce.
If you want a site-specific assessment, request a quote and provide your annual kWh use. We can then replace the illustrative figures above with the geometry, generation and tariff assumptions relevant to your property.
