Solar ROI Under Rising vs Falling Energy Prices

Author: Steve Fairless
Originally Published: 29th March 2026 · Updated: 2nd September 2026

Solar can remain financially valuable whether electricity prices rise, stay broadly flat or fall, but the return changes because every kilowatt-hour you avoid buying from the grid has a different future value. The important point is that no credible installer can know today what household electricity will cost for each of the next 25 years. We therefore prefer scenario modelling to a single headline payback promise.

At Sustainable Energy Engineering, we build the financial case from the system's expected generation, the customer's consumption profile, realistic self-consumption, export, equipment life and replacement assumptions. Energy-price growth is then one variable in the model rather than a sales assumption hidden inside it.

This guide shows what happens when we hold the solar energy displaced by a system constant and change only the future import price. It is deliberately transparent: the example is not a forecast or a quotation, but it demonstrates why two installers can produce very different lifetime-saving figures from the same roof.

Start With the Price We Can Actually Verify

For the period from 1 October to 31 December 2026, Ofgem's price-cap page lists an average Direct Debit electricity unit rate of 26.32 pence per kWh across England, Scotland and Wales. The preceding July-to-September period is listed at 26.11 pence per kWh. These are average capped rates rather than a prediction of what any individual household will pay, but they give us a clear public reference point for a worked example.

A Transparent 25-Year Scenario

Assume, purely for illustration, that a solar system avoids 3,000 kWh of grid imports in year one. At 26.32p/kWh, those avoided imports are worth £789.60 before considering export income. To isolate the price effect, the table below holds annual displaced energy constant and changes only the electricity unit price by +3%, 0% or -3% each year.

Important: this is a price-sensitivity illustration, not a financial forecast. It intentionally excludes module degradation, changing consumption, export income, maintenance, inverter or battery replacement, finance costs, inflation in other costs, tax and discounting. Those variables belong in a full investment model.

Why a Fixed “5-Year Payback” Claim Can Be Misleading

A payback figure is the result of assumptions, not a permanent characteristic of the equipment. If a model assumes high annual electricity inflation, very high self-consumption and no future replacement costs, it can produce an impressive headline. Change those assumptions and the answer changes.

We prefer to show the customer the inputs. For domestic solar PV, that normally means annual consumption, available roof capacity, modeled generation, shading, self-consumption estimate, export assumption and any planned future loads. The financial result should be traceable back to those numbers.

Generation Comes Before Financial Modelling

A return model is only as good as the energy model beneath it. MCS 032:2025 sets out the standard estimation approach using installed array capacity, location-specific yield, orientation, inclination and shading. PVGIS is also useful as an independent solar-resource and performance modelling reference.

Self-Consumption Is Usually More Valuable Than Export

The strongest direct saving normally comes from solar electricity that replaces electricity you would otherwise import. Exported electricity can still be valuable through the Smart Export Guarantee, but export rates are set by suppliers and are not the same thing as the retail import price.

This is why two homes with identical arrays can have different financial outcomes. A household using electricity during the day may naturally consume more solar. Another may export heavily unless loads are shifted or storage is added.

How a Battery Changes Solar ROI

A battery can increase self-consumption by moving daytime surplus into the evening, but it also adds capital cost, conversion losses, power limits and another component with its own warranty and expected service life. The question is therefore not simply whether storage increases self-consumption; it is whether the extra usable energy and tariff flexibility justify the extra cost for that customer.

When we model solar battery storage, we look at usable capacity, charge and discharge power, daily surplus, evening demand, off-peak charging opportunities and the value of backup if required. Oversizing a battery can weaken ROI just as easily as undersizing one can leave useful surplus uncaptured.

The Variables We Stress-Test Before We Talk About Lifetime Savings

Falling Energy Prices Do Not Make the Panels Stop Working

A lower future unit price reduces the cash value of avoided imports, but the array still produces electricity. That matters because solar is both an energy asset and a price-risk hedge: it reduces the volume of electricity that must be bought from the market. The value of that hedge is greatest when grid prices are high, but it does not become zero just because a future tariff is lower than today's.

The sensible question is therefore not “will prices definitely rise?” It is “does the project remain acceptable across a range of plausible outcomes?” A design that only works financially under aggressive inflation assumptions is less robust than one that still makes sense under conservative assumptions.

What We Recommend for a Real Solar Investment Decision

Ask for the energy model and the financial assumptions separately. A customer should be able to see how much energy is expected to be generated, how much is expected to be used directly, how much is exported and what price has been assigned to each stream. If the proposal includes 20 or 25 years of savings, it should be clear how future prices, degradation and replacement costs were handled.

At Sustainable Energy Engineering, we would rather show a range that can be explained than one very large lifetime-saving number that depends on assumptions the customer never sees.

Nominal Savings and Present Value Are Not the Same Thing

A 25-year total shown as a simple sum of future pounds is a nominal cash total. It does not automatically tell you what those future savings are worth in today’s money. A more advanced investment appraisal can discount future cash flows to reflect the time value of money and compare solar against alternative uses of the capital.

That distinction matters when quotes use very large lifetime numbers. A £1 saving in year 25 is still useful, but it is not economically identical to £1 saved today. We therefore want customers to know whether a proposal is showing simple cumulative savings, discounted present value, internal rate of return, or just simple payback.

Export Rate and Import Rate Should Never Be Blended Into One Price

Suppose a system generates 4,000 kWh in a year. If 2,500 kWh is consumed in the property and 1,500 kWh is exported, those two energy streams should be valued separately. Applying the full retail import rate to all 4,000 kWh would overstate the saving unless the export tariff happened to match it.

The same applies to battery modelling. A battery may convert an exported kWh into a later self-consumed kWh, but the improvement in value should be compared with battery losses, cycling and capital cost. It is the incremental financial benefit that matters.

Future Consumption Can Be as Important as Future Prices

A household that adds an EV, heat pump, electric hot-water control or home office can change the value of solar without electricity prices moving at all. More daytime consumption can increase self-consumption; extra winter demand can increase imports at a time when solar output is lower.

That is why we ask about expected lifestyle and electrification changes. A 25-year asset should not be designed only around the last 12 months of bills if the household already knows its demand is about to change.

Five Questions We Would Ask About Any Impressive ROI Claim