When investing in a commercial solar panel system, you want to know that it will be worth the investment. Many people harp on about solar panels generating a great ROI, but not much is mentioned about the time frame for that. If you are researching solar panels for your commercial building, one of the most important things you are likely looking for is the payback period on solar panels for commercial buildings.
A payback period refers to the time it takes to recuperate the amount of money invested into the installation of the system. It is achieved through the savings on energy bills predominantly, but could also be helped by the Smart Export Guarantee (SES), which uses your solar panel system as a way of generating an income for excess energy produced.
At Prostar Energy, we are experts in commercial solar panel systems, with our team having over 50 years of combined experience in the industry. Having spent so long in the industry, we have seen how quickly businesses can start making money back on their systems thanks to the amount they save on their energy bills.
In this blog, we discuss the key factors that will influence the time frame for your payback period and give you some ideas of when you can expect to see your system producing some return on your initial investment.
Key Factors That Affect the Payback Period for Commercial Solar Panels
Before we delve into potential time frames for generating ROI on your commercial solar panels, we must point out there are a number of factors that will influence your payback period.
Factors will include:
- Installation Costs – the amount of money paid for the installation of the system (obviously, the more money invested, the longer it will take to get back).
- Energy consumption and savings potential – the more energy your commercial building uses, the more you are going to benefit from the savings. The right solar power system will generate most of your energy, meaning your reliance on the National Grid is reduced, and you save more on your energy bills.
- Government incentives and tax breaks – the best scheme available is the Smart Export Guarantee, which will allow you to sell excess energy to the National Grid, making your solar power system a revenue generator. If you are able to do this, the payback period will be shorter as you will be generating money with the investment.
- Electricity costs and trends – as energy prices rise, solar panels become a more cost-effective solution. The higher the energy prices, the bigger your savings, shortening your payback period.
- Maintenance and operational costs – commercial solar panel systems do require maintenance, which will cost, so you need to factor this into any financial planning. However, the cost is minimal compared to other maintenance costs of traditional energy sources.
Typical Payback Periods for Commercial Solar Panels in the UK
The payback period will very much depend on the size and complexity of your commercial solar panel system, the cost of installation and energy consumption. Therefore, it can be very different from situation to situation. This means it is important not to take the following as a rule of thumb and instead use it as a guideline.
If you want exact figures, you must talk to a professional company, such as us, who will be able to forecast savings based on your unique solar panel system design and energy consumption.
Typically, in the UK, you can expect a payback period on solar panels for commercial buildings to be between five and 10 years.
Some examples are:
- Small business properties that consume a moderate amount of energy see shorter payback periods of around five to eight years due to their higher daily energy consumption and potential for energy export.
- Larger industrial facilities that are energy intensive have the shortest payback period because of the amount of energy they use and, therefore, their savings opportunities. For a warehouse, manufacturing facility or the likes, you could expect a three to six-year payback period.
Calculating Your Payback Period on Your Solar Panels For Commercial Buildings
You can calculate the period it might take for you to start generating ROI on your solar panel system using a calculation.
You will need to work out your yearly savings from using a solar panel system. Plus, find out how much money you might be able to gain from schemes such as the SEG. This will give you your total annual savings.
Then, all you need to do is divide the investment amount by the total annual savings.
This will give you the number of years it will take for you to recuperate your investment amount.
Here is an example using a medium-sized office building:
Information for the calculation:
- Initial Cost of Solar Installation: £50,000
- Annual Electricity Savings: £8,000 (based on average energy use and energy rates)
- Government Incentives: £2,000 per year from the Smart Export Guarantee (for selling unused power to the grid)
The calculation:
- Total annual savings = £8,000 on energy bill savings + £2,000 from SEG = £10,000
- Payback period = £50,000 for the initial investment / £10,000 of total savings = 5 years
Benefits Beyond the Payback Period
Of course, installing a commercial solar panel system with a storage battery offers many more benefits than the ROI it can generate, especially in the long term and after the payback period.
- Increased savings and revenue income – once you have paid back the investment amount, your savings will turn into profit. Plus, any money you make from selling excess energy is also profit.
- Environmental impact – solar panels offer many environmental benefits as they help you reduce your carbon footprint and reliance on fossil fuels, helping you meet sustainability goals.
- Brand reputation and benefits – solar panels enhance your green credentials, helping you align with audiences who prioritise sustainability and environmentalism, bringing in more revenue from these audiences.
- Energy independence and future-proofing – solar panels help you become independent from the National Grid, protecting you from blackouts and power outages. It also protects you from future changes to traditional energy consumption regulations that might be put in place to reduce reliance on fossil fuels.
How ProStar Energy Can Help You Go Solar
There are several factors that will influence your payback period on solar panels for commercial buildings. But you can easily calculate it if you know the installation amount and how much you can expect to save each year.
If you want to understand your payback period better, don’t hesitate to get in touch with a professional commercial solar panel company such as us.
At Prostar Energy, we have been helping commercial businesses switch to solar power and save significant amounts on their energy bills. Our experience has taught us the expected payback periods for different industries, so we can advise you on what you can expect based on rough energy consumption notes.
From our initial consultation, we can give you a rough savings figure and payback time frame. If you want more accurate data, we can work with you to determine your needs and create a more precise scenario.
Contact us today to start your process of working out your ROI and payback period for solar panels on your commercial building. Call us on 0331 6302 225 or complete our online contact form to request a callback.
