Calculating warehouse solar ROI is a 6-step process: (1) PVSyst yield model, (2) self-consumption from HH meter data, (3) avoided grid cost, (4) AIA tax shield, (5) 25-year DCF, (6) IRR and payback. Most commercial solar quotes only show payback — this guide covers the full picture.
Step 1: PVSyst yield model
PVSyst is the industry-standard photovoltaic simulation tool. A rigorous PVSyst model uses: site-specific irradiance data (Meteonorm or SolarAnywhere, not UK-average); exact roof orientation (azimuth and tilt from structural drawings); module temperature coefficients for the specific panel selected; system losses (DC cables, AC cables, inverter efficiency, soiling, shading). Output: monthly generation profile (kWh). UK rule of thumb: 920-960 kWh/kWp/yr in the Midlands and North; 1,000-1,050 kWh/kWp/yr in the South East; 1,050-1,100 kWh/kWp/yr in the East.
Step 2: Self-consumption from HH meter data
12 months of half-hourly (HH) meter data is the input. We match the hourly solar generation profile against the HH load profile to calculate: self-consumed kWh (solar displaces grid); exported kWh (solar exceeds load, goes to grid via SEG). Self-consumption varies significantly by warehouse type: cold chain 88-94%; fulfilment 82-89%; distribution centre 72-81%; cross-dock 60-74%; self-storage 50-65%.
Step 3: Avoided grid cost and SEG export revenue
Avoided grid cost = self-consumed kWh × grid retail tariff (2026: 20-24p/kWh for commercial). SEG export revenue = exported kWh × SEG tariff (2026: 4-15p/kWh depending on supplier and tariff type). Grid retail tariff trajectory over 25 years is the largest financial model uncertainty — we model under central (2.5%/yr escalation) and conservative (1.5%/yr) assumptions.
Step 4: AIA tax shield
100% Annual Investment Allowance on first £1m capex: deducted from taxable profit in year of installation. At 25% corporation tax: £250,000 tax saving per £1m capex. This is a year-one cash flow item — significantly improves IRR relative to simple payback. After-tax payback is typically 1-2 years faster than simple payback. Freeport ECA stacks on top for eligible sites.
Step 5: 25-year discounted cash flow
Full 25-year DCF captures: year-one AIA tax shield (positive); annual avoided grid cost (growing with tariff escalation); annual SEG export revenue; annual O&M cost (£8-15/kW/yr); system degradation (0.4-0.5%/yr, compounding over 25 years); capital cost (year 0, negative); inverter replacement at year 12-15 (approx 10-15% of original capex). Discount rate: typically 6-8% for UK commercial property. NPV at 8% discount rate for a typical 1 MW warehouse install: £600,000-£900,000.
Step 6: IRR and payback
Simple payback (years) = capex ÷ year-1 net saving. After-tax payback = (capex - AIA tax shield) ÷ year-1 net saving. IRR = the discount rate that makes NPV = 0. For typical UK warehouse: IRR 15-25% — well above commercial hurdle rates. Worked example: 1 MW Midlands distribution centre. Capex: £800,000. Year-1 avoided grid cost: £138,000. Year-1 SEG: £9,200. Year-1 O&M: £10,000. Year-1 net saving: £137,200. AIA tax shield: £200,000. Simple payback: 5.8 years. After-tax payback: 4.4 years. IRR: 18.3%.
Common modelling mistakes to avoid
Three mistakes that make commercial solar paybacks look better than they are: (1) Using UK-average irradiance instead of site-specific PVSyst (can overstate yield by 5-15%); (2) Assuming 90%+ self-consumption without modelling actual HH meter data (most warehouses are 70-80%, not 90%); (3) Applying 100% AIA to all capex in a group where multiple subsidiaries have already claimed AIA cap (only £1m AIA per qualifying entity per year).
See more
Warehouse solar costs and payback: /warehouse-solar-costs/. Tax allowances: /guides/warehouse-solar-tax-allowances/. Free DCF from your meter data: /contact/.