DCF model structure for warehouse solar
A correct warehouse solar DCF contains: (1) PVSyst yield forecast: year 1 generation (kWh), degradation curve (0.35-0.45%/yr), P50/P90 spread. (2) Self-consumption profile: hour-by-hour or half-hourly consumption vs generation, self-consumption ratio (%), export volume. (3) Revenue and savings: self-consumption value (£/kWh × self-consumed kWh); SEG export income (£/kWh × exported kWh); avoided grid import (the primary value driver). (4) Capex: EPC cost, DNO connection fee, structural survey, design. (5) Tax: AIA in year 1 (up to £1m), 50% FYA above £1m, corporation tax shield. (6) Opex: O&M (£5-8k/yr per 500 kW), monitoring (£1-2k/yr), insurance increment. (7) Terminal value: system residual at year 25.
PVSyst yield validation
PVSyst is the industry-standard yield modelling tool. Key parameters to validate: Global Horizontal Irradiance (GHI) source — Meteonorm 8.1 or SolarGIS (reject older sources); Shade scene — 3D model of surrounding obstructions; Module degradation curve — manufacturer-specific (Tier 1 bifacial: 0.35-0.40%/yr); Performance Ratio target — 79-83% for well-designed UK rooftop systems; Transposition model — Perez preferred for UK latitude. Our PVSyst models are typically within 2% of measured first-year actual generation.
Self-consumption modelling from HH data
The most accurate self-consumption modelling uses actual half-hourly (HH) meter data. Data source: request HH export from your energy supplier or smart meter. Overlay generation profile (from PVSyst hourly output) against HH consumption. Calculate: self-consumption ratio (%) = self-consumed kWh / total generated kWh. Cold store typical: 87-94% self-consumption. Standard logistics: 72-82%. Cross-dock / intermittent: 65-77%. Our self-consumption models from HH data are typically within 5% of measured outturn.
Sensitivity analysis — the grid tariff problem
Grid retail tariff trajectory is the largest financial model uncertainty. Our base case uses current tariff with no real-terms growth — conservative. Key sensitivities to run: (1) Grid tariff +2%/yr real: payback 0.5-0.8 years faster. (2) Grid tariff flat (base): standard payback. (3) Grid tariff -1%/yr real: payback 0.3-0.5 years slower. The solar system still delivers positive NPV in all three scenarios for most warehouse types. Show the sensitivity table in any board capex submission — it demonstrates rigour and reduces approval risk.
Correct AIA and FYA tax treatment
100% Annual Investment Allowance (AIA): first £1m of qualifying capex expensed in year 1. Tax shield: £1m × 25% CT rate = £250k. For capex above £1m: 50% First Year Allowance (FYA) on the excess. Example: £1.4m install — AIA on £1m (£250k shield), FYA on £400k (£50k shield in year 1). Within Freeport zones: 100% ECA available on qualifying assets in addition to AIA — check with tax advisor. The AIA/FYA tax shield materially accelerates after-tax payback — always show on the DCF.
Common questions
How accurate is PVSyst modelling for UK warehouse rooftops?
Our PVSyst models, using Meteonorm 8.1 GHI data and full 3D shade scenes, are typically within 2% of measured first-year actual generation across our UK portfolio. The main sources of variance are: unexpected shading (HVAC units installed post-survey), module soiling in high-particulate environments (food processing, aggregate handling), and grid curtailment events. We use P90 yield (not P50) for payback calculation to provide a conservative base case.
What discount rate should I use for warehouse solar NPV?
Most large UK logistics operators use a 7-10% nominal WACC for infrastructure capex decisions. Solar PV, with a 25-year output warranty and fixed generation profile, is typically risk-rated lower than operational capex — many operators use 6-8% for solar. At 7% discount rate: a 1 MW warehouse install delivering £202k/yr saving from year 1 has NPV of approximately £1.8m over 25 years against £750k capex — IRR 26%+. We model at the client's specified WACC.