Payback is the installed cost divided by the yearly saving, and the saving depends mostly on how much of the energy you use yourself and what you would otherwise pay for it. The Ofgem price cap averages about 26.3p per kWh for electricity from October to December 2026, with a standing charge of about 54.8p a day.
The examples below are illustrations, not predictions. Replace the inputs with your own usage, tariff and quotes.
The method
- Find the yearly energy saved or generated in kWh, from your usage or the installer's design.
- Multiply by the price you avoid for energy you use yourself, and by the export rate for energy you send to the grid.
- Subtract any new running cost, such as extra electricity for a heat pump.
- Divide the net installed cost (after any grant) by the net yearly saving to get a simple payback in years.
Simple payback ignores future price changes, equipment replacement and the time value of money, so use it to compare options, not to forecast.
Prices to use
| Input | Figure used here |
|---|---|
| Electricity unit price | About 26.3p per kWh (Ofgem price cap, October to December 2026 average) |
| Electricity standing charge | About 54.8p per day |
| Gas unit price | About 8p per kWh |
| Export rate (SEG) | About 12p per kWh on one widely available open tariff |
Your own tariff will differ, and prices change every quarter. Check the figures you are quoted against your latest bill.
Worked examples
Solar PV: a 4kWp system
Suppose the system generates about 3,400kWh a year and you use half of it. Use of 1,700kWh at 26.3p saves about £447, and exporting 1,700kWh at 12p earns about £204, a total of around £650 a year. At an installed cost of £7,000 that is a simple payback of roughly 11 years. A larger share used at home, or a higher export rate, shortens it. See the Solar PV guide.
Heat pump: replacing a gas boiler
For a home needing 12,000kWh of heat a year, a gas boiler at about 88% efficiency uses roughly 13,600kWh of gas, around £1,090 at 8p. A heat pump with a SCOP of 3 uses 4,000kWh of electricity, around £1,050 at 26.3p. The running costs are similar, so the case rests on the grant and on avoiding boiler replacement, not on large savings. Against oil, LPG or direct electric heating the savings are often larger. See the Heat pump guide.
EV charging at home
A car driving 7,500 miles a year at 3.5 miles per kWh uses about 2,140kWh, around £560 at 26.3p. A cheaper off-peak or EV tariff, or your own solar, lowers that. See the EV charging guide.
Battery
A battery earns by shifting cheap or free energy to expensive hours. If it shifts 2,000kWh a year and each shifted kWh saves about 15p net, that is £300 a year, and a £6,000 battery then takes 20 years to repay. Payback is often much longer than solar alone, so model it carefully. See the Battery guide.
What changes the answer
- Self-consumption: energy used on site is worth far more than exported energy.
- Tariff: time-of-use, EV and heat pump tariffs can change the economics a lot.
- Insulation: a lower heat demand cuts heat pump running costs directly.
- Grants and VAT: these reduce the net cost. Check the current terms.
- Maintenance and replacement: inverters and batteries have a shorter life than panels, so allow for replacement.
- Price changes: higher future prices improve payback, lower prices worsen it.
Beyond payback
Some benefits do not show in a payback sum: warmer and more comfortable homes, protection from price rises, lower carbon, and a better EPC rating. See the EPC glossary entry. Weigh these alongside the numbers.
Sources and further reading
- Ofgem: energy price cap and standing charges Electricity unit rates and standing charges
- HMRC: VAT rates for energy-saving materials (VENSAV2083) Zero rate dates for batteries and heat pumps
External links open in a new tab. Last checked October 2026.
Frequently asked questions
How do I work out payback for solar panels?
Divide the installed cost by the yearly saving. The saving is the energy you use yourself at the price you would pay, plus exported energy at the export rate.
Are heat pumps cheaper to run than gas boilers?
Often similar, because electricity costs more per unit but a heat pump delivers several units of heat per unit of electricity. They are usually cheaper than oil, LPG or direct electric heating.
What electricity price should I use?
Use your own tariff. For reference, the Ofgem price cap averages about 26.3p per kWh for October to December 2026, and prices change each quarter.
Does a battery pay for itself?
Often slowly. Payback depends on how much cheap energy you can shift to expensive hours, and 10 years or more is commonly quoted, so model it with your own tariff.
Are these figures guaranteed?
No. They are illustrations using current prices and typical assumptions. Use your own usage, tariff and written quotes.