ROI Guide: Small Factories

Solar ROI for Small Factories (50–150kW): Is the Investment Worth It?

Yes — and the numbers prove it. A 100kW solar system for a small UK factory delivers 3-5 year payback at 2026 electricity rates. Here is the complete financial analysis for SME manufacturers.

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Quick Answer: Small Factory Solar ROI Summary

A 100kW solar system for a small factory typically costs £70,000–£95,000 installed. At 2026 electricity rates of 28–32p/kWh, annual savings of £18,000–£26,000 give a payback period of 3–5 years. With 100% Annual Investment Allowance, the after-tax cost for a 25% corporation tax payer is reduced by £17,500–£23,750 — making the effective after-tax payback period closer to 2.5–3.5 years.

Small Factory Solar: Full Cost and ROI Table 2026

All figures based on 2026 installed costs, UK electricity rate of 28p/kWh daytime rate, 90% self-consumption assumption, and 25% corporation tax for AIA calculation. Generation figures use 900 kWh/kWp/year (typical UK average for south-facing industrial roof).

System Size	Installed Cost	Annual Generation	Annual Savings (28p)	AIA Tax Saving (25%)	After-Tax Cost	Payback Period
50kW	£38,000–£50,000	45,000 kWh	£12,600	£9,500–£12,500	£28,500–£37,500	2.5–3 yrs
75kW	£54,000–£72,000	68,000 kWh	£19,000	£13,500–£18,000	£40,500–£54,000	2.8–3.5 yrs
100kW (most popular)	£70,000–£95,000	90,000 kWh	£25,200	£17,500–£23,750	£52,500–£71,250	2.8–3.5 yrs
150kW	£100,000–£135,000	135,000 kWh	£37,800	£25,000–£33,750	£75,000–£101,250	2.5–3.5 yrs

Note on electricity rates: If your factory pays 30p/kWh or more (common for businesses on variable tariffs in 2026), the savings and payback periods above improve proportionally. A 100kW system at 30p/kWh generates £27,000/year in savings — an after-tax payback of under 3 years.

G98 vs G99: Grid Connection for Small Factory Solar

One of the most significant advantages of small factory solar (under 50kW per phase) is the simplified G98 grid connection process. Understanding the threshold helps you plan your installation efficiently.

G98 Connection (Under 50kW per Phase)

✓ Notification only — no formal application required

✓ Self-certification by MCS-certified installer

✓ No DNO approval waiting time

✓ Minimal additional cost (£200-£500 for notification)

✓ Installation can proceed immediately

Example: A 49kW single-phase system or a 3 × 49kW = 147kW three-phase system both qualify for G98.

G99 Connection (50kW or Above per Phase)

● Formal application to Distribution Network Operator (DNO)

● DNO technical assessment and approval required

● Typical approval timeline: 4-8 weeks

● Additional cost: £500-£3,000 depending on DNO and system complexity

● Protection relay may be required for larger systems

Note: G99 is routine and well-understood. It adds time and modest cost but does not change the fundamental economics of the investment.

Planning Tip: Maximise G98 Benefit on Three-Phase Supplies

Three-phase industrial supplies allow up to 49kW per phase under G98 — meaning a 147kW system can qualify for the simplified connection process. If your specification requires just over 50kW per phase, it is worth reviewing whether a slight design modification can bring each phase under the G98 threshold while achieving your overall capacity target.

Grants for Small Factory Solar: SME-Specific Funding

Several grant programmes specifically target SME manufacturers for solar and energy efficiency investments. Combining these with AIA can dramatically reduce the net cost of installation.

UK Shared Prosperity Fund (UKSPF)

Up to 40%

Administered through local authorities and Growth Hubs, UKSPF provides capital grants for SME green investment. Eligibility and grant rates vary by local authority area. Many rural and post-industrial areas offer enhanced rates.

Typical grant: £10,000–£50,000 for solar installations. Check with your local Growth Hub for availability.

Innovate UK Smart Grants

Up to 70%

Available for projects with an innovative element — e.g., combining solar with AI-driven energy management, battery storage optimisation, or manufacturing process integration. SMEs can receive up to 70% of eligible project costs.

Typical grant: £25,000–£500,000 for qualifying R&D projects. Quarterly application rounds.

Regional LEP and Growth Hub Grants

Varies

Local Enterprise Partnerships (now often incorporated into Mayoral Combined Authorities) offer a variety of SME capital grant programmes. These are the most accessible and fastest to access for straightforward solar installations.

Typical grant: £5,000–£30,000 for qualifying SME green capital projects. Contact your local Growth Hub for current availability.

Common Mistakes Small Factory Owners Make with Solar

After 650+ industrial solar installations, we have seen these mistakes repeatedly. Avoiding them can save thousands and ensure your system performs as expected.

✗ Undersizing the System

Specifying a system based only on current consumption, without accounting for planned growth. A factory adding a new production line 18 months after installation will quickly find the solar system undersized. Always size for 3-5 year projected consumption, not current usage.

✗ Ignoring Roof Condition

Installing solar on a roof that needs replacing in 5-7 years. The cost of temporarily removing and reinstalling panels is typically £8,000-£20,000. Always survey roof condition before specifying solar. If the roof has less than 15 years of remaining life, replace it first or factor replacement into the cost model.

✗ Missing the AIA Year-End Deadline

AIA is claimed in the tax year the asset is purchased. If installation completes in April but your tax year ends in March, you miss a full year of tax benefit. Plan installations to complete before your company's financial year end to claim AIA at the earliest opportunity.

✗ Not Checking Export Tariff Options

Solar systems produce more electricity than you can use during lower-demand periods. Without registering for an export tariff (Smart Export Guarantee), this excess generation earns nothing. SEG rates of 3-10p/kWh are available from most energy suppliers and should be factored into ROI calculations for systems with significant export periods.

Real Case Studies: Small Factory Solar in Action

Three real-world examples from our installation portfolio, anonymised but based on actual project data.

Light Engineering, Midlands

75kW System — Engineering Workshop

Installed cost £61,500

Annual generation 66,000 kWh

Annual saving £18,500

AIA tax saving £15,375

Effective payback 2.5 years

G98 connection on single-phase supply. Completed in 4 days. Company used UKSPF grant (£18,000) to reduce upfront cost further.

Food Prep, Yorkshire

100kW System — Food Preparation Unit

Installed cost £82,000

Annual generation 88,000 kWh

Annual saving £27,000

AIA tax saving £20,500

Effective payback 2.8 years

G99 on three-phase supply. Refrigeration and processing loads provided near-100% self-consumption. Daytime operations maximised generation capture.

Printing, South East

90kW System — Commercial Printer

Installed cost £74,000

Annual generation 81,000 kWh

Annual saving £24,300

AIA tax saving £18,500

Effective payback 2.7 years

East-West roof split maximised morning and afternoon generation for dual-shift operation. Added battery storage 18 months post-installation to capture weekend excess.

Frequently Asked Questions

What's the minimum viable solar system for a factory? ▼

The minimum viable system for a factory is typically 50kW, which requires approximately 125-135 solar panels and around 250-350m² of clear roof space. At 50kW you generate approximately 45,000 kWh/year and save approximately £12,600/year at 28p/kWh. Below 50kW, the cost per kWp increases significantly and the economies of scale that make factory solar so attractive begin to diminish.

Can a small factory claim AIA on solar? ▼

Yes. Solar panels qualify for 100% Annual Investment Allowance (AIA) in the year of purchase for all UK businesses, including sole traders, partnerships and limited companies. The AIA limit is £1,000,000 per year — well above the cost of any small factory solar installation. A company paying 25% corporation tax on a £80,000 solar installation saves £20,000 in tax in the year of purchase, effectively reducing the after-tax cost to £60,000.

Does a 100kW factory solar need G99? ▼

Systems under 50kW per phase use the G98 connection standard (simplified notification to the DNO, no application required). Systems of 50kW or above require G99 (formal application to the DNO). For a 100kW three-phase system, this means G99 applies. However, G99 for systems in the 50-150kW range is typically straightforward, with DNO approval taking 4-8 weeks. The additional cost is usually £500-£3,000 for the application and any required protection relay equipment.

Are there grants for small factory solar? ▼

Yes. SME manufacturers can access several grant programmes for solar installations. UK Shared Prosperity Fund (UKSPF) administered through local authorities can cover up to 40% of installation costs for eligible SMEs. Innovate UK Smart Grants and Knowledge Transfer Partnerships can fund solar-integrated projects with innovative elements. Regional LEP (Local Enterprise Partnership) and Growth Hub grants vary by area but many offer capital grants of £10,000–£50,000 for SME green energy projects. Contact your local Growth Hub to check current availability.

What's the smallest solar system worth installing on a factory? ▼

The smallest system genuinely worth installing on a factory is 30-50kW, provided the factory has daytime electricity consumption to absorb the generation (i.e., operates during daylight hours). Below 30kW, the cost per kWp rises above £900-1,000, eroding the payback period. The sweet spot for small factories is 75-100kW, where installed costs per kWp typically fall to £700-750 and payback periods of under 4 years are consistently achievable.