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.
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.
At the bottom of this bracket, we have broken down the cost of a 50kW solar system in its own guide — panel counts, roof area needed, DNO connection and the line items that move the installed price up or down.
G98 vs G99: Grid Connection for Small Factory Solar
The simplified G98 route (connect-and-notify) only covers micro systems — up to 3.68 kW (16 A) per phase, roughly 11 kW on a three-phase supply. Every 50–150kW factory system therefore needs a G99 application to the DNO before installation. Knowing the process helps you plan it into the programme rather than discover it late.
G98 Connection (Under 3.68 kW (16 A) per phase)
G99 Connection (Above 3.68 kW per Phase — Every 50–150kW System)
Planning Tip: Put the G99 Application at the Front of the Programme
Submit the G99 application at design stage — approval typically takes 4–8 weeks and can run in parallel with procurement. At 50–150kW on an existing three-phase factory supply, applications are usually straightforward; if the DNO applies an export limit it changes the inverter settings, not the project. Budget £500–£3,000 for DNO fees.
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.
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.
Regional LEP and Growth Hub Grants
VariesLocal 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.
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.
75kW System — Engineering Workshop
G98 connection on single-phase supply. Completed in 4 days. Company used UKSPF grant (£18,000) to reduce upfront cost further.
100kW System — Food Preparation Unit
G99 on three-phase supply. Refrigeration and processing loads provided near-100% self-consumption. Daytime operations maximised generation capture.
90kW System — Commercial Printer
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? ▼
G98 (connect-then-notify, no prior application) only covers systems up to 3.68 kW (16 A) per phase, so every system in the 50–150kW class needs a G99 application to the DNO before installation. 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.
Related Guides and Resources
Medium Factory ROI (150–500kW)
ROI analysis for medium UK manufacturers considering larger systems.
Large Industrial Site ROI (500kW–2MW)
Enterprise solar analysis for large factories and industrial sites.
Factory Solar Panel Costs
Full 2026 pricing guide for all system sizes.
Grants and Funding
All available grant programmes for industrial solar in 2026.
Capital Allowances
How to maximise AIA and tax relief on your solar installation.
Solar PPA vs Ownership vs Lease
Compare finance models: zero-upfront PPA, outright purchase and lease.
Get a Free Factory Solar Assessment
Our specialists provide a detailed savings projection with no obligation.
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