Every financial metric in a commercial solar business case — payback, net present value, internal rate of return — is a different view of the same 25-year cashflow. Understanding how that series is built is the fastest way to challenge a number that looks too good, or to rescue a roof that looks too weak on payback alone.
For UK commercial rooftop PV, the cashflow model sits at the heart of commercial solar feasibility. Get the annual benefits and costs right at screening level, and the board metrics follow. Get them wrong, and precise-looking NPV is meaningless.
The structure of the model
A standard commercial rooftop model has two phases.
Year zero (investment). Negative cashflow: total installed cost including modules, inverters, mounting, electrical works, commissioning, and allowances for grid connection or enabling works identified at feasibility. What is in scope must be written down — “capex” without definition is a common source of dispute later.
Years one to twenty-five (operation). Annual net benefit:
- Avoided electricity import (self-consumed kWh × relevant tariff)
- Plus export revenue (exported kWh × export rate)
- Minus operating expenditure (O&M, monitoring, insurance)
- Minus occasional capital items (typically inverter replacement around mid-life)
Some models add a terminal or residual value in year twenty-five; many corporate rooftop cases simply end at year twenty-five with zero residual. Either is acceptable if stated.
The commercial solar financials hub explains how this series feeds NPV, IRR, and payback.
Year-one generation and degradation
Year-one kWh output comes from roof-specific modelling: usable area, orientation, pitch, shading, system losses, and estimated capacity. Stage1Energy documents this approach in our methodology.
Subsequent years reduce output by a degradation factor. Modern crystalline modules are often modelled at 0.4–0.5% per year, compounding over the life. Over 25 years, that materially reduces late-life savings — and therefore NPV — compared with a flat generation assumption.
Availability — downtime from inverter faults or grid outages — may be folded into losses or applied as a separate factor. Feasibility should say which.
Self-consumption and export in each year
Annual benefit splits each year’s generation into kWh used on site and kWh exported. That split drives value because import avoidance and export revenue rarely share the same p/kWh.
Self-consumption is often held constant as a percentage of generation across years — a simplification that works when load profile is stable. If occupancy is expected to change materially, the model should say so or scenario it.
Export assumptions should name a tariff, PPA structure, or conservative proxy. Twenty-five years of inflated export income is the easiest way to manufacture attractive NPV.
Deep dive: self-consumption and export for commercial solar.
Tariff escalation and contract risk
Import unit rates may be:
- Held flat for conservatism
- Escalated with inflation or a stated percentage
- Stepped at known contract end dates
Each choice changes the cashflow shape. A model that escalates tariffs at 3% annually produces higher NPV than a flat tariff — not wrong, but must be visible.
Corporate PPAs, pass-through arrangements, and REGO claims can add complexity. At feasibility stage, the model usually focuses on import offset and export at declared rates, with a note that commercial structures may adjust who captures benefit.
Operating costs and replacements
O&M is often expressed as a percentage of capex per year or a fixed annual fee. Cleaning frequency depends on roof environment; monitoring may be bundled with inverter warranty.
Inverter replacement is a significant mid-life cost on many designs — commonly modelled between years twelve and fifteen. Omitting it flatters IRR and NPV.
Panel warranty and performance warranty are not the same as O&M. The cashflow should reflect who pays for what after year one.
Indexation choices deserve an explicit row in the model notes. If import tariffs escalate but export is held flat, late-year cashflows tilt toward self-consumption — which may suit a building expecting higher occupancy, but should not be assumed silently.
From cashflow to headline metrics
Once the annual series exists:
- Simple payback cumulates net benefits until they equal year-zero capex.
- NPV discounts each year’s net benefit at the hurdle rate and sums, minus capex.
- IRR solves for the discount rate that sets NPV to zero.
See commercial solar NPV explained and solar IRR vs payback for interpretation. Commercial solar payback in the UK covers breakeven specifically.
Sensitivity analysis — generation ±10%, self-consumption ±10%, tariff flat vs escalated — belongs in the same workbook as the base case.
What feasibility should deliver
A board-ready feasibility dossier should include the cashflow table or chart, not only headline metrics. Reviewers should trace year-five net benefit back to generation, split, and tariff.
The example report shows a full 25-year financial section for a real UK commercial roof, with formulae and sources — feasibility-grade, not design.
Stage1Energy’s site assessment delivers this as part of a 29-page dossier at £1,250 per site, in five working days. Free screening in three working days tells you whether full cashflow modelling is worth ordering.
The 25-year model is not prophecy. It is a structured way to compare roofs, test assumptions, and decide whether to spend on the next stage — with eyes open about what could change the series.
When you receive the model, check that year zero and year one reconcile: capex should appear once, and year-one benefit should reflect the same kWp and yield as the technical summary. Mismatches between sections are a sign the headline metrics were pasted without a single underlying workbook.
To model these metrics for a named UK commercial roof, see solar feasibility study cost in the UK or start with free screening.