Solar against a savings account
The comparison people reach for, and usually get wrong in both directions. Solar’s return is not taxed and not guaranteed; a savings account is the reverse. Here is the arithmetic side by side, with the wrinkle that makes solar’s return worth more than its headline rate suggests.
Two different kinds of decision, and one asymmetry worth understanding.
Our modelling puts a median-priced 4 kWp system between −0.8% and 9.4% a year over 25 years, depending almost entirely on the household — the full model is at ROI and IRR.
The asymmetry: most of solar’s return is avoided spending, not income. Savings interest is generally taxable; money you do not spend on electricity cannot be. For a taxpayer, that makes solar’s headline rate worth more than the same number on a savings account.
Against that: cash can be withdrawn, is protected up to a limit, and does not depend on an inverter still working in year fourteen.
Comparing like with like
Most versions of this comparison fail at the first step, by putting a gross savings rate next to a solar return without adjusting for what each one actually is.
| Savings account | Solar | |
|---|---|---|
| Return | The interest rate | Avoided electricity spending, plus export income |
| Tax | Interest is generally taxable, with allowances | Avoided spending is not income and is not taxed |
| Guaranteed? | Rate can change, capital is protected up to the limit | Neither guaranteed nor protected |
| Access | Withdraw it | Cannot be withdrawn; fixed to the roof |
| Inflation | Erodes the capital | Partly hedged: the saving rises with electricity prices |
| Maintenance | None | Inverter replacement, occasional cleaning, insurance |
| Ends when? | When you close it | When the equipment stops, or you move |
The tax point is the one most often missed. A basic-rate taxpayer earning 5% on savings outside an allowance keeps 4%. A household that avoids £500 of electricity spending keeps £500. That is not a trick of accounting — it is the ordinary difference between income and expenditure.
The inflation point cuts the other way from most investments. Solar’s return is denominated in electricity, not in pounds. If electricity gets more expensive, the value of each avoided unit rises with it. That is a genuine partial hedge and it is why holding the import price flat, as our model does, is conservative.
Not a savings account: an overpayment on a mortgage.
Both are money you cannot easily get back. Both return a rate that is effectively tax-free — a mortgage overpayment by avoiding interest, solar by avoiding spending. Both are tied to the house.
The differences are that a mortgage rate is known and solar’s return is modelled, and that one of them has an inverter in it.
We are not financial advisers and cannot tell you which is right for you. But if you are weighing solar against something, that is the more honest comparator, and it is the one that will produce a real answer rather than a flattering one.
Where solar loses this comparison
Plainly, because the case is not one-sided:
When the return is at the bottom of the range. A household using 14% of its generation on the median export rate is, on our modelling, not getting its capital back over 25 years. Against any positive savings rate, that loses.
When you might move soon. A savings account moves with you. An installation does not, and we have consistently declined to say what it does to a sale price because we have no source we trust.
When you need the money. Liquidity has a value that no rate captures.
When the roof is wrong. North-facing, shaded, or near the end of its covering life — the arithmetic starts from generation, and if generation is poor everything downstream is.
Where solar wins it
When self-consumption is high. The 60% row returns about 9.4% on our modelling, before any tax adjustment, and after adjustment it compares with a savings rate materially higher than that.
When electricity prices rise. The saving rises with them; a fixed savings rate does not.
When the alternative is a current account. Money sitting at nothing is losing to inflation with certainty.
What we will not do
Tell you which to choose. We are not financial advisers, we do not know your tax position, your other assets, your plans for the house or your tolerance for a fifteen-year asset with no resale market.
What this site can do is give you the arithmetic with every assumption named, so that when you or your adviser make the comparison, the solar side of it is real. That is the model, and it is all on the table.
Sources
- Solar photovoltaic (PV) cost data
- Energy price cap unit rates and standing charges
- MGD 003: Solar PV Self-Consumption, issue 2.0 (1 April 2022) Read locally. MCS restricts reproduction, so we cite clauses and quote sparingly.
Contains public sector information licensed under the Open Government Licence v3.0.
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