How to calculate payback on a commercial battery

Ask what the payback is on a commercial battery and the honest answer is that it depends on your tariff, your load shape and how many ways the battery can earn on your site. A figure quoted without your half-hourly data is a guess, so this guide gives no headline number. It gives the arithmetic, a grid that shows how much the answer moves, and a list of what to measure so you can work it out yourself.

The formula

Simple payback is the net cost of the system divided by the annual benefit it produces:

payback in years = net installed cost ÷ annual benefit

Both halves need care. The cost side is published and you can source it. The benefit side is yours alone, and it is where most quotes are weakest.

The cost side

The most recent published UK bands put installed cost at about £20,000 to £40,000 for a system of up to 100 kWh, about £80,000 to £250,000 or more for 200 to 500 kWh, and roughly £140 to £240 per kWh for containerised systems of 500 kWh and above (Reonic, July 2026, drawing on Heatable and GSL Energy). The bands overlap because they come from different sources. Our cost guide has the full bands, the sources and a worked table of size times cost per kWh.

Two adjustments turn the quoted price into the net cost:

• VAT. A commercial installation is standard-rated at 20%. A VAT-registered business normally recovers it, so it does not belong in the net cost. The 0% household relief does not apply to a business.
• Tax relief. A battery is plant and machinery, and the Annual Investment Allowance covers the first £1m of qualifying spend a year. For a company paying the 25% main rate of corporation tax, relief of 100% in year one cuts the cost of the system by a quarter of the amount claimed. Above £1 million a year, a company claims the 50% first-year allowance on special-rate spend, which is how this site treats a battery, as HMRC treats solar panels; the rest is written down at 6% a year (see our tax guide). Take your accountant’s view before you rely on it.

The benefit side: what to measure

The benefit is the sum of the ways the battery earns on your site. For each, here is the arithmetic and where the inputs come from. None of the inputs below is a typical value, because there is none.

• Peak shaving. The kW of peak the battery removes, multiplied by the capacity charge you pay for each kVA over a year, plus the units it moves out of the red band, multiplied by the difference between the red and green unit rates. The charges are in your network operator’s charging statement and on your bill. See DUoS charges.
• Energy arbitrage. The usable kWh the battery cycles in a year, multiplied by the gap between the price when it discharges and the price when it charges divided by the round-trip efficiency. A battery cycles about once a day at most.
• Solar self-consumption. The kWh of surplus it moves into the evening, multiplied by the difference between your import price and your export rate.
• Backup power. The cost of the outages it would prevent, which is your own estimate. It is a risk reduction and not a saving on the bill.
• Grid services. Payments you have a contract for, if any. They depend on delivery, are never guaranteed and change from year to year, so keep them out of the base case.

A grid that shows how much the answer moves

The table divides three illustrative project costs by four illustrative annual benefits. The costs are mid-points of the published bands for 100 kWh (£30,000), 250 kWh (£100,000) and a 1 MWh containerised system (£190,000). The benefits are placeholders to show the effect, not predictions. Payback in years, before and after the tax relief described above for a company paying the 25% main rate (cost × 0.75):

Read it across a row: halve the benefit and the payback doubles. Read it down a column: the same benefit pays back a bigger system far more slowly. A forecast that does not tell you its annual benefit and how it was worked out cannot be tested against this grid.

What to do with it

1. Get a year of half-hourly data and work out each line of the benefit for your site.
2. Ask each bidder for the net cost, the annual benefit they assume and how they derived it.
3. Put both numbers into the formula and into the calculator on the cost page, and see how far the answer moves when the benefit is 20% lower than the bidder says.
4. If the case only works when grid-services revenue is high, treat it as fragile.

Honest limits

This is simple payback. It ignores the time value of money, the battery’s degradation over its life, the cost of replacing equipment and any change in tariffs. A site with a flat load, no solar and spare capacity may find the benefit is small enough that no battery pays back, and it is better to learn that from your own data before you spend money than after. Payback also depends on a workable grid connection, and the network operator sets that timescale, so see the G99 guide early. For the wider buying decision, our guide to commercial battery storage sets out six checks, the UK rules and the steps from first look to a working system.

Related reading

• battery storage costs in Nottingham
• battery storage for Sheffield manufacturers
• peak shaving as a service

If you want to sanity-check the arithmetic on a solar-plus-storage project before speaking to anyone, check the generation side against the European Commission’s free PVGIS solar-yield model for your postcode.