Solar Panels for Factories and Manufacturi

UK factories and manufacturing sites sit in a sweet spot for solar PV. Large, flat or low-pitch roofs that would otherwise sit idle, combined with high daytime electricity demand from machinery, compressors, and lighting, means that most of the power generated is consumed on-site rather than exported at lower rates. The result is a faster payback and a stronger business case than almost any other building type. This guide covers everything a manufacturing site manager or finance director needs to evaluate the investment.

Why factories are ideal solar candidates

High self-consumption is the key driver. A factory running a shift from 7 am to 7 pm will use the majority of the solar output directly, avoiding the grid import cost rather than relying on export income. Industrial electricity tariffs typically include both a unit rate (p/kWh) and a demand charge — a standing charge based on your peak half-hourly consumption recorded by your mandatory half-hourly (HH) meter. Solar generation during the peak demand window shaves that recorded peak, reducing the demand charge component of your bill on top of the unit savings.

For context, Ofgem data shows UK non-domestic electricity prices averaged around 24–28p/kWh in early 2026. A 200 kWp factory system generating roughly 180,000 kWh per year and achieving 80% self-consumption saves approximately £34,000–£40,000 annually in avoided imports alone — before any demand charge reduction or export income.

Typical system sizes for manufacturing

Most factory installations fall in the 50 kWp to 500 kWp range, though large distribution centres and process manufacturers regularly install 1 MW or more. As a rough guide:

50–100 kWp — small to medium factory unit, 500–1,000 m² of usable roof, annual output approximately 45,000–90,000 kWh.
100–500 kWp — medium to large manufacturing site, 1,000–5,000 m² roof, output 90,000–450,000 kWh per year.
500 kWp–1 MW+ — major distribution or process facility; at this scale, a full DNO G99 connection application is required and grid connection costs become a significant line item.

Installation costs for systems above 100 kWp typically fall in the £700–£900 per kWp range, reducing towards £650/kWp for systems exceeding 1 MW as economies of scale apply.

Planning permission for large rooftop solar

Most factory rooftop installations qualify as permitted development under Part 14 of The Town and Country Planning (General Permitted Development) (England) Order 2015. In 2025, the government scrapped the previous rule requiring planning permission for systems generating more than 1 MW, meaning organisations can now install larger arrays without the delay and cost of a full planning application — subject to conditions in conservation areas and listed buildings. Scotland and Wales have their own equivalent frameworks. Always confirm with your local planning authority if the site has any constraints.

DNO connection process and timelines

Systems above 16 A per phase (roughly 3.68 kW per phase) require a formal DNO notification or application. Factory installations almost always fall under the G99 application route, which applies to embedded generators above 16 A per phase. The process involves:

Pre-application enquiry to your Distribution Network Operator (DNO) to confirm available network capacity and likely costs.
Formal G99 application, including single-line diagrams and protection relay settings.
DNO feasibility study and offer (typically 10–16 weeks for distribution-scale systems).
Acceptance and connection works — often requiring a DNO-supplied protection relay and potentially a new metering cabinet or transformer upgrade at your cost.

Grid connection costs for industrial-scale systems vary enormously by location and network capacity: a 200 kWp site in a well-served industrial area may pay £5,000–£15,000, while a 1 MW+ site needing reinforcement can face costs of £50,000 or more. Ofgem's ongoing connections reform programme is working to reduce queue delays, with a new end-to-end process being rolled out from 2026.

Ownership versus a Power Purchase Agreement (PPA)

Outright ownership delivers the highest long-term returns. The business buys the system, claims the capital allowances (see below), and owns the electricity savings. Payback periods for industrial sites typically run 4–8 years, with a system lifespan of 25–30 years, giving 17–26 years of near-free electricity after payback.

A solar PPA transfers ownership to a third-party investor who funds, installs, operates, and maintains the system. The factory pays a discounted per-unit rate for the electricity generated — typically 10–20% below the prevailing grid tariff — with no upfront capital outlay. PPA contracts run 15–25 years, with options to purchase the system or extend at the end of the term. PPAs suit businesses that are capital-constrained, do not want asset management responsibilities, or cannot use capital allowances efficiently. For a fuller comparison of financing models, see our guide to commercial solar panels UK.

Capital allowances and tax relief

Solar panels are treated as special rate plant and machinery under HMRC rules (CA22335), meaning they do not qualify for the 100% Full Expensing regime that applies to main rate assets. However, businesses can claim:

Annual Investment Allowance (AIA) — up to £1 million of qualifying expenditure can be deducted 100% in year one. For most factory solar installations, the entire cost will fall within the AIA limit, delivering immediate corporation tax relief at 25% (or 19% for smaller companies).
50% Special Rate First-Year Allowance — for expenditure that exceeds the AIA limit, a 50% first-year allowance is available, with the remainder entering the special rate pool at 6% per year writing-down allowance.

Consult a tax adviser to confirm the current treatment for your accounting period, as rules can change at Budget.

ESOS compliance and energy audits

The Energy Savings Opportunity Scheme (ESOS) is a mandatory energy assessment programme for large UK organisations — those employing 250 or more people, or with an annual turnover above £44 million and a balance sheet above £38 million. Phase 3 requires mandatory progress updates in December 2025 and December 2026. ESOS audits must identify energy-saving opportunities across buildings, industrial processes, and transport. A rooftop solar investment directly addresses the buildings energy stream and can form part of the evidence base for an ESOS action plan. Even if your organisation does not meet the ESOS threshold, a solar feasibility study aligns closely with the audit methodology and provides a ready-made business case for the investment.

Battery storage and demand charge management

Adding a battery storage system to a factory solar installation unlocks an additional layer of savings: the battery charges from solar during low-demand periods and discharges during the half-hourly peak, reducing the recorded demand peak that drives your demand charge. For sites on complex industrial tariffs with significant demand charge components, the combined solar-plus-battery ROI can be considerably stronger than solar alone. For more detail on the economics, see our guide to whether solar batteries are worth it in the UK.

Worked payback example: 200 kWp factory

Assumptions: 200 kWp system, 900 kWh/kWp annual yield, 80% self-consumption, 25p/kWh avoided import rate, 5p/kWh Smart Export Guarantee rate, total installed cost £160,000 (£800/kWp), AIA claimed in year 1 at 25% corporation tax rate.

Annual generation: 180,000 kWh
Self-consumed (144,000 kWh × 25p): £36,000 saved
Exported (36,000 kWh × 5p): £1,800 income
Total annual benefit: £37,800
Year-1 tax relief (AIA at 25% on £160,000): £40,000
Net cost after tax relief: £120,000
Simple payback (on net cost): approximately 3.2 years
Payback on gross cost (no tax relief assumption): approximately 4.2 years

These figures exclude demand charge savings and any future electricity price rises, both of which would shorten the payback further. Real projects should be modelled using actual half-hourly consumption data from your HH meter.