Commercial solar — why the maths work better than domestic

Self-consumption is the key number — and it is very high for businesses

Domestic solar owners typically self-consume 30–40% of what their panels generate — the rest exports to the grid at lower SEG rates. A business operating 9am–5pm consumes electricity throughout the solar day. Typical self-consumption rates for commercial sites:

• Manufacturing / light industrial (continuous daytime): 75–95%
• Warehouses and logistics: 70–85%
• Offices (Mon–Fri, 9–5): 50–65%
• Hotels and commercial kitchens (extended hours): 70–90%
• Cold storage and refrigeration (24/7): up to 95%

Self-consumed solar displaces electricity bought at the full business rate (typically 20–28p/kWh including all levies). Export earns 1–15p/kWh via SEG. The higher your self-consumption rate, the faster the payback. This is why commercial systems in the UK typically pay back in 3–5 years, versus 7–10 years for a domestic system.

Typical installed costs and returns for light commercial systems (2026):

• 20 kWp: £16,000–£30,000 installed; saves ~£4,000–£6,000/year; payback 4–6 years
• 50 kWp: £33,000–£60,000 installed; saves ~£10,000–£15,000/year; payback 3–5 years
• 100 kWp: £70,000–£110,000 installed; saves ~£18,000–£28,000/year; payback 3–5 years

See our full commercial solar guide for costs by sector, system sizing, and installer selection.

Capital allowances — the immediate tax advantage

Unlike residential landlords, businesses can claim full capital allowances on solar. The Annual Investment Allowance (AIA) allows 100% of qualifying plant and machinery costs to be written off against taxable profit in year one, up to £1 million per year.

On a £50,000 solar installation at a 25% corporation tax rate: £12,500 immediate tax saving in year 1. This effectively reduces the net cost of a £50,000 system to £37,500 before any energy savings are counted.

Note: Full Expensing (100% first-year allowance) does not apply to solar. Solar PV is classified as a 'special rate' long-life asset and is explicitly excluded from Full Expensing. Use the AIA instead — which achieves the same 100% first-year write-off for any installation under £1 million. Sole traders and partnerships can claim AIA in exactly the same way.

Climate Change Levy — solar eliminates it on self-consumed power

The Climate Change Levy on electricity is 0.775p per kWh in 2025–26, rising to 0.801p from April 2026. All self-consumed solar generation is exempt — HMRC classifies it as auto-generated renewable electricity, so no CCL liability arises on that portion of your energy use.

For a 100 kWp system generating ~90,000 kWh/year consumed entirely on-site, the CCL saving alone is approximately £700/year (rising each April as rates increase). This is on top of the grid electricity cost saving. Grid supply remains fully liable at the standard rate unless you hold a Climate Change Agreement, which entitles CCA participants to an 82% discount on electricity CCL.

Finance options — including zero upfront

Businesses do not need to find capital upfront to install solar. The main finance routes:

• Power Purchase Agreement (PPA): The PPA provider funds, owns, and maintains the system on your roof at no upfront cost. You buy the electricity generated at a fixed discounted rate (typically 10–30% below grid tariff) for a 20–25 year contract term. No capital outlay, no maintenance responsibility. Trade-off: you do not own the asset, so capital allowances are not available to you (they accrue to the PPA provider). SEG export income also goes to the provider.
• Lease / hire purchase: Business finances the install over 5–7 years, with payments structured to be cashflow-neutral against energy savings. Ownership transfers at end of term; you then benefit from free generation for the remaining 20+ year system life. Capital allowances are available.
• Green asset finance: NatWest, Lloyds, HSBC, and Barclays all offer green commercial lending. Outright purchase with a green loan maximises capital allowance benefits while spreading the cash outlay.

For farms and agricultural buildings, the Farming Investment Fund (Improving Farm Productivity Grant) offers 25% of eligible costs, up to £100,000 per business, for rooftop solar on farm buildings and irrigation reservoirs. Ground-mounted arrays are ineligible. Check the Rural Payments Agency for current open rounds — Round 2 closed July 2025. See our agricultural solar guide for farm-specific detail.

Grid connection — G98 vs G99 and what it means for your timeline

Systems above roughly 11 kWp (three-phase) or 3.68 kWp (single-phase) require a G99 application to your Distribution Network Operator before installation. This is not a barrier, but it is a timeline factor: a straightforward 50–100 kWp rooftop project typically takes 8–12 weeks for the DNO to issue a connection offer, with the full process from application to energisation running 4–6 months.

The G99 application involves a formal submission, DNO feasibility assessment, a connection offer (with an acceptance window of 30–90 days), and then physical commissioning. Application fees run £500–£2,500. Network reinforcement costs are typically zero for sub-100 kWp projects in urban or suburban locations where grid capacity exists, but vary by site.

Commercial solar is also fully eligible for the Smart Export Guarantee for systems up to 5 MW. SEG export income for a business is treated as taxable business income.