Finance Options
Solar Canopy Finance UK
You do not need capital to fund a solar canopy. PPA, asset finance, Salix, PSDS grants, and Annual Investment Allowance all reduce or eliminate the upfront cost — and in many cases generate positive cash flow from month one.
Four routes to solar canopy finance
The right structure depends on whether you want to own the asset, preserve capital, or maximise tax efficiency. Most organisations use a combination.
Power Purchase Agreement (PPA)
Zero upfront costUnder a PPA, we own and operate the solar canopy on your site. You buy the electricity it generates at a fixed rate — typically 15-25% below your current grid tariff. Term: 15-25 years. At term end, you can purchase the system at market value, renew the PPA, or have the system removed. Cash flow is positive from month one: your electricity bill falls immediately with no capital outlay. PPA structures are off-balance-sheet under IFRS 16 for many organisations, though this depends on your accountant's treatment.
- No upfront capital
- Immediate bill savings
- No O&M responsibility
- Off-balance-sheet option
- − Lower long-term returns vs outright purchase
- − Contract commitment (15-25 yr)
- − You do not own the asset
Asset Finance / Commercial Loan
Own the assetAsset finance (hire purchase, finance lease, or unsecured commercial loan) allows you to spread the capital cost over 5-10 years. Monthly repayments are typically lower than the monthly electricity saving, creating positive cash flow throughout the loan term. You own the system outright at the end of the agreement. Interest rates vary — specialist green finance lenders currently offer 6-9% for commercial solar. The system can be used as security. AIA tax relief (see below) can make the after-tax cost of the first year substantially lower than the headline capital figure.
- You own the asset
- Cash-flow positive from month one
- AIA tax relief applies
- System equity builds over time
- − Higher long-term cost than outright
- − Loan on balance sheet
- − Credit approval required
Annual Investment Allowance (AIA)
Tax reliefA solar canopy purchased outright (or via hire purchase) qualifies for 100% first-year Annual Investment Allowance up to the £1 million AIA limit. This deducts the full capital cost from taxable profits in the year of installation. At the 25% corporation tax rate, a £500,000 solar canopy reduces your tax bill by £125,000 in year one — reducing the effective net cost to £375,000. Combined with a 5-year payback based on electricity savings, the after-tax payback can be under 3 years for profitable organisations. We provide the AIA documentation needed by your accountant as part of the handover pack.
- Reduces effective capital cost by up to 25%
- Available in year of installation
- No cap on system size (up to £1M AIA)
- Combines with asset finance
- − Requires taxable profit to offset against
- − One-time relief (not annual)
- − Must be classified as plant & machinery
Grant Funding (PSDS, Salix, LEP)
Public sector / schoolsSeveral public grant programmes are available for solar canopy installations. The Public Sector Decarbonisation Scheme (PSDS) provides non-repayable capital grants of 30-80% of project cost for schools, councils, NHS bodies, and other public sector organisations. Salix Finance provides interest-free loans to state schools, local authorities, and NHS bodies. Local Enterprise Partnerships (LEPs) in some regions offer additional grant funding for commercial businesses. We identify all applicable grant routes at feasibility stage and manage applications on your behalf. Grant stacking — combining multiple funding sources — is possible and can reduce effective capital cost to near zero for eligible organisations.
- Non-repayable (PSDS)
- Interest-free (Salix)
- Stackable with other finance
- We manage application
- − Public sector only (PSDS/Salix)
- − Competitive — not guaranteed
- − Application timelines add to programme
Finance structure comparison
| Structure | Upfront cost | You own asset? | 25yr total return | Best for |
|---|---|---|---|---|
| Outright purchase | Full capital | Yes (immediately) | Highest | Organisations with capital + high tax rate |
| Asset finance | Zero (monthly payments) | Yes (at end) | High | Preserving capital while building equity |
| PPA | Zero | No | Medium | No capital, immediate savings, no O&M |
| PSDS grant + purchase | Partial (grant reduces) | Yes | Very high | Schools, NHS, public sector |
| Salix loan + purchase | Zero (interest-free loan) | Yes | High | State schools, councils, NHS |
Example: 200 kWp solar canopy financial model
A 200 kWp system on an 80-space car park. Based on UK average irradiance, 75% self-consumption, 25p/kWh avoided, 4p/kWh SEG export, and corporation tax at 25%.
Outright purchase
- Capital outlay
- £240,000
- AIA relief
- −£60,000 (yr 1 tax)
- Net cost
- £180,000
- Year 1 cash flow
- £47,500
- Payback
- 3.8 years
- IRR
- 28%
Asset finance (7%, 7yr)
- Capital outlay
- £0 upfront
- AIA relief
- N/A
- Net cost
- £41,800/yr payments
- Year 1 cash flow
- +£5,700 (saving − payment)
- Payback
- 0 (positive from yr 1)
- IRR
- 22%
PPA (20p/kWh vs 25p grid)
- Capital outlay
- £0
- AIA relief
- N/A
- Net cost
- 0
- Year 1 cash flow
- +£9,500 immediate saving
- Payback
- Immediate
- IRR
- N/A (no cost)
Illustrative only. We produce a site-specific DCF model for every project at no charge during the feasibility stage.
Finance FAQs
A power purchase agreement (PPA) is a no-upfront-cost finance structure where the installer owns the solar canopy and sells you the electricity it generates at a fixed rate below your current grid tariff. You pay nothing to install the canopy and benefit from lower electricity costs throughout the PPA term (typically 15-25 years). At term end, you can purchase the system, renew the PPA, or have it removed.
Yes. Schools and public sector bodies can access the Public Sector Decarbonisation Scheme (PSDS) providing capital grants of 30-80% of project cost. NHS bodies can access Salix Finance (interest-free loans). Some local enterprise partnerships (LEPs) offer additional grant funding for commercial businesses. We identify all applicable grant routes and manage applications during the feasibility stage.
Yes. A solar canopy purchased outright qualifies for 100% first-year Annual Investment Allowance (AIA) up to the current £1 million AIA limit. This means the full capital cost can be deducted from taxable profits in the year of installation, reducing the after-tax cost of the system by up to 25% (at the 25% corporation tax rate). We provide the AIA documentation needed by your accountant as part of the handover pack.
Grant funding (PSDS, Salix) generally cannot be combined with a PPA, since the grant pays for an asset that would then be owned by the installer under a PPA structure. However, grants can be combined with outright purchase or asset finance. AIA tax relief combines with any purchase structure. We model all valid combinations and recommend the optimal structure for your organisation type and tax position.
Under outright purchase or hire purchase (finance lease), the asset appears on your balance sheet as plant and machinery. Under an operating lease or PPA, the treatment depends on the specific contract terms and your accountant's judgement — IFRS 16 has tightened the criteria for off-balance-sheet treatment. We provide the contract documentation for your accountant to assess. For most SMEs on FRS 102, PPA structures are treated as operating expenses.
Get a free financial model for your site
We model all four finance routes for your specific site, tax position, and organisation type — outright purchase, asset finance, PPA, and grant stacking. Returned within 5 working days at no charge.
Request free financial model