October 17, 2024 Solar Incentives
Solar Power in the UK: what incentives are available to businesses to install solar power?
It might be surprising that in a country with an average of 1,400 sunshine hours per year, solar power uptake for UK businesses is increasing dramatically, with more solar installed in 2023 than in the previous 6 years combined. This isn’t just a testament to the inherent benefits of solar power, or solely explained by an 85% reduction in the cost of panel technology in the past decade – it also comes in spite of landmark incentives, such as the Feed-in Tariff (FIT) coming to an end.
That’s because, even without additional incentives, businesses across the UK will save by going solar – no matter the weather. However, even if solar power offers a guaranteed return on investment, cost-conscious businesses can benefit even further by finding the right financial support.
That’s why we’ve put together this brief guide to quickly summarise the key incentives available to businesses across the UK looking to install solar power – as well as to clarify a few incentives that are subject to confusion.
What incentives are available for UK businesses to install solar solar power?
Incentives for businesses to adopt solar power, including grants, loans and tax deductions, are available throughout the UK.
Whilst the landmark Feed-in Tariff has long since concluded, there are three other broad incentives relating to commercial renewable energy that are very helpful to know about.
These are:
1. Annual Investment Allowance (AIA) & 50% First-Year Allowance
Type: Corporation Tax Relief
Regions: UK
What is it?: The Annual Investment Allowance (AIA) a tax relief that lets you deduct the cost of solar panel purchase and installation from your business’ yearly taxable profits (up to £1,000,000).
If your business has already passed that threshold, you may still be eligible for a 50% First Year Allowance, which lets you deduct half the cost of purchase/installation from taxable profits.
What else do I need to know?: It is one of the most accessible incentives available to businesses across the UK looking to transition to renewable energy, and the allowance is in place until 31st March 2026.
2. Non-domestic rates relief
Type: Tax Deduction
Region: Scotland only
What is it?: Solar panel installations (among other renewable energy projects) qualify for non-domestic (business) rates relief, exempting new solar panel installations from non-domestic rates in Scotland until 2035.
What else do I need to know?: It is particularly valuable for rural businesses, and even small businesses who qualify for an additional small business bonus.
We have a complete guide on solar power installations in Scotland as well as a guide for agricultural businesses.
3. Green Business Loan Scheme
Type: Loan
Region: Wales only
What is it?: A loan with a value of £1,500 to £1.5 million pounds available for Welsh businesses to fund renewable energy upgrades, including solar power.
What else do I need to know?: To qualify for this loan, as with many other forms of funding, you will need to provide detailed information on your energy consumption and potential energy savings. A proposal for a system designed by Innasol can provide all of this information long before you commit to a solar power installation.
All it takes is 10 questions to know exactly what your commercial solar power system will save …
These three incentives are perhaps the most ‘all-encompassing’ and accessible to businesses in the UK that are looking to install solar power, but they are far from the only ones.
What other solar incentives are available to install commercial solar power?
As you may be aware, grants, loans and funding opportunities for solar power are constantly evolving, changing, opening up or coming to an end.
In other cases, unclear communications from funding sources can cause confusion about who exactly can take advantage of funding for a solar power transition (for example, whether support is restricted to domestic dwellings only).
That is why we are listing a few of the most common ‘additional’ funding sources to help clarify details about those which might be most helpful to you.
VAT 0% Rate
The 0% VAT Rate (UK-wide) on energy-efficient systems reduces the VAT on purchase and installation of solar panels to zero. However, as these only apply in residential properties, most businesses will be charged at the standard 20% VAT rate.
Nevertheless, some businesses fall under this definition – care homes, boarding schools, and self-catering holiday accommodation are examples of businesses included under the ‘residential’ umbrella, which can benefit from the 0% rating.
Government Funding by sector, region, etc.
Funding for businesses to transition to renewable energy can often become available in ‘funding rounds’ – limited periods in which businesses can make an application for a grant or loan that covers the cost of purchasing (and sometimes installing) solar panels.
These can be general, such as the Northern Ireland Sustainable Energy Programme (NISEP) or sector-specific (e.g. DEFRA Farm Productivity Grants (England and Wales) or the Energy Resilience Fund for heritage buildings (England only)
Top tip: Innasol can advise on funding opportunities as they become available. Alternatively the Business Climate Hub regularly updates a breakdown of support and incentives available in each region of the UK.
Bank/Building Society Funding
You may also want to check what loans or incentives your business banking partner can offer. A few examples from high-street banks include:
- The Co-Operative Bank – Renewable Energy Funding Scheme
- Barclays – Green Barclayloan
- HSBC – Green SME Loan
- Natwest – Green Loans
Community Solar Programmes
Community solar (or community renewable energy programmes) are small-scale grants that can contribute loan or grant funding to local businesses to purchase and install solar power systems.
These programmes vary in scope – some rely on membership of a community organisation or proving a direct community benefit (e.g. Edinburgh Community Solar Co-Operative), and some are for charitable organisations only (e.g. Northern Ireland Community Energy).
These can be found in search engines, but if you have a trusted installer partner, they may be able to advise you on programmes you may be eligible for.
The Smart Export Guarantee
Last of all, the Smart Export Guarantee (SEG) is widely touted as one of the most attractive benefits of installing commercial solar power, allowing you to receive payment for unused electricity that you send back to the grid.
That being said, we often advise our customers against using the SEG – simply because there are often more cost-effective options for using electricity generated by solar power.
As a principle, the most efficient solar power systems are designed to use all the electricity they generate immediately. A perfectly sized system will balance generating the maximum possible electricity from solar, while streamlining the cost of the system itself. This fundamentally reduces the time you wait to receive a full return on your investment, and maximises the amount of time your solar power system operates with a positive cash flow.
However, if your system does generate excess electricity, you may stand to save more by using a solar power battery and using it to operate during peak hours, or equally, diverting this excess electricity to power a fleet of electric vehicles.
In every case, Innasol’s design-led approach to solar power ensures that your system performs as efficiently and cost-effectively as possible, considering all the options.
What can you do?
In summary, while the landscape for funding solar power has changed since the end of the Feed-in Tariff, the most important fact to remember is that, even without additional funding, solar power’s inherent benefits – low-cost, zero-carbon electricity with a rapid return on investment – make it an incredibly attractive option in its own right.
With a system designed by Innasol, you can generate the maximum possible energy for the minimum possible cost, and our dedicated project team is on hand to advise on funding options that could make an already lucrative source of energy pay back even quicker.
If you are simply curious about what you could save by going solar, simply contact our team online or call 01621 892613 for a no-obligation quote.
