Five things every business should know about solar energy

The amount of electricity produced from solar panels is on the rise. On a sunny day in 2020 it has been estimated that up to 40% of the UK’s electricity demand will be met by solar panels and that one third of all UK homes will have solar panels on their roofs.

  1. Solar panels can generate substantial profits – particularly for commercial premises with unused space either on a roof or within ground space. Even if businesses have previously looked at the viability of installing solar panels, they should look again – the costs of panel installation are falling with growing economies of scale and technical improvements in the efficiency of panels.
  2. Whilst income to owners from feed in tariffs available for solar panels has come down from when they were first introduced in April 2010, the potential income remains considerable – the government feed-in tariff offers an index linked 8-13% return on investment over 20 years whilst the panels themselves should last for about 50 years. If you don’t want to finance the installation costs up front, it is relatively straightforward to find an intermediary company willing to subsidise installation costs in exchange for a share of the feed-in-tariffs for electricity being generated.
  3. Every commercial building sold or leased since 2009 has required an energy performance certificate (an ‘EPC’). There has been a tendency for businesses to regard EPCs as a paper cost and of marginal relevance – but this view is likely to change over the next year.  The Scottish Government is about to publish proposals to force owners to carry out energy efficiency improvements on energy inefficient buildings if and when owners sell or lease.  Details are expected within the next few months of exactly how this should work.  Solar panels are relevant to EPCs in two ways.  First, a solar panel system counts towards your EPC rating – often enough to take you into the next band up. Second, in order to install a solar panel system (with a few exceptions), your property must have at least a level D Energy Performance Rating (which the Government thinks is achievable for the majority of commercial buildings).
  4. Before installing a solar panel or signing up to any agreement with a supplier, you do need to do your legal homework. If you have a security over your building, the chances are that you will need your lender’s consent.  You need to make sure that solar panels are installed on land you own – empty land neighbouring a building could be disputed or common ground.  You should consider the impact of a solar panel installation when you sell or rent out a property – in the case of a lease, who gets to keep the income from the panels and how do solar panels impact on repair and maintenance liabilities?

Michael is an experienced and talented solicitor who specialises in commercial property transactions and property dispute resolution.