As business costs rise, Geo Green Power warns that scaling back net-zero plans could be costly. What are the finance options available if you want solar but can’t afford the capital cost?
For years, solar energy and renewables have been hailed as the future of sustainable business, offering companies a way to reduce energy costs while cutting carbon emissions. The UK Government is so confident in this fact that Great British Energy is investing £200m in solar PV installations for the NHS and schools to achieve £400m of energy bills savings.
Yet, despite the proportion of businesses committed to achieving net zero by 2030 nearly doubling since 2024 – from 28% to 47% – increasing costs are putting going green at risk, with rising business expenses taking precedence.
While businesses whose energy costs are putting too much pressure on their bottom line could significantly benefit from generating their own on-site energy, the upfront cost involved in a solar panel installation can be a major barrier. Research shows that the costs hinder over a third of SMEs from transitioning to green energy.
Keeping renewables on the agenda can help businesses to mitigate growing operational costs, economic uncertainty, and energy price volatility.
With the NHS and schools set to benefit from solar following the new wave of funding, alternative finance options could help UK businesses achieve the same savings. The rise of flexible options like PPA and asset finance can make solar more accessible by helping to overcome the initial hurdle of upfront costs.
As business owners across the UK prepare their budgets for the next financial year, Geo Green Power explains that it doesn’t have to be a compromise.
Capital expenditure
Purchasing and installing a solar system in a one-time capital investment means the business fully owns the system from the outset, making it the best option for businesses that can cover the installation fees upfront.
After making the initial investment, companies can expect to see a full payback on their installation in under 5 years. As soon as the system is turned on, businesses start making a return on their investment, and those savings become pure profit.
Every commercial solar project is different, and costs will vary depending on the system size, business energy needs and the current energy tariff they have. A (medium-sized) 100kWp installation will typically cost around £70k and save businesses over £20,000 a year on energy bills, particularly when installed on a south-facing roof with ample sunlight.
Of course, particularly in these challenging economic times, funding a solar installation upfront could be out of reach for many businesses. What are the options for those who need support to bring their solar project to life?
PPA: paving the way for change
Power Purchase Agreements (PPAs) have become an increasingly popular financing solution, offering businesses a way to adopt solar energy without the burden of any upfront costs.
Across the UK, companies are already harnessing the power of renewable energy, with some of the world’s largest organisations now relying on solar for up to 75% of their energy needs. This shift has been made possible and financially appealing largely due to the flexibility and structure of PPAs.
Through a PPA, businesses – including global retailers like Tesco and Amazon – can secure clean energy by entering into long-term contracts to purchase the electricity produced by solar systems, allowing them to reduce reliance on traditional power sources.
The installation is funded by a PPA provider, with the business then buying the generated electricity back at a rate which is lower than their grid energy tariff. This financing option means the third party is also responsible for service and maintenance.
The long-term, fixed contracts often range from 10 to 15 years, eliminating exposure to fluctuating energy prices and volatility, offering businesses both stability and cost savings. Additionally, they provide full transparency over energy usage, allowing businesses to enhance their EPC ratings, lower their carbon footprint, and meet Scope 2 emissions reporting requirements.
PPA can be a solid option for businesses with multiple sites, as they can trial solar at one location without the upfront installation costs and then scale this if they see significant cost savings. Once the agreement ends, the business can either finish the contract, extend it, or buy the system outright.
Leasing options
Leasing is another financing option for businesses, where they pay a fixed monthly rate to temporarily use an asset. In the case of solar, a third party installs the panels, and the business covers the cost through these monthly payments.
Although payments may increase over time, this will be clearly outlined in the initial agreement, and they will remain lower than the original electricity grid tariff costs.
The clear benefits of leasing are the fact that they make solar energy more accessible for a wider range of businesses, regardless of size. Additionally, as solar energy becomes an increasingly viable long-term solution to rising energy costs, businesses using leasing can lock in predictable, lower energy expenses over time.
Asset finance
Another flexible option is asset finance, which allows businesses to acquire solar systems without paying the upfront costs. With asset finance, companies borrow money specifically for the installation, enabling them to spread payments over an extended period while benefiting from the energy savings generated by solar.
Fixed monthly payments offer businesses more predictable budgeting and protection against fluctuating energy prices. The business can benefit from the energy generated during the term of the agreement and continue to enjoy savings afterward.
Asset finance can offer significant cash flow and tax benefits for businesses. In some cases, your asset finance payments will be less than your savings on electricity, meaning that your business could be cash-positive from day one.
Grant schemes
Although there isn’t the type of UK-wide funding available to UK businesses as there is for the NHS and schools, businesses may be able to access local funding and grants.
While they tend to be limited in geography and funding, some local authorities provide grants to help businesses reduce their carbon footprint and support them to cover energy costs, so it’s definitely worth investigating whether you qualify for one of these incentives in your local area.
Examples of regional schemes include:
- Suffolk’s ‘Net Zero Innovation Fund.
- The Staffordshire CC Green Solutions Programme.
Is solar worth the investment?
Businesses that can generate their own renewable energy are less reliant on grid energy, which is directly linked to global gas prices. This means they’re more protected against the unpredictable spikes in energy prices we’ve seen over the past few years. With increased energy independence, solar can also help businesses offset increasing industry costs resulting from new tariffs.
Speaking about financing options, Geo Green Power’s James Cunningham, Managing Director, said, “If your energy costs are putting too much strain on your budget for the new financial year, solar is well worth considering – even if you would struggle to cover an installation upfront.
“Not only have solar technology advances made systems more efficient and cost-effective, but we’re also now regularly working with businesses who access different types of finance to help them start benefiting from solar right away.
“Solar is a smart investment with significant long-term gains and funding options like PPA are a low-risk way to adopt solar without the financial barriers of upfront costs.”
