Capital-Free Commercial Solar in London
Capital-free commercial solar means a funder pays for, owns and operates the array on your roof, and you buy the power it makes at a rate below your grid price. No capex, no plant on your balance sheet — and several traps worth understanding before you sign anything.
What capital-free actually means
Under an on-site power purchase agreement (PPA), the funder finances and installs the system, owns and maintains it for the contract term, and sells you its output at an agreed rate. Under a roof lease, you grant the funder rights over the roof for the term and the power deal sits alongside. Either way the array is their asset, the electricity is your saving, and your capital stays in the business.
The economics work because the funder’s return comes out of the spread between the PPA rate and your delivered grid price — which for mid-band London commercial users averaged 24.14p/kWh including the Climate Change Levy in Q1 2026 (DESNZ Quarterly Energy Prices). The wider that spread, the better the deal supports itself; London’s rates are why funders like London roofs.
The structures compared
| Structure | Who owns the array | Your cost line | Watch for |
|---|---|---|---|
| On-site PPA | Funder | Pence-per-kWh for generated power | Term length, indexation, buyout schedule, what happens at sale of the building |
| Roof lease + PPA | Funder | Power price; sometimes a roof rent to you | Lease term vs your own tenure; freeholder consent for leaseholders |
| Operating lease | Lessor | Fixed rentals | Genuine operating terms — see the tax small print below |
| Owned outright | You | Capex, then free generation | AIA covers 100% up to £1m in year one — often the better deal if cash allows |
Owning usually wins on lifetime value; capital-free wins on this year’s cash flow and on risk transfer — performance, maintenance and insurance sit with the funder for the term. Start from what London systems cost installed so the comparison is against a real number.
The tax small print
Who owns the asset decides who gets the relief. Own the system and the spend is special-rate plant: no full expensing (a claim still live on many solar sites), but the Annual Investment Allowance gives 100% year-one relief up to £1m, with the 50% special-rate first-year allowance above that for companies. Under a PPA or roof lease the funder owns the plant, so those allowances are theirs — your side is simpler: the power price is an ordinary operating cost.
One structure deserves a warning label. A sale-and-finance leaseback — selling an array you already own to a funder who leases it straight back on full-payout terms — is treated by HMRC as a long funding lease whatever its length: the rentals are not fully deductible (only the finance element is), and the buyer’s allowance claim is capped. Worked examples online routinely get this wrong. If refinancing an existing array is the goal, take tax advice before anything is signed.
What a funder needs from a London building
Capital-free deals are underwritten, so the building has to qualify:
- Tenure longer than the term. Freeholders sign directly; leaseholders need enough unexpired term and the freeholder’s consent, usually via a roof lease.
- A covenant the funder can price. The PPA is a long revenue contract — your accounts are part of the application.
- Daytime consumption. The model pays when the building drinks the power as it is made — the profile that fits offices, hotels and industrial occupiers alike.
- A roof with life left in it. The membrane needs to outlast the term or be priced for renewal — and planning is rarely the blocker: rooftop arrays are permitted development under Class J, with a 56-day prior approval determination for larger systems.
One pricing note: since April 2023 the fixed residual element of network charging is levied per site regardless of import volume, so no structure — owned or funded — makes it disappear. What behind-the-meter generation does avoid is the volumetric layer, and that is priced into any honest PPA comparison.
Capital-free solar questions
Is a solar PPA really zero cost?
Zero capital cost, yes — the funder pays for the system. You commit to buying its output for the term at the agreed rate, so the real question is how that rate compares with your delivered grid price over the same years.
Who claims the tax allowances under a PPA?
The funder — capital allowances follow ownership of the plant. Your side is an operating cost. If you buy the system instead, the AIA gives 100% year-one relief up to £1m; solar does not qualify for full expensing.
Can leaseholders do capital-free solar in London?
Yes, with two extras: enough unexpired lease term to cover the contract, and the freeholder’s consent — normally structured as a roof lease. We flag both at feasibility, before anyone spends design money.
What happens if we sell the building?
The PPA or roof lease is designed to transfer — the incoming owner takes over the power deal, or a buyout schedule prices an early exit. Insist on seeing both mechanisms in the draft before signing; they are standard, but not automatic.
Get a fixed-price proposal for your building
Tell us where the building is and what it does. You get a priced, planning-checked proposal — no site visit needed to start, no obligation.