Delivering the solar rooftop revolution

With the government targeting a near fivefold increase in solar capacity to 70GW by 2035, it is estimated that the rate of rooftop solar installations in the UK must double. Fortunately, momentum is building among policymakers and businesses for a “rooftop revolution” in solar panel deployment on the UK’s commercial and industrial buildings. For example, the Independent Review of Net Zero recommended the removal of planning permission requirements for rooftop solar installations. It also recommended the creation of a government-industry ‘solar taskforce’ to identify other barriers and appropriate solutions, which was agreed to and established as part of the government’s Powering Up Britain plan. The taskforce had its inaugural meeting in May to begin the process of identifying key issues obstructing the “untapped potential” of commercial buildings for rooftop solar. However, a number of considerations need to be reviewed to make a scheme viable. Here we focus on three: grid connections, building ownership/occupation and planning. Export capacity and other grid issues A key consideration will be the ability to secure a suitable grid connection. Even though rooftop solar projects would typically be connected in such a way that they can provide electricity directly to the building they sit on, there may be periods (eg weekends) when generating capacity exceeds demand. Without adequate grid “export” capacity to allow this surplus generating capacity to be used, installing a solar array that makes full use of the available roof space may not be viable. This is an issue which applies regardless of who is funding the solar installation. Where suitable export capacity exists, the ability to export surplus generation will depend on the building’s grid connection remaining energised. Building owners will generally require the grid connection agreement with the local grid operator (the distribution network operator), which governs the use of the building’s grid connection, remains in their name. If the owner engages a third-party solar project developer to fund and operate the solar array under a rooftop lease structure, this means that the solar developer will be reliant on the building owner maintaining a suitable grid connection. Related to this, if the building owner was to become insolvent there is a risk that the DNO might seek to de-energise the connection and prevent any export by the rooftop solar project or, potentially, any generation at all. To mitigate these risks, specific covenants will be needed from the building owner as to maintenance of the grid connection relating both to the agreement with the DNO and the physical infrastructure. Ideally, these covenants would be supplemented by specific rights for the solar developer to take remedial action where necessary. Building ownership and occupation Commercial premises are often let to third parties, rather than occupied by the owner. In these circumstances, whether the owner is considering funding and owning the rooftop solar array itself or granting a rooftop lease to a third-party solar project developer, it will need to consider whether the occupational lease needs varying to allow for this. Where the building owner will be the party selling solar electricity to a tenant, it will need to consider the basis on which it is priced. Where it will be funding and owning the rooftop array, it may wish to charge a price equivalent to the full grid price in order to maximise its return on investment. Alternatively, it may feel it is more desirable commercially to offer a benefit to its tenants by making electricity available at a discount to grid prices. Additional complexities can arise where the building owner has chosen to engage with a third-party solar project developer. There continues to be a lack of certainty on whether the sale of electricity by a solar developer to a building owner or tenant constitutes a “supply” of electricity under legislation (introduced more than 20 years ago), which requires suppliers either to have a supply licence or be covered by a specific exemption from the requirement to have a licence. This is compounded by a question of whether a building owner who buys electricity from a solar developer and then resells that electricity to one of its tenants (whether at a discount or otherwise) is able to do so in a way which complies with this legislation. The government put out a call for evidence on this more than two years ago, but has yet to provide any clarity on how the rules apply. Planning considerations Part 14 of the Town and Country Planning (General Permitted Development) (England) Order 2015 sets out which types of renewal energy installations do not require planning permission (subject to a variety of conditions). These permitted development rights were originally centred on domestic solar installations but now Class J permits the installation of some solar equipment on commercial premises. However, the conditions are complicated and are subject to a limit of 1MW. If the proposed installation is for solar PV equipment on the roof of the building, it is subject to a prior approval process which is essentially a lighter planning application. Although, as the local planning authority is allowed to request the submission of further information, this may not in fact be that much lighter. The main benefit is that the proposed installation may be commenced once 56 days have elapsed, provided the local planning authority has not refused the application for prior approval before this date. As technology advances, it seems likely that the 1MW cap may have to be revised and it may be considered that all such development – save those where there are sensitive buildings or locations – should be permitted development. Next steps The government has committed to producing, with input from the Solar Taskforce, a comprehensive solar roadmap in 2024, outlining step-by-step plans to further the deployment of solar. The above points should be considered as part of this exercise. In the meantime, parties interested in exploring potential installations on their commercial buildings can take steps and advice from the outset to minimise the potential pitfalls and put themselves on the road to having their own clean, unobtrusive energy source that can lower bills and increase the value of their assets. Stuart Urquhart is a legal director and Kerri Ashworth is a partner at TLT