Reference · 91 terms

UK commercial solar finance glossary

A working glossary of terms used in UK commercial solar finance, tax allowances, finance structures, technical standards, and ESG reporting. Curated for project teams, finance directors, and procurement leads engaging with commercial solar for the first time.

Jump to A B C D E F G H I K L M N O P R S T W

A

After-tax IRR: Internal rate of return on a project after corporation tax effects (capital allowances, tax-deductible interest). The standard metric for comparing commercial solar finance structures.
Annual Investment Allowance (AIA): Tax allowance giving 100% deduction in year one on the first £1m of qualifying capital expenditure per accounting period. Where AIA headroom is available, it delivers stronger year-one tax relief than FYA + special-rate pool.
Annual yield: The annual electricity generation per kWp installed. UK average is ~950 kWh/kWp/year on south-facing roofs. South-coast and Cornwall sites reach 1,050–1,090 kWh/kWp; northern Scotland sites typically 850–900 kWh/kWp.
Asset finance: A category of secured business finance using the underlying asset as collateral. Includes hire purchase, finance lease, and equipment finance arrangements. Typically 5–7 year terms.
Avoided cost: The electricity tariff rate that solar generation displaces — i.e. the cost the customer would otherwise pay for grid electricity. Avoided cost rather than export tariff is the dominant component of solar economics on well-sized systems.
AVR (automatic voltage regulator): Equipment maintaining stable voltage on the distribution network as solar generation varies. Often required for commercial solar above 500 kWp on grid-constrained connections.

B

B Corp: A certification for businesses meeting verified social and environmental performance standards. Some commercial solar advisors and financiers are B Corp certified.
Battery storage: Lithium-ion (typically LFP chemistry in 2026) battery systems storing surplus solar generation for later use. Adds £400–£550/kWh of usable capacity to project capex; modelled at 350 cycles/year and 90% round-trip efficiency.
Boiler Upgrade Scheme: UK government grant programme for residential and commercial heat-pump installation. Not directly for solar PV but often complementary in PSDS bundled applications.
Broker (commercial solar finance): A specialist intermediary connecting commercial solar customers with FCA-regulated lenders or PPA providers. Typically paid by lender margin rather than customer fee.
Building-integrated PV (BIPV): Solar PV technology integrated into building structures (rather than mounted on top), e.g. solar-roof tiles, BIPV facades. More expensive than conventional PV; aesthetic benefit on architectural projects.

C

Capacity charge: A demand-related charge on commercial electricity supply based on contracted maximum demand. Solar can reduce peak demand and therefore capacity charges on sites where contract demand can be reduced.
Capacity market: UK regulatory mechanism providing payments to generators and demand-response providers for guaranteed capacity availability. Battery storage above 1 MW can access T-1 and T-4 capacity market auctions via aggregator partnerships.
Capital expenditure (capex): Expenditure on long-life assets that creates economic value beyond the current accounting period. Commercial solar PV is treated as capital expenditure for tax and accounting purposes.
Capital purchase: A finance structure where the buyer pays for the commercial solar system in full upfront, takes legal title, and captures the full tax allowances. Lowest total cost of ownership over 25 years for profitable trading companies.
CDP (Carbon Disclosure Project): Voluntary global climate disclosure framework with strong investor uptake. Solar deployment improves CDP scoring through reduced operational emissions.
CHAS: Contractors Health and Safety Assessment Scheme — pre-qualification for construction contractors. Most commercial solar installers maintain CHAS or equivalent (Constructionline, SafeContractor) accreditation.
Corporation tax (UK): Tax on UK company profits. The main rate (2026) is 25% for profits above £250,000; 19% for profits below £50,000; marginal rates between. Capital allowances reduce taxable profits and therefore the corporation tax payable.
Cumulative free cash flow: The sum of project cash flows over the project life. Commercial solar 25-year cumulative free cash flow typically £400k–£1.5m on £200k systems for capital-purchased projects on profitable trading companies.
Curtailment: Reduction of solar generation below technical capacity due to grid constraints, e.g. when DNO export limit is reached. Battery storage absorbs would-be-curtailed generation for later self-consumption.
Cycle life: The number of charge-discharge cycles a battery can perform before significant capacity degradation. Commercial LFP batteries deliver 6,000+ cycles at 80% depth-of-discharge.

D

Daytime self-consumption: The portion of solar generation absorbed by daytime electricity demand. Manufacturing, retail, and offices typically run 75–90% daytime self-consumption; logistics with 24/7 cold-storage often run 90%+.
DNO (Distribution Network Operator): The licensed company operating the local electricity distribution network. UK DNOs include UK Power Networks, Northern Powergrid, SP Energy Networks, Western Power Distribution, Electricity North West, and SSEN.

E

EPC (Energy Performance Certificate): A statutory rating of building energy performance (A best, G worst) required for commercial property sale and letting. Solar PV improves EPC rating through reduced grid-electricity demand.
EPC contract: Engineering-Procurement-Construction contract — turnkey design-build-commissioning arrangement for commercial solar. Single point of contractor accountability through commissioning.

F

50% First Year Allowance (FYA): A capital allowance allowing companies to deduct 50% of qualifying capital expenditure on commercial solar PV from year-one taxable profits, with the residual 50% in the special-rate pool. Time-limited to capex incurred before 31 March 2026 unless extended.
Finance lease: A lease structure where the lessee takes substantive ownership of the asset, captures the FYA, and bears O&M responsibility. Functionally similar to a loan with a leasing-company structure.
Firm Frequency Response (FFR): National Grid service paying for fast-response capacity to maintain grid frequency. Battery storage qualifies above ~1 MW; revenue contribution typically 2–5% of project IRR for qualifying systems.
Free advisory model: A fee structure where the customer pays nothing directly and the advisor is paid by the lender/installer recommended. Common for solar installers offering "free quotes." May create conflict of interest in structure recommendation.

G

G98: The UK technical standard for connecting smaller generators (below 16A per phase) to the distribution network. Simpler than G99 — installer-certifies rather than DNO-witnesses.
G99: The UK technical standard for connecting generators (including solar) above 16A per phase to the distribution network. G99 commissioning involves DNO approval, testing, and witnessed inspection. Required above 50 kWp typically.
Green lease: A commercial property lease incorporating sustainability provisions — e.g. data sharing, capex-pass-through clauses, green-rent uplift, MEES compliance commitments. Increasingly standard on new commercial leases.
Green loan: A loan specifically priced for renewable energy or sustainability projects. Commercial solar green loans typically run 7–10 years at 6.5–8% APR. Borrower retains title and FYA capture.
Green rent: A premium on base rent reflecting partial saving capture by the landlord on landlord-funded sustainability infrastructure. Typically 0.5–1.5% rent uplift on solar-equipped buildings.
Grid connection: The physical and contractual arrangement linking a solar installation to the electricity network. Larger commercial systems may require dedicated transformer capacity, AVR, or network reinforcement.
Ground-mounted solar: Solar PV deployed on land using fixed or tracking mounting structures. Common for agricultural sites with under-utilised land. Sometimes raises planning sensitivity; agrivoltaic arrangements (sheep grazing, biodiversity) help support consent.

H

Half-hourly demand data: Detailed electricity consumption data at 30-minute intervals, available from suppliers on request for half-hourly settled meters. Essential for accurate solar sizing — annual consumption alone systematically misrepresents optimal system size.
Hire purchase: An asset-finance structure where the buyer makes regular payments and takes legal title at the end of the term. HMRC permits FYA capture during the term because legal title transfers progressively.

I

IEC 62446: International standard for grid-connected PV system documentation, testing, and inspection. Standard reference for commissioning evidence.
Independent solar finance advisor: A commercial solar finance specialist providing structuring advice without taking commissions from manufacturers, installers, or lenders. Compensated by fixed advisory fees. Differs from broker (intermediates lender selection) and installer (sells systems).
Inverter: Equipment converting DC electricity from solar panels to AC for grid use. Commercial systems use string inverters (per-section) or central inverters (whole-system). Inverters typically need replacement at year 10–13 at £80–£120/kWp.
Investment Zone: UK government designation providing enhanced capital allowance reliefs for qualifying advanced-manufacturing and energy investments. 8 active designations across England (West Midlands, East Midlands, North East, etc.).
ISO 9001 / 14001 / 45001: International management system standards covering quality (9001), environment (14001), and occupational health & safety (45001). Most commercial solar installers maintain at least 9001 + 14001.

K

kWh (kilowatt-hour): The standard unit of electricity consumption and generation. A 250 kWp solar system in the UK generates ~237,500 kWh/year on average.
kWp (kilowatt-peak): The standard measure of commercial solar system size, denoting peak DC power output under standard test conditions (1000 W/m² irradiance, 25°C). A 250 kWp system on a typical UK roof generates ~237 MWh/year.

L

Landlord-tenant split: The commercial-property issue where the landlord owns the building (and would pay solar capex) but the tenant pays the electricity bill (and captures the saving). Resolved through tenant-funded with rent abatement, landlord-funded with green rent, or third-party PPA structures.
Levelised Cost of Electricity (LCOE): The total cost of generating one kWh of electricity over the system's lifetime, including capex, opex, financing, and degradation. UK commercial solar LCOE in 2026 is typically 5–8p/kWh — well below grid electricity prices.

M

MCS (Microgeneration Certification Scheme): UK accreditation scheme for renewable energy installers and equipment. Required for SEG eligibility on systems below 50 kWp; demonstrates installer competence on residential and small commercial systems.
MEEF (Mayor's Energy Efficiency Fund): £500m+ revolving green-finance fund providing senior debt at competitive rates (6–8% APR) for London public-sector and not-for-profit energy projects. Administered by Amber Infrastructure.
MEES (Minimum Energy Efficiency Standards): UK regulatory framework setting minimum EPC ratings for commercial property letting. Currently E or above; C or above proposed by 2030. Solar PV typically delivers 5–15 EPC point uplift on commercial buildings.
Membrane roof: A flat-roof construction with single-ply or multi-ply membrane (typically PVC or EPDM). Solar mounting typically uses ballasted or membrane-bonded systems to avoid penetration.
Module: The standard solar PV unit — typically 60–72 cells in a glass-fronted laminate. Modern tier-1 modules deliver 400–500 W peak output, 2–2.5m² area, with 25-year linear power warranties.
Mounting system: The structural framework securing solar modules to the roof. Commercial flat-roof systems typically use ballasted (weighted, no penetrations); pitched-roof systems use rail-and-clamp mounted to roof structure.
MWh (megawatt-hour): One thousand kilowatt-hours. UK commercial sites consuming above ~500 MWh/year are typical commercial solar candidates; below 100 MWh/year suits SME-scale sub-50 kWp installations.

N

Net Zero NHS: NHS England decarbonisation framework with Trust-level commitments. Solar PV qualifies as supporting intervention; PSDS Phase 4 applications by NHS Trusts align with framework targets.
Network charging: The component of electricity tariffs paying for the transmission and distribution network. Recovered through use-of-system charges that fund DNO and TNO operations.
NICEIC: UK electrical installer certification body. Demonstrates electrical-installation competence; commercial solar installers typically NICEIC-accredited.

O

O&M contract: Operations and Maintenance contract — typically 25-year arrangement covering monitoring, periodic cleaning, fault-response, and inverter replacement. Annual cost typically £8–£12/kWp/year.
Operating expenditure (opex): Day-to-day expenditure on running operations. Operating lease payments and PPA tariffs are typically treated as opex rather than capex.
Operating lease: A lease structure where the lessor retains legal title and bears O&M responsibility. Lessee pays a fixed annual rent. Lease payments are deductible as operating expenses; FYA captured by the lessor not the lessee.

P

P50 / P90 yield estimate: Probabilistic yield estimates: P50 is the 50th percentile (median expected yield); P90 is the 90th percentile (yield exceeded in 9 of 10 years). Project finance models typically use P75 or P90 for conservative forecasting.
Performance Ratio (PR): A measure of system performance versus theoretical optimum, typically expressed as a percentage. Modern UK commercial solar achieves 80–85% PR. Performance warranties typically guarantee 80%+ PR for 25 years.
Policy costs: The component of electricity tariffs funding renewable subsidies (RO, FiT, CfD), capacity market levy, and social levies. Peak likely passed; declining as a share of total tariff into the 2030s.
Power Purchase Agreement (PPA): An arrangement where a third-party developer installs and owns the solar system on the offtaker's roof, selling electricity to the offtaker at a fixed below-grid tariff. Zero capex for the offtaker; lower lifetime saving than capital purchase.
PSDS (Public Sector Decarbonisation Scheme): UK government grant programme administered by Salix Finance funding decarbonisation in public-sector estate. Phase 4 active. Bundled applications (solar + heat pumps + fabric) score better than solar-only on cost-per-tonne metrics.
PV (photovoltaic): The technology converting sunlight directly into electricity using semiconductor cells. Commercial solar PV uses crystalline silicon cells in modules; modules are connected to inverters that convert DC to AC for grid synchronisation.

R

RECC (Renewable Energy Consumer Code): Trading-standards-approved consumer code for renewable energy installers. Demonstrates consumer-protection compliance; commercial-only installers do not always hold RECC.
Roof age: A key constraint on commercial solar deployment — roofs nearing end-of-life require replacement before adding 25-year solar load. Older roofs may require structural reinforcement (£15–£40/m²) before solar installation.
Roof-mounted solar: Solar PV deployed on building roof structures. Most common commercial solar deployment. Requires structural assessment of roof bearing capacity and fixing methodology.
Round-trip efficiency: The percentage of energy retained when stored in and discharged from a battery. Commercial LFP batteries achieve 88–92% round-trip efficiency on well-specified systems.

S

Sale and leaseback: An arrangement where an existing asset owner sells the asset to a financier and leases it back. Less common in commercial solar than equivalent in property; can structure around timing or cash-flow constraints.
Salix Finance: Government-funded body administering Salix decarbonisation loans (zero-interest revolving facility for public sector) and the PSDS grant programme. Loans complement PSDS grants on bundled applications.
Schedule of dilapidations: A landlord's statement of tenant lease-end repair obligations. Solar installations need explicit lease provisions to avoid dilapidations claims at lease end (e.g. who removes/keeps the system).
Scope 2 emissions: Greenhouse gas emissions from purchased electricity (under GHG Protocol). On-site solar PV directly reduces Scope 2 emissions through reduced grid electricity import. Major retailers and corporate occupiers increasingly require Scope 2 reduction in supplier contracts.
Scope 3 emissions: Indirect greenhouse gas emissions from a company's upstream and downstream value chain. Major retailer supplier decarbonisation programmes (Tesco Pathways, Sainsbury's 1.5°C-aligned engagement) target supplier Scope 1+2 reductions to address retailer Scope 3.
SECR (Streamlined Energy and Carbon Reporting): UK regulatory framework requiring large companies and LLPs to report energy use and carbon emissions in their annual reports. Solar PV reduces reportable emissions through reduced electricity import.
Self-consumption: The percentage of generated solar electricity used on-site rather than exported. Higher self-consumption percentages drive higher project IRR because self-consumed kWh are valued at avoided-cost (~17p) rather than export tariff (~7p).
Smart Export Guarantee (SEG): UK regulatory framework requiring large electricity suppliers to pay for surplus solar electricity exported to the grid. Tariffs vary 4–15p/kWh by supplier. Applies to MCS-certified or G99-commissioned systems.
Solar carport: Solar PV deployed as roof structures over car parking areas. Combines parking shelter with electricity generation; integrates well with EV charging.
Special-rate pool: A capital allowance pool attracting 6% writing-down allowance per year on a reducing-balance basis. Long-life assets including commercial solar PV qualify; the residual 50% under the FYA route enters this pool.
Standing charge: The fixed daily charge on electricity supply contracts independent of consumption. Typically £200–£800/month for commercial sites depending on supply capacity. Solar self-consumption does not avoid the standing charge.
Standing-seam roof: A metal roof construction with raised vertical seams. Standing-seam roofs accept solar mounting without roof penetration and are particularly suited to commercial solar deployment.
String: A series of solar modules connected to a single inverter input. String design balances voltage matching, partial-shading performance, and inverter capacity.

T

Take-or-pay: A PPA contract provision requiring the offtaker to pay for a minimum quantity of generation regardless of actual consumption. Standard in long-term PPA structures; allocates generation risk to the offtaker.
Tax allowance (capital allowance): A category of tax deduction available against expenditure on long-life assets. The principal commercial solar capital allowances are FYA, AIA, and the special-rate pool.
TCFD (Task Force on Climate-related Financial Disclosures): UK statutory climate-related financial disclosure framework. Listed companies and large LLPs subject to mandatory TCFD reporting from 2022. Solar deployment supports TCFD disclosures on transition planning.
Time-of-use tariff: An electricity supply tariff with different rates at different times of day. Peak/off-peak tariffs create economic case for battery storage that shifts solar generation to peak demand periods.
Time-shift: Battery storage strategy of charging when solar generates and discharging during peak demand or peak tariff periods. Captures spread between low and high tariff periods.
TrustMark: UK government-endorsed quality scheme for tradespeople. Solar installers typically TrustMark-registered.

W

Wholesale electricity: The component of electricity tariffs paid to the generator. UK wholesale prices peaked at over £400/MWh in 2022 and are now (Q2 2026) trading around £85–£105/MWh forward 12–24 months.
Writing-down allowance: The annual percentage deduction allowed on assets in capital allowance pools. Solar PV in the special-rate pool attracts 6% per year on the reducing balance.

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