Legal guide: solar panels on commercial rooftops

Alastair Frew, partner and head of the Renewables team at Lodders, explains key considerations to make when installing solar panels on your commercial rooftop.

With the UK recently turning off the last of its coal power stations, the need for renewable energy has never been greater. If you own a commercial rooftop, either as a long-term tenant or a freeholder, you might consider trying to generate some additional income or saving on electricity bills by having solar panels installed.

How does the solar panel installation process work?

A solar panel development company will usually seek to install panels on your roof for either a 20 or 30 year lease term. They will often want to be able to break this lease after either five or ten years in case the market is not favourable but will nonetheless discuss terms and engineering and agree on documentation.

The solar panel company will generally pay you £1 to rent your rooftop unless it is particularly large, and in return you will receive cheaper electricity provided by your solar panel. You will enter into an arrangement where the company has a lease of your building.

Later down the line, if you wish, you can ask the company to move away from the building. You will be required to buy the panels back. It is important to discuss the landlord buyback and business rates in the proposal to ensure you are getting the best deal. Whilst business rates for solar panels on commercial rooftops were previously very expensive, they are currently on a reduced rate reduced until 2035.

Key considerations before installing solar panels:

• Think about your space – the development company will need to put up a crane and fly materials over the building during installation and this may not be possible in tight urban living spaces.
• Look at the strength of your roof – evaluate whether or not your roof is strong enough to take the weight of the panels and withstand the wind as it whips under the panels during strong weather.
• Assess the visual impact – you will need to undertake a Visual Impact Assessment as part of the planning process to ensure your neighbours have no objections to the sight of the panels.

Potential installation damages

Whilst installing the solar panels, the company will need to drill holes in order to secure them to the roof. Take care to ensure no water gets into your property during the process. You should also carefully scrutinise repairing obligations, so you know who is responsible for any potential damages caused by installing the solar panels.

Appropriate insurance

You will also need to make sure your insurance company is aware that you are installing solar panels as the rooftop solar scheme includes a form of battery storage. Insurers are often nervous about the location of these batteries as they can occasionally catch fire. Indeed, insurance premiums are increasing for buildings that have batteries installed in them, so it is important to mention this to your insurance broker before you get too far into the process and have signed contracts.

Power purchase agreement

As well as the lease of £1 per year, you will also need a power purchase agreement (PPA). PPAs are long-term contracts between a customer and an electricity generator to buy energy at a pre-determined price. It is important to negotiate the price to best deal possible as this price will then be fixed, though you may have a five-yearly right to rediscuss the price.

No guaranteed supply

You will be provided with only the electricity that is available and so there is no guaranteed supply. If there is no sun, there will be no power. The solar panel company is not obliged to buy electricity for you and so you will receive what your panels produce. Any surplus will belong to the company, and they will sell it on to the National Grid.

This arrangement balances the risk between the two parties, as you are not paying for the company to put the panels on, and they are not obligated to provide you with electricity if none is produced. You can try and demand a fixed price for a fixed amount of electricity but for most commercial buildings this is not usually considered.

Legal advice on installing solar panels

If you have any further questions about the legal aspects of installing solar panels on your commercial rooftop or would like support to ensure you get the best possible deal, please do not hesitate to contact the expert Renewable Energy solicitors at Lodders today.