The (roof) space race: key considerations for rooftop solar PV in the logistics sector

Developers, investors and occupiers of land across a wide range of sectors, including logistics, are increasingly seeing opportunities in the installation of rooftop solar PV apparatus. This comes in the context of a favourable policy environment:

• the previous Conservative administration introduced permitted development rights for domestic rooftop solar, removed the 1MW limit on solar permitted development rights for non-domestic premises in England in December 2023 and launched a “Solar Taskforce”; and
• the Labour Government, in pursuance of a rooftop solar “revolution”, has cited in its December 2024 “Clean Power 2030 Action Plan” figures from the  UK Warehousing Association highlighting the potential for roof space to unlock very significant levels of further rooftop solar, and has committed to publish a “Solar Roadmap” with a view to removing barriers for rooftop solar projects this spring.

At the same time, solar PV technology continues to improve and become more cost-effective.

The main benefits that on-site generation can bring for stakeholders include:

1. clearly demonstrating that power is produced and procured from renewable sources (e.g. for ESG purposes);
2. improving performance against the Energy Performance of Buildings regime and achieving compliance with Building Regulations and the Minimum Energy Efficiency Standard; and
3. potentially saving on power costs (compared with electricity imported from the grid, which, unlike power generated on site, has substantial “non-commodity” costs added to it by licensed electricity suppliers in order to fund our electricity networks and apply “final consumption levies”, which fund energy initiatives such as the Contracts for Difference and Capacity Market schemes).

These benefits are greatest where power is consumed on the same site as it is generated. This makes on-site generation particularly attractive at premises with significant and sustained on-site demand. Logistics developments can be particularly well-suited for this brief, since, together with substantial roof space for solar PV installation, they may accommodate a number of power-hungry activities (especially where they are home to e.g. an electrical vehicle fleet or refrigeration facilities).

The opportunity for sectors like logistics is clear. Despite bullish interest in the area, however, one key challenge for rooftop solar PV projects is the potential for a level of legal and regulatory complexity that may not always be expected, in particular relative to the size of the project. There is no “one-size-fits-all” approach from a legal perspective for rooftop solar projects, nor any industry-standard suite of documentation to look to. In practice, a broad range of approaches and commercial positions have emerged, with stakeholders willing to take or manage risks in very different ways.

In this article we look at some of the key legal and regulatory issues that stakeholders in rooftop solar projects are likely to need to consider when structuring and documenting their projects, together with some areas of potential regulatory reform.

Key considerations for rooftop solar PV projects

Structuring

Stakeholders will need to consider fundamental questions, such as who will procure the installation, operation and ownership of the PV panels (e.g. the landlord or the tenant themselves or a third party generator). A number of factors may be relevant to the decision on basic structure, including ringfencing of risks, corporate capacity (e.g. real estate investment trusts are generally unable to obtain income from sources other than property) and regulatory, accounting and tax considerations. The chosen structure will of course have very significant impacts on the appropriate documentation.

Interfaces between key documents

Depending on the chosen structure, solar PV projects will typically require various agreements (whether freestanding, or by way of variation to existing occupational lease documentation) to be concluded, including a power purchase agreement “PPA” or solar asset licence, an airspace lease, EPC and operation & maintenance contracts, and arrangements with the operator of the regional electricity distribution network and a power offtaker for export of surplus power etc. It is crucial to ensure that these agreements all work together, and dovetail with any existing arrangements, such as  occupational leases. The position will differ depending on whether the structure is being put in place at the outset of the construction of a building (prior to occupation) or where the kit is being retro-fitted onto an existing structure with an existing tenant in place.  If an occupational tenant enters into a rooftop solar PPA with its landlord, the landlord will be keen to ensure the reservation of the rights it needs to install and operate that PV (which may require variations to the rights and reservations granted in an exiting occupational lease), but will want to avoid cutting across the tenant’s FRI obligations. This can create tensions where the tenant is to take on liability for roof repair, but the landlord has installed (or wishes to install) PV. One solution could be to  include a mechanism for the temporary removal of the solar PV apparatus in appropriate circumstances for repairs to take place. It is also important to ensure alignment of any existing utility on-supply obligations and service charge provisions and to achieve appropriate “stapling” of the duration and assignment provisions between the occupational lease and PPA.

Preserving original building warranties

Carrying out works to a building which has already been certified as being practically complete can run the risk of invalidating subsisting warranties or third party rights. Practical measures can be taken to minimise any damage or disruption, but care should be taken to understand any remaining reliance which is enjoyed at the date of the installation to ensure that these are not inadvertently lost.     

Compliance with electricity regulatory / licensing regime

It is an offence to generate, distribute or supply electricity in Great Britain without a licence to do so granted by Ofgem or an applicable exemption from the requirement for such a licence. On-site generators will typically want to operate on a licence-exempt basis to avoid the administrative burden of applying for and complying with an electricity licence and to unlock the full benefits of on-site generation projects referred to above. The legislation around electricity licence exemptions is nuanced and open to interpretation (especially in the context of electricity supply), and it is not possible to obtain formal certification or assurance from Ofgem or Government that any particular exemption is available. Structuring the project to ensure the availability of an applicable licence exemption therefore needs to be given careful thought on a project-by-project basis. While stakeholders may expect exemptions to be available in a “plain vanilla” scenario, a number of factors could present challenges in the regulatory analysis, e.g. where there is any prospect of on-selling, where one solar facility serves multiple tenants, where any consumption site is remote from the location of the solar panels, where there is any domestic occupation on the site and so on.

Pricing

A broad range of pricing structures are deployed in the context of rooftop solar projects, from volumetric to fixed rate, whether by way of power price, rent increase or licence fee. Parties will want to ensure that the economic benefits of on-site renewable supply are realised and correctly allocated between the parties – and to ensure whichever party initially bears the capital expenditure associated with the installation of the solar assets will see a return on their investment.

Relevant reforms

Network connections reform

Grid connection reform remains a very active policy area, with Government, Ofgem and industry backing ever-more radical change in recent years. See our recent Law-Now on the latest position on this regulatory “Connections Reform” workstream.

Under this further revised package, in order to be awarded arrangements for a network connection within the next decade, generation projects will need to demonstrate not only readiness to connect, but also alignment to the Government’s strategic plans (initially branded the “Clean Power 2030 Action Plan”), which will set out the amounts of each generation and storage technology that are needed in each area of the country. The reforms are set to apply to “relevant” generators, which may have the effect of excluding smaller rooftop solar projects where the distribution network operator believes they will not have a significant effect on the transmission system. Even for smaller projects that are not ultimately directly affected by these reforms, there could be indirect impacts on availability and cost of export connections for surplus on-site power.

Reforms on electricity licence exemptions and policy levies

The Labour Government has inherited from their predecessors an open workstream around potential reforms to the legislative regime for “class exemptions” from the requirements for electricity licences. The previous administration published a call for evidence in 2020 and a response in 2023 (see our previous Law-Now in this regard), but we are not aware of any specific timeline having been set for taking this workstream forward. It will be interesting to see if (and, if so, how) the new administration picks this up. Changes to the licence exemptions regime could significantly affect the viability of on-site generation projects. The previous Government also committed to consider moving policy levies from electricity bills to gas bills – if this approach were to be adopted, it could also have a profound impact on the economics of on-site generation projects.

Reforms to Energy Performance of Buildings regime and Building Regulations

The Government launched a consultation on 4 December 2024 on refinements to the Energy Performance of Buildings regime. One of the key aspects of this regime is the persons selling or letting buildings are generally required to produce up-to-date Energy Performance Certificates (“EPCs”), which in turn are used to measure compliance with efficiency measures including the Minimum Energy Efficiency Standard (“MEES”) regime (see our previous Law-Now on MEES) . The proposals include requiring EPCs to certify a more granular range of metrics to provide a more complete representation of building energy performance than just cost or emissions per square metre, including measures of thermal performance that may increase the impact of rooftop solar in the EPC context.

Additionally, in a residential context, while the Private Members’ “Sunshine” Bill, proposing mandatory installation of solar panels on new domestic premises, was recently rejected by Parliament, rooftop solar panels do play a prominent role in the proposed Future Homes and Building Standards, on which the Government consulted last year with a view to ensuring new buildings are “net zero ready”.