UK Solar Power: Navigating the Path from Planning to Delivery

As we approach the final stages of grid connection reform and the next round of Contracts for Difference, this seems an opportune moment to step back and examine how the solar market has developed and what challenges lie ahead both for funders and those seeking capital.

A Market Shaped by Subsidy

The trajectory of UK solar capacity tells a story of policy-driven growth. Sharp inclines followed by plateaus mark the sector’s development, each peak corresponding to approaching subsidy deadlines and subsequent withdrawal of support. Capital initially flooded in through tax-incentivised structures such as the Enterprise Investment Scheme and Venture Capital Trusts, targeting projects in the 1-5 MW range, before those taps were closed.

The Feed-in Tariff era left an indelible mark. Between April 2014 and March 2016 alone, 36% of today’s total capacity came online as developers raced to secure guaranteed rates before tariff deadlines.

The United Kingdom now operates 19.5 GW of solar capacity, contributing over 10% of generation during summer months but falling to just 2-3% in winter. The installed base exhibits a barbell distribution: 30% comprises small-scale installations under 10 kW, predominantly residential rooftop systems, whilst large commercial ground-mounted arrays exceeding 5 MW make up 43%.

Over the past five years, growth has concentrated further at the extremes: 45% from projects under 10 kW and 30% from developments exceeding 25 MW. The middle market has effectively stagnated.

The Planning-to-Building Disconnect

Government data tracking projects over 100 kW, representing approximately half the market by capacity, reveals some interesting patterns. Planning applications collapsed from 5.2 GW in 2014 to 0.2 GW in 2016, reflecting the subsidy hiatus when solar was excluded from CfD auctions between 2017 and 2022. The sector has since secured 2.1 GW in CfD AR4 (2022), 1.9 GW in AR5 (2023), and 3.3 GW in AR6 (2024).

Applications have rebuilt steadily since 2018, with 10 GW submitted in the past twelve months. Yet whilst approval rates remain consistent with historic norms, projects are not getting built. Before 2018, approximately 56% of projects securing planning permission were built. Since 2018, this figure has fallen to just 4%. The sector is generating “zombie projects”, sites with planning approval but lacking the grid access or the commercial fundamentals to attract financing.

Grid connection represents the primary bottleneck. The well-publicised connection issues prompted the Grid Connection Reform (TMO4), which is comprehensively re-sorting the applicant queue. Developers are expecting notification of their revised queue positions before year-end, likely triggering a flurry of activity as projects gain certainty over connection dates.

However, grid access alone cannot explain the low conversion rates. Projects unsuccessful in CfD auctions face the additional challenge of securing sufficiently robust power purchase agreements to attract funding or waiting for the next auction round. Without the revenue certainty of a CfD, projects must demonstrate bankable off-take arrangements, a significant bar in volatile wholesale markets.

Government Ambition Meets Developer Appetite

Ministers have established ambitious targets for solar capacity of 45 GW by 2030 and 69 GW by 2035. The 10 GW of planning applications in the last 12 months – covering only larger projects – suggests developers share this appetite. The question is whether commercial fundamentals and the UK’s creaking grid can translate ambition into operational capacity.

Financing the Build-Out – CfD Projects

The 2024 AR6 auction awarded 3.3 GW of solar to 94 projects across 46 organisations. Approximately one quarter are independent developers who will need to secure equity at the project or holding company level, alongside project finance debt (or sell the scheme “shovel ready”). The majority – energy majors, established infrastructure funds, or developers backed by institutional investors – will have some capital, but may wish to complement this with debt or additional equity.

Applications for AR7 have closed, and the auction is scheduled for the coming months. The Clean Power 2030 Action Plan sets a target of 23-24 GW of solar capacity across AR7 and AR8 combined, a significant step-up from recent rounds. It will be interesting to see whether the same developers maintain their appetite or whether delays in progressing AR6 projects caused by grid reform have dampened enthusiasm.

The Rooftop Opportunity

Growing political momentum supports rooftop solar, which avoids the public opposition that bedevils many large-scale ground-mounted projects. The opportunity spans residential installations of a few kilowatts to extensive warehouse and car park space. The UK Warehousing Association estimates there is 15 GW of potential capacity on warehouse roofs alone.

Yet rooftop deployment faces distinct challenges. Without proper maintenance regimes, installations present fire risks. On commercial premises, the complexity of split incentives, where building owners differ from occupiers, can prove intractable, particularly when power purchase agreements exceed lease terms.

From an investor perspective, attractive business models are emerging for commercial rooftop solar. Companies that can source, aggregate, and maintain portfolios at scale offer compelling propositions. These require operational efficiency in portfolio construction and management, but deliver attractive returns as counterparty risk is mitigated across numerous sites. The technology may be similar to ground-mounted solar, but the skills required to build and manage large commercial rooftop portfolios differ markedly. The scale of the opportunity suggests significant third-party capital will flow into this space, though funders will need to assess these opportunities through a different lens than traditional project finance.

Reasons for Optimism

With grid connection allocations for 2026 and 2027, alongside a potentially substantial AR7 round, set to be announced in the coming months, there are grounds for optimism about delivering the large-scale projects currently stalled. This will require significant capital deployment, both equity and debt, into well-structured opportunities.

The convergence of grid certainty and CfD revenue security should unlock many of the “zombie projects” currently trapped in planning limbo. For developers, the challenge is securing appropriate financing through development stages without the constant distraction of fundraising. For funders, the opportunity is to gain early involvement whilst managing development risk exposure through structured approaches.

The United Kingdom’s path from 19.5 GW to 47 GW is achievable, but requires more than planning applications and ministerial targets. It demands efficient capital allocation, grid reforms that align connection availability with project readiness, and innovative business models, particularly in rooftop solar, that can achieve scale whilst managing operational complexity.

The subsidy era shaped Britain’s solar landscape. The question now is whether commercial fundamentals, supported by well-designed policy mechanisms, can drive the next phase of growth.

For project owners seeking to raise capital, or funders looking to expand their activities in the solar sector, we welcome a conversation about how we can support your objectives.