Rooftop solar: splitting value between landlord and tenant

A landlord and tenant can split the value of a rooftop solar array through one of three structures: a roof lease, an on-site power purchase agreement (PPA), or a private wire. A roof lease rents the roof space to whoever funds and owns the array. A PPA sells the generation to the building's occupier at an agreed price per unit, usually set below the grid import price. A private wire runs a dedicated cable from the array to the user, so the power is consumed without passing through the public network. Which structure fits a given building follows from who uses the electricity under the roof and who is willing to fund the array.

For an asset manager, this is the question that decides whether a rooftop scheme happens at all. The party that owns the roof is often not the party that pays the electricity bill, so the benefit of cheaper on-site power and the cost of the array sit with different parties. A structure that directs the value to the party carrying the cost is what lets a stalled proposal proceed.

The split that stops rooftop schemes

Under a typical full repairing and insuring lease, the landlord owns the building fabric, including the roof, while the tenant pays the electricity bill for the space it occupies. Rooftop solar reduces the tenant's import, so the saving accrues to the tenant. The roof and the capital decision belong to the landlord. A landlord asked to fund an array whose saving accrues to someone else, who may leave at the next break clause, has little reason to proceed, and a tenant cannot install on a roof it does not control. The saving is real, and it goes unclaimed because one party owns the roof while another pays the bill.

Each of the three structures resolves that split differently, by moving either the array, the power, or the roof itself between the two parties.

Roof lease

A roof lease rents the roof space to the party that will fund and own the array. That party may be the tenant, the landlord, or an outside developer or funder. The owner of the array installs it, operates it, and sells the generation to the occupier, while paying the roof owner rent for the space.

For an asset manager unwilling to commit capital, this is the structure that keeps the array off the landlord's balance sheet. A funder carries the cost and the operating risk, the tenant buys cheaper power, and the landlord earns rent on roof space that otherwise earns nothing. The terms that need care are the length of the roof lease against the expected life of the array, rights of access for installation and maintenance, and the effect of the array on any roof warranty or future redevelopment. A roof lease that outlasts the occupational lease, or that constrains a later refurbishment, can cost more than the rent is worth.

On-site power purchase agreement

Under a PPA, the array owner sells the generation to the building's occupier at an agreed price per unit, usually below the price the occupier pays for grid import. The occupier buys the solar power first and draws the balance from the grid. The saving to the occupier is the gap between the PPA price and the avoided import price; the return to the owner is the PPA revenue against the installed cost.

Selling electricity to another party is a licensable supply activity under the Electricity Act 1989, but most on-site schemes fall under a class exemption. A person who supplies no more than 5 megawatts at any time, of which no more than 2.5 megawatts goes to domestic consumers, is exempt from holding a supply licence under Class A of Schedule 4 to The Electricity (Class Exemptions from the Requirement for a Licence) Order 2001. A rooftop array serving a single commercial tenant sits well within that limit, so the licensing question is usually settled early in a C&I scheme.

The value of a PPA to each side depends on how much of the generation the occupier actually uses. A unit the occupier consumes on site displaces a full grid import; a unit exported because the occupier is not drawing at the time earns only the lower export price. The share consumed on site therefore sets how much value there is to split.

Private wire

A private wire is a dedicated cable that carries power from the array directly to the user, without using the public distribution network. It suits a site where the generator and the user are close but metered separately, such as an array on one unit feeding a neighbour, or a landlord's array feeding several tenants across an estate.

Distributing electricity over a private network also normally requires a licence, and here too a class exemption applies. Distribution that reaches only non-domestic consumers has no power threshold at all, while on-site distribution reaching domestic consumers is exempt up to 1 megawatt, under the classes set out in Schedule 3 to the same order. The gain from a private wire is that power kept on the cable avoids the distribution and transmission use-of-system charges that apply to electricity carried over the public network. That saving has to be weighed against the cost of installing and maintaining the cable and the metering, which is why a private wire tends to pay only where the flow between generator and user is large and steady.

What the structure is worth, and why it varies by site

The value available to split, and the structure that captures most of it, depend on the building rather than on a general rule. Power generated on the roof and consumed in the building is not supplied through the public meter, so it does not attract the Climate Change Levy, a tax on business energy use charged at a main rate of £0.00775 per kWh to 31 March 2026 and £0.00801 per kWh from 1 April 2026, as set out in HMRC's Climate Change Levy rates. Each unit of on-site generation that displaces an imported unit saves that levy along with the wholesale and network cost of the import, which is the saving the landlord and tenant are dividing between them.

How large that saving is turns on the occupier's demand profile, its tariff, the roof area and the site's connection capacity, together with the embedded benefits that remain after regulatory reform. Two buildings with the same roof can carry very different value, because a site that uses most of its generation on site keeps far more of it than one that exports the surplus. The structure that works, and the price or rent that makes it fair to both parties, follows from those figures.

This is why the structure is settled from the numbers rather than before them. Lupa works the value out against a site's own half-hourly consumption data, and the platform sets out what a rooftop array saves across the year and how that saving is split by the part of the bill it comes from, so the lease, PPA or private wire can be priced on what the array is actually worth at that building. For an estate, the same figures rank which roofs are worth a scheme at all, which is where a portfolio screen comes in before any single feasibility study.