Blog · Published 2026-05-12

The 2026 warehouse solar business case: should you buy, lease or PPA?

UK warehouses have arguably the strongest 2026 commercial solar economics of any sector — enormous rooftops, light electrical loads (favouring export), permanent 100% Full Expensing for limited companies, and a maturing wholesale PPA market for systems above 1MWp. The question for most operators isn't 'should we install solar?' but 'which finance route wins?' This post walks through the economic comparison with real 2026 numbers.

The economic context

A typical UK big-box warehouse (15,000-25,000 m² floor area) accommodates 800kWp to 1.8MWp of solar PV. At 2026 installed prices (£0.65-£0.80/Wp at this scale), that's £520k-£1.44m of capex. Annual generation: 800,000 kWh to 1.8m kWh, with around 20-30% self-consumed and 70-80% exported.

The economics break down into three streams: - Self-consumption savings: ~£42k-£190k/year (depends on rate paid for grid imports) - SEG / wholesale export income: ~£40k-£180k/year (depends on tariff structure) - REGO sales: ~£6k-£36k/year on systems above 50kWp

Annual revenue / savings: roughly £90k-£400k/year for a typical big-box warehouse.

Route 1: Cash purchase

The simplest route. You pay 100% of the capex from operating cash or RCF debt. For a tax-paying limited company, the entire capex qualifies for 100% Full Expensing in year one — saving 25p in the £ of corporation tax.

For a £1m warehouse solar project: - Capex: £1,000,000 - Full Expensing year-one tax saving: £250,000 - Net effective cost: £750,000 - Annual savings/revenue: ~£190k - Payback: 4.0 years post-tax - 25-year IRR: ~17%

Best for: profitable Ltd companies with abundant capex and a 5-year+ planning horizon.

Route 2: Asset finance / hire purchase

A specialist lender funds 90-100% of the capex. You repay over 5-7 years at fixed monthly payments. Treated as the owner from day one — full Full Expensing in year one.

For a £1m project, 90% HP over 5 years at 8.5% APR: - Deposit: £100,000 - HP monthly payment: £18,460 (£221,520/year) - Full Expensing year-one tax saving: £250,000 - Year-one cash effect: -£100k deposit - £221k HP + £250k tax + £190k savings = +£119k positive - Total interest paid over 5 years: £107,580 - 25-year IRR (post-tax, post-finance): ~11-13%

Best for: tax-paying limited companies that want to preserve working capital but capture full tax relief.

Route 3: Operating lease

A finance company owns the asset and leases it to you for typically 7-10 years. You don't own it; you can't claim Full Expensing.

For a £1m system on a 7-year operating lease at 8% implicit interest: - £0 upfront - Monthly lease payment: £18,200 (£218,400/year) - Lease payment is fully tax-deductible as revenue expense - Annual tax saving (25% of £218k): £54,600 - Net annual cost: £163,800 - Annual savings/revenue: £190k - Net annual cashflow benefit: +£26,200 from year one

Best for: loss-making businesses (no tax to offset Full Expensing); businesses preferring operating expenses over capital expenditure in management accounts.

Route 4: Power Purchase Agreement (PPA)

A specialist developer/financier installs and owns the system. You buy the electricity at a fixed per-kWh rate for 15-25 years. £0 upfront. No tax relief (you're buying electricity, not the asset).

For a typical 2026 warehouse PPA on a £1m system: - Year-one PPA rate: 8-10p/kWh (vs typical grid rate 24-30p/kWh) - 25-year fixed escalator: 2-3% per year capped - Annual generation: 950,000 kWh - Annual PPA payment (year 1): 950,000 × 9p = £85,500 - Equivalent grid cost (year 1, self-consumption portion only): 950,000 × 0.30 (self-consumption) × 28p = £79,800 - Net annual saving vs grid: ~£10k to £30k (depending on self-consumption rate) - Total 25-year saving: £600k-£1.4m

The PPA is less profitable than ownership but requires zero capital and zero operational responsibility.

Best for: large systems with long property tenure (15+ years); landlords with multi-let warehouses; PE-backed or FCA-listed operators where balance sheet preservation matters.

The deciding factors

Capital availability. If you have abundant capex (and your business returns less than 10-12% on marginal cash), cash purchase wins on IRR. If capital is constrained, HP > Operating Lease > PPA.

Tax position. Profitable Ltd companies should always capture Full Expensing — cash or HP. Loss-makers or partnerships should prefer Operating Lease.

Property tenure. Freehold or 15+ year lease: any route. 7-15 year lease: HP or Operating Lease. <7 years: Cash only.

Balance sheet preference. PE-backed businesses optimising leverage ratios often prefer PPA / Operating Lease for off-balance-sheet treatment.

Operational capacity. PPAs shift operations to the developer. HP / cash leaves O&M with you (typically £8-£15/kWp/year for maintenance).

Risk appetite. PPAs lock in fixed pricing — protect against grid price rises. Cash / HP exposes you to electricity price variability.

FAQs

FAQs on this topic

What is the largest UK warehouse solar installation?

Several systems above 5MWp have been installed in 2025-2026 — the largest publicly disclosed are around 8-10 MWp on big-box logistics estates in the Midlands and the South East.

Can I install solar on a leased warehouse?

Yes — through landlord installation with rent uplift, or tenant-funded install with proper landlord consent. Multi-tenant logistics requires careful contract structuring.

Is battery storage worth it on warehouses?

Depends on load profile. Cold-store and 24/7 fulfilment hubs: yes. Standard daytime warehouses: usually no — export at 5-15p captures more value than self-consumption when the day-export rate is similar to the avoided import rate after Full Expensing.