Building a farm solar business case for board approval

For larger UK farm operations — limited companies, partnerships with formal governance, or estates with board oversight — solar PV capital decisions go through structured business case approval. The right business case framework helps the decision get through quickly with proper supporting analysis. Here’s the 2026 approach.

Business case structure

A typical UK farm solar business case includes:

1. Executive summary — 1 page covering: project scope, total capex, year-one cash impact, simple payback, 25-year NPV/IRR, strategic rationale.

2. Project specification — system size, building specification, panel and inverter brands, ground-mount vs rooftop, battery (where included).

3. Financial analysis — DCF model with 25-year cash flows, NPV at appropriate discount rate, IRR, simple payback before and after tax relief, sensitivity to key assumptions.

4. Strategic rationale — beyond direct financial returns: supplier-audit value, sustainability commitment, fleet electrification enablement, succession planning, building maintenance pairing.

5. Risk assessment — financial, technical, planning, DNO connection, market.

6. Recommendations and next steps.

Financial analysis assumptions

Standard 2026 assumptions for UK farm solar financial models:

• Capex: £700-£950/kW for systems above 100 kW (£800-£1,000 sub-100 kW)
• Annual generation: 900-950 kWh/kW (UK average for south-facing rooftop)
• Self-consumption: 50-95% depending on building type and load profile
• Grid retail tariff: 24-28p/kWh (current 2026 UK commercial average)
• SEG export tariff: 8-15p/kWh (best variable tariffs at upper end)
• Annual electricity price escalation: 3-5% real (conservative)
• Panel degradation: 0.5-0.6% per year (tier-1 manufacturer warranty)
• Inverter replacement: year 12-18 typically, £100-£200/kW replacement cost
• 25-year discount rate: 4-7% real depending on farm’s cost of capital
• 100% AIA tax relief: 25% effective for incorporated farms at 25% corporation tax

NPV and IRR computation

For a typical 200 kW dairy parlour install in 2026:

Capex year 0: £160,000 AIA year 1 tax saving: £40,000 Net year-0 cost after AIA: £120,000 Year 1 generation: 180,000 kWh Year 1 self-consumption (88%): 158,400 kWh at 25p/kWh = £39,600 saving Year 1 export (12%): 21,600 kWh at 11p/kWh = £2,376 income Year 1 cash flow: £41,976 saving

Applying 4% electricity escalation, 0.55%/yr panel degradation, and £18,000 inverter replacement at year 14:

25-year cumulative saving: ~£1.45 million Net 25-year value (after capex and inverter replacement): ~£1.29 million Simple payback: 3.8 years before AIA, 2.9 years after AIA IRR (25-year): 18.6% real

Sensitivity analysis

Key sensitivities worth modelling:

• Electricity price escalation: 2% (conservative) vs 5% (high) — IRR varies from 14% to 23%
• Self-consumption ratio: 70% (conservative) vs 95% (optimistic) — IRR varies from 14% to 21%
• SEG tariff: 5p (conservative) vs 15p (variable Octopus tariff upside) — IRR varies from 17% to 20%
• Inverter replacement cost: half this estimate (best case) vs double (worst case) — IRR varies from 18% to 19% (relatively low sensitivity)
• Panel degradation: 0.4% (best-case tier-1) vs 0.8% (worst case) — IRR varies from 18% to 19%

The two highest-sensitivity variables are electricity price escalation and self-consumption ratio. Both are partially predictable: HH meter data analysis informs SC%; UK electricity market trajectory informs price escalation.

Strategic rationale beyond financials

Financial NPV/IRR is only part of the case. Strategic rationale to include:

Supplier-audit value. For farms supplying Tesco, Sainsbury’s, M&S, Waitrose, Morrisons — solar generation is increasingly material to supplier sustainability scorecards. Multiple farm clients have cited solar as contributing to contract retention or favourable contract terms.

Sustainability commitment. SBTi or CDP targets for incorporated farms; estate-level commitments for institutional ownership; succession planning narrative for family farms.

Fleet electrification enablement. Solar PV provides the marginal-cost-near-zero electricity that makes ATV, light pickup, and (eventually) tractor electrification economic.

Building maintenance pairing. Combined re-roof + PV unlocks deferred maintenance funded by PV business case.

Brand and marketing. For farms with direct-to-consumer or retail-facing operations, solar visibility supports sustainability messaging.

Risk assessment

Standard risks to include:

Technical risks: equipment failure (mitigated by manufacturer warranty); workmanship issues (mitigated by IWA-backed workmanship); performance under-delivery (mitigated by PVSyst yield model and active monitoring).

Financial risks: electricity price decline (unlikely scenario but possible); SEG tariff changes; tax policy changes (AIA cap could change in future budgets).

Planning risks: unexpected planning requirement (mitigated by Class A Part 14 PD assessment); listed buildings (mitigated by Listed Building Consent process if applicable).

DNO connection risks: capacity-constrained feeder leading to delayed connection (mitigated by no-export design alternative).

Market risks: changes in supplier-audit landscape; changes in EV adoption rate affecting fleet electrification timeline.

Most risks are mitigated through proper design, contracting, and ongoing management.

Presentation format

For formal approval boards: PDF document, 8-15 pages, with executive summary, financial analysis tables, sensitivity charts, and clear recommendations.

For partner-level decisions in family farms: simpler 2-3 page summary covering the key numbers and the rationale.

For estate-level decisions involving institutional landlords: more detailed document including the lease addendum implications and end-of-tenancy reversion.

We support clients with business case preparation as part of standard scope where required — the desk feasibility output is structured to support the case directly.