Your Tenant Pays the Bills — So How Do You Profit From Solar?

It is the question that stops most commercial landlords before they start. You own the roof. You own the building. But under a standard FRI lease, the tenant holds the electricity contract and pays the bills. So if you spend £150,000 putting 250kWp of solar on the roof, the tenant pockets the savings on cheaper power, and you are left holding the capital cost. Why would any owner do that?

The honest answer is that on the naive version — you pay, they save — you would not, and you should not. But that framing assumes there is only one way to own and route the electricity. There are at least five. Each one decides, deliberately, who pays for the array and who captures the value it produces. Get the structure right and solar stops being a gift to your tenant and becomes an asset that pays you a return, protects your capital value, and keeps the building lettable as MEES tightens.

This is the split incentive, and it is solvable. Here is how.

What the split incentive actually is

The split incentive is the mismatch between who would pay for an energy improvement and who would benefit from it. In a let commercial building, the landlord controls the fabric — the roof, the plant, the structure — but the occupier controls the energy use and usually holds the supply contract. The party with the power to install solar is not the party who would see the savings on their bill.

It is the single biggest reason rooftop solar sits unbuilt on millions of square feet of UK commercial roof space. Not cost, not planning, not grid — structure. And because the default lease puts the bill with the tenant, owners assume the maths cannot work for them.

It can. But only if you stop thinking like an occupier chasing a lower bill and start thinking like an asset owner deciding where the value lands. The full mechanics, including the service-charge trap below, are set out in our split incentive guide — this post is the plain-English tour.

The service-charge truth most owners get wrong

Before the five routes, clear up the assumption that sinks half of these conversations. Owners often think they can simply install the array and recover the cost through the service charge. Under RICS guidance and most standard leases, you cannot. Capital expenditure — the array itself — is not a recoverable service-charge item. The service charge funds the running, maintenance and repair of the building, not improvements to it that add capital value the landlord retains.

You can sometimes recover the maintenance and cleaning of a common-parts array through the service charge. You cannot recover the £150,000 of kit. So “put it on the service charge” is not a funding route. Fund the capital another way, then choose how the generation is consumed and paid for. That choice is the whole game.

The five ownership routes

Each route answers two questions: who pays for the array, and who benefits from the electricity. Here they are side by side.

1. Common-parts / landlord supply

In a multi-let building you almost always pay for the common-parts electricity yourself — the lifts, the stairwell and car-park lighting, the landlord’s HVAC, the management plant. That is your bill, not the tenants’. Put solar on the roof to serve those loads and the savings land directly with you, no lease renegotiation required. The running cost of that common-parts energy is also usually recoverable through the service charge, so the displaced grid spend works in your favour twice. It is the lowest-friction route because it touches no tenant contract. See common-parts landlord supply for the metering and apportionment detail.

2. Landlord-to-tenant PPA

Here you fund the array and sell the electricity to your tenant under a power purchase agreement at a rate below what they pay the grid. With commercial grid power sitting around 24 to 28p per kWh in 2026, you can price a PPA that genuinely undercuts the tenant’s supplier while still earning you a healthy margin on self-consumed solar. The tenant gets cheaper, more stable power. You get a contracted income stream off your own roof. It needs a private-wire arrangement and a properly drafted PPA, which we cover in landlord-tenant PPA and private wire. This route shines with a single occupier or a long-lease anchor tenant whose load profile matches daytime generation.

3. Sell the roof — a roof or airspace lease

If you want the asset-value and ESG benefits without spending a penny of capex, lease the roof. A solar developer funds, installs, owns and maintains the array, pays you rent for the roof space, and typically sells the power to the occupier at a discount. You carry no capital cost, no maintenance obligation and no operational risk. You collect rent and improve the building’s energy credentials. The trade-off is that you give away the bulk of the generation economics in exchange for that simplicity — the developer takes the upside because the developer took the risk. For portfolio owners who want renewable coverage across many roofs without a capital programme, this is often the pragmatic choice. The mechanics, and how it compares to a PPA and a licence, are in roof lease vs PPA vs licence.

4. Green leases

A green lease bakes the energy arrangement into the letting itself. At a new letting or a lease renewal, you agree how an array is funded, who consumes the power, how data is shared and how the costs and benefits split between the parties. Because you are setting the terms from a blank sheet, you can engineer almost any of the arrangements above into the contract — landlord-funded with a PPA, tenant-contributed, shared savings. It is the cleanest structure when the lease is genuinely open for negotiation, and it removes the retrofit problem of trying to bolt solar onto a contract that never anticipated it. See green leases and solar.

5. Owner-occupier

The simplest case. If you occupy your own commercial building, there is no split to bridge — you are both the party who pays for the array and the party who benefits from every kilowatt-hour it generates. You self-consume the solar at the full grid-displacement value of roughly 24 to 28p per kWh, export the surplus under a Smart Export Guarantee tariff, and claim the capital allowances and business-rates exemption yourself. This route captures 100% of the economics, which is why owner-occupier solar typically pays back fastest, often inside four to six years.

So which one is right for your building?

It depends on the lease structure, the tenant mix, your appetite for capex, and what you are optimising for — income, capital value, MEES compliance or all three. A multi-let office with high common-parts load points one way. A single-let industrial unit on a fifteen-year lease points another. A portfolio of twenty retail units with no capital budget points to the roof-lease route across the lot.

What does not change is the principle: never accept the naive framing that solar only benefits whoever holds the meter. The meter is a contract, and contracts can be structured. The job is to engineer the ownership and lease arrangement so the right party pays and the right party benefits — and for a landlord, that party can be you.

Work out which route pays you

The fastest way to know which of these five routes fits your building is to put the actual numbers against the actual lease. Tell us the property type, the tenant arrangement and the roof, and we will model who pays, who benefits and what it returns under each viable structure. Request a quote and we will show you the route that makes your roof an asset rather than a gift to your tenant.