Business Model: Solar and Storage Licensing Agreement

This model provides local authorities with the opportunity to benefit from solar and storage technologies without having to front the initial capital investment. The installation is covered under a ‘licensing agreement’, which means that assets are owned by a third party.

This can be enacted as follows:

Third party designs, builds and commissions solar and storage generation assets onsite.
Solar energy used onsite is covered under a PPA which should provide a reduction in energy bills for the local authority.
The asset owner uses revenue from the PPA and other commercial opportunities to recover costs.
Any excess revenue is retained by the service provider.

In this model, solar and storage technologies are deployed at scale. This means that the benefits from numerous sites can be aggregated. Adopting this portfolio approach could mean that less desirable sites, where the business case for storage and site optimisation may not stack up on its own, are able to be included.

Local Authority benefit from solar and storage without having to invest
Installation covered under a “licensing arrangement”, which means the assets are owned by a 3rd party
Any power used on site from the assets is covered under a PPA, and should provide a reduction in energy bills for no up front cost
The asset owner uses value they generate to recover costs – any extra is kept as margin
Primarily aimed at cluster of homes (e.g. social housing) and can include further upgrades like low carbon heating or retrofit
Model is also applicable for any organisation with multiple sites depending on suitability

Key Benefits

Financial and CO2

Energy bill reduction – estimated 10-20% reduction in energy bills for no up front investment
Fixed price PPA and provides price certainty. Other Benefits
Helps finance roll out of solar and storage at scale
Fair transition – Allows low cost access to net zero transition,
Reduces complexity and effort of delivery in house

Other Benefits

Helps finance roll out of solar and storage at scale
Fair transition – Allows low cost access to net zero transition,
Reduces complexity and effort of delivery in house

Risks and Considerations

Potential legal issues of roof licensing and 3rd party asset ownership

Complexity on energy supply contracts, especially with tenants
Only deployed in social housing currently
LA loses control of future revenue opportunities
Cost of finance likely to be higher

Contracts and Value Flow

Most Suitable for

Technology – solar and storage installed on site
Where local authorities lack resource, this could be the most viable option to mobilise more quickly
Looking for 3rd party to manage complexity and risk
Best suited for local authority housing assets or working in partnership with local Housing Associations
Could look at adapting model to be joint venture where local authority looks to roll out across local area

Contracts required

Lease or licence for equipment to be installed
PPA for energy supply (on site generation/ balancing supply)
Export supply agreement with the DNO (Note this is likely to be best placed with the building owner as opposed to leaseholder or concession holder)
Contract with meter operator – will need to allow for both import and export metering
Depending on occupation this might also have implications for onward supply to either commercial or domestic tenants

Contractual Considerations

On site generation across multiple sites could lead to a breach of a minimum supply requirement on existing contracts
Costs associated with grid infrastructure upgrades required to support export could be disproportionate to export
PPA for on-site generation will require long term contract
Significant on-site generation may impact pricing on balancing supply
Where the building is tenanted there are significant additional complexities

Business Model: Solar and Storage Licensing Agreement

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