Public-sector solar finance: Salix and beyond

Public-sector solar sits in a different world from private-sector solar. A trading company funds panels to cut its energy bill and shelter profit behind capital allowances. A school, an NHS trust or a county council usually pays little or no corporation tax, answers to a fixed capital budget, and works within procurement rules that a private firm never sees. The funding routes that win for a manufacturer often make no sense for a maintained school. This guide sets out how public bodies actually pay for solar in 2026 — starting with Salix, then the alternatives where Salix does not reach.

We arrange asset finance for commercial solar; we are not an installer, and we are not Salix. What follows is an honest map of the options, including the ones we cannot fund, so you can choose the right route before you talk to anyone about money.

Salix: interest-free loans for public bodies

Salix Finance is the government-backed body that lends to the public sector for energy-efficiency and decarbonisation projects, including solar PV. Its central proposition is simple and hard to beat: interest-free finance, repaid out of the energy savings the project delivers. For a school or council with a tight capital programme, an interest-free loan that effectively self-funds from a lower electricity bill is close to the ideal instrument.

Salix funding has historically flowed through targeted programmes rather than as an open-ended pot. The Public Sector Decarbonisation Scheme (PSDS) is the best-known channel — grant and loan support for central government, NHS, schools, universities and local authorities replacing fossil-fuel heating and adding low-carbon measures such as solar. Eligibility, application windows and whether support arrives as grant or loan change between phases, so the first job on any public-sector project is to confirm which scheme is currently open and whether your organisation type qualifies. Do not assume last year’s terms still apply.

Where Salix works, it usually wins. The point of this guide is what to do when it does not — because for a large share of public bodies, in a given year, it will not.

When Salix does not reach

Salix funding is finite and competitive. Application windows close, programmes are over-subscribed, certain organisation types fall outside a given scheme, and the savings-based repayment test rules some projects out. A multi-academy trust might secure PSDS support for one site and nothing for the next three. A council might want to move this financial year rather than wait for the next funding round.

When that happens, the body still has a building with a good roof and a daytime electricity load that solar suits well. The question becomes how to fund it from outside the Salix system. Two routes dominate: the operating lease and the power purchase agreement.

The operating lease

For most private companies we steer firmly towards ownership, because owning the system keeps two valuable things with the business: the capital allowances and the Smart Export Guarantee (SEG) income. Solar PV is special-rate (integral-feature) expenditure, so it qualifies for the Annual Investment Allowance at 100% on up to £1m a year, and the 50% first-year allowance above that. Both reliefs are permanent. That is the heart of our usual pitch, set out in full on our capital allowances page.

A public body, though, often has no corporation tax bill to shelter. If you cannot use a capital allowance, the single biggest reason to own evaporates. That changes the calculus entirely, and it is exactly where an operating lease earns its place. Under an operating lease the lessor owns the asset and the public body simply pays a rental for the use of it. The lessee claims no allowances — but a non-taxpayer was never going to use them anyway — and the rentals are a clean, budgetable operating cost rather than a capital draw. For a body managing a constrained capital programme but with revenue headroom, converting a capital project into a predictable rental can be the difference between proceeding and shelving.

One accounting change to flag for your finance team: revised FRS 102 brings most leases on-balance-sheet for lessees for accounting periods beginning on or after 1 January 2026, with short-term and low-value leases exempt. Public bodies often report under different frameworks again, but if your organisation applies FRS 102, the historic off-balance-sheet appeal of the operating lease no longer holds in the same way. The case now rests on cash flow and capital-budget relief, not on keeping the asset off the books.

The power purchase agreement

The third route is the power purchase agreement (PPA). A funder installs and owns the system at no upfront cost to the public body, which then buys the generated electricity at an agreed rate, typically over 15 to 25 years. Zero capex is genuinely attractive when capital is unavailable and tax relief is irrelevant.

Be clear-eyed about the trade-off. Under a PPA the third-party funder owns the asset, claims the capital allowances, and keeps the SEG export income — none of that touches the public body’s accounts. You are buying power, not building an asset. For a non-taxpaying body that cannot raise capital, surrendering allowances it could never use is no real loss, which is precisely why PPAs suit the public sector better than they suit most profitable companies. We weigh this in detail in our asset finance vs PPA comparison.

Schools, NHS and councils: the practical differences

The three big public buyers do not behave identically.

Schools and academies vary by status. A multi-academy trust with delegated budgets and a degree of borrowing freedom can sometimes use lease or PPA structures directly; a maintained school may have to route everything through the local authority. Trust-level procurement and the spread of sites across an estate both shape what is fundable.

NHS trusts carry significant daytime loads and large roof areas, which makes the underlying economics strong, but capital is tightly rationed and decarbonisation targets are firm. PSDS has been a major channel here; where it is unavailable, PPAs and leases fill the gap.

Local authorities have the widest toolkit — prudential borrowing, their own climate programmes, and in some cases the scale to run a portfolio approach across many buildings at once. A council can often blend Salix support on eligible sites with leasing or PPAs on the rest.

Across all three, procurement compliance is non-negotiable: framework agreements, competitive tender thresholds and proper governance sit over every funding decision. Our solar finance by sector pages go deeper on how structure choices land in each setting. And while public bodies are largely outside the corporation-tax grant-and-allowance system, it is still worth understanding the wider landscape of solar grants for business, not least because trading subsidiaries, leisure trusts and arms-length companies attached to public bodies may sit on the taxpaying side of the line and have different, more ownership-friendly options.

Choosing the route

The decision tree for a public body is shorter than for a company. Confirm first whether a Salix-channelled scheme is open and whether you qualify — if so, interest-free finance repaid from savings is usually the strongest option on the table. If Salix is closed or unavailable, weigh an operating lease (predictable rental, capital-budget relief) against a PPA (zero capex, but you forgo the asset and its income). Because most public bodies cannot use capital allowances, the ownership-versus-rental argument that dominates private-sector advice largely falls away, and the choice turns on cash flow, governance and how long you want the commitment to run.

If you want to put numbers behind the comparison, a quick model of rental and repayment scenarios will show how each route lands, and the team can help you frame a structure that fits public-sector procurement rather than fighting it. Tell us your organisation type, roof size and rough load on our quote page, and we will set out the realistic funding routes — including whether Salix should be your first call before finance enters the picture at all.