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: what it offers in 2026

Salix Finance delivers government funding for public-sector energy-efficiency and decarbonisation projects, and what it offers depends on where you are. In England, Salix administers grant programmes rather than loans — there is no general interest-free public-sector loan scheme open there. In Scotland and Wales, Salix delivers loan schemes for public bodies on behalf of the devolved governments. The Scottish Public Sector Energy Efficiency Loan Scheme offers zero-interest loans; the Wales Funding Programme lends at a low fixed rate, with an interest-free Invest to Save strand for bodies without borrowing powers, such as health boards. Both are designed around projects whose savings repay the loan within set payback limits. For a body with a tight capital programme, a loan that effectively self-funds from a lower electricity bill is close to the ideal instrument, but only where one is available.

In England the best-known channel was the Public Sector Decarbonisation Scheme (PSDS): grant funding for public bodies replacing fossil-fuel heating, where solar could be included alongside the heating work rather than funded on its own. Its fourth phase opened in October 2024, closed to new applications in November 2024, and has since been described by the government as the final phase of the scheme. So the first job on any public-sector project is to confirm what is genuinely open for your organisation type and nation today — do not plan around a scheme from a previous year.

Where Salix funding is available, it usually wins. The point of this guide is what to do when it is not — because for a large share of public bodies, it will not be.

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 have won PSDS funding for one site in an earlier phase; since the final phase closed in November 2024 there is no PSDS route. 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 expenditure, so it qualifies for the Annual Investment Allowance at 100% on up to £1m a year, and, for companies buying new, unused equipment, the 50% first-year allowance above that. 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 predictable — though public bodies applying IFRS 16 bring most leases onto the balance sheet, and under HM Treasury budgeting rules the right-of-use asset can score as capital expenditure when the lease starts, so check whether a lease actually eases your capital budget. For a body with revenue headroom but a constrained capital programme, a rental can still help — but confirm the budgeting treatment with your finance team before relying on it.

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 sits with the public body — though your finance team should check whether the agreement contains a lease under IFRS 16. 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 was a major channel here until its final phase closed to applications in November 2024; PPAs and leases now 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. In Scotland and Wales a council can blend a Salix loan on eligible sites with leasing or PPAs on the rest; in England, check what is open first, because PSDS has closed.

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 — a grant in England, a zero-interest loan in Scotland or a low fixed-rate loan in Wales — and if one is open to you, it is usually the strongest option on the table. If Salix is closed or unavailable, weigh an operating lease (predictable rental, though check how it scores against your budgets) 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.