Dfe Solar PPA Pilot: What schools need to know

The Department for Education (DfE) is trialling a new approach to funding solar photovoltaic (PV) installations on schools and colleges. In this new approach, they are using private investment rather than requiring education providers to fund the installation themselves.

The pilot is an interesting development for schools, academy trusts and colleges looking to reduce energy costs and increase their use of renewable energy, but there is an important legal point to keep in mind: “standardised” does not necessarily mean “simple”.

How will the DfE’s solar PPA model work?

Under a power purchase agreement (PPA), a private sector provider typically finances, installs, and maintains solar panels on a school building (provided the roof is in good condition). The school then purchases the electricity generated by the panels at an agreed rate, which aims to stay lower than standard grid tariffs.

This can provide schools with access to solar generation without the need for significant upfront capital expenditure, while the provider takes responsibility for the installation, maintenance, and performance of the system.

The arrangement will also involve the school granting rights over its property to the provider. In the DfE model, a linked land lease addresses this.

The DfE is currently piloting the model with up to 150 schools and colleges in Yorkshire and the Humber, the East Midlands, and the South East. The intention is to test the approach before making the model more widely available. The DfE hopes that schools and colleges will be able to procure renewable energy in this way from the 2027–28 financial year.

Why use standardised documents?

There is an obvious attraction to having a standard PPA and land lease.

Solar projects on school sites can involve a number of different parties, approvals, permissions, and legal considerations. A consistent contractual framework could reduce the time and cost involved in getting projects agreed, and provide greater certainty for both schools and solar providers. However, the success of a standardised approach will depend on the documents working effectively for all sides of the transaction.

The current documents are being tested, and participants have already discussed whether the proposed terms strike the right balance between the interests of schools, investors, and other market participants.

That feedback is an important part of the process. If the model is ultimately to be used at scale, the documents need to be commercially workable for providers, while also giving schools and education bodies appropriate protection and clarity.

What should schools be thinking about?

For a school, the attraction of solar panels and potentially lower energy costs is understandable. However, it is important not to lose sight of the fact that the arrangement is much more than simply having solar panels installed on a roof.

The PPA creates ongoing contractual obligations and the linked lease gives the provider rights over part of the school’s property. These arrangements are likely to be long-term commitments. Schools, therefore, need to understand what happens not only on day one, but potentially many years down the line.

Questions the schools will likely raise include:

• How long will the PPA and lease last?
• What happens if the school needs to carry out works to, or replace, the roof?
• What happens if the school wants to sell, transfer or redevelop the property?
• Who is responsible for maintenance and repairs?
• What happens if the solar installation does not perform as expected, or if the panels require an upgrade during the life of the agreement?
• What happens if either party want to terminate the arrangement?
• What rights do the provider have if the school breaches the agreement?
• What happens to the panels and other equipment at the end of the term?

There is also a particular consideration for academy trusts and other education groups managing a number of sites. Property portfolios and school arrangements can change over time, so it will be important to understand how the PPA and lease operate if responsibility for, or occupation of, the relevant site changes during the term.

These do not necessarily give you reasons to avoid proceeding; they simply represent the kinds of questions you should understand before you enter into these long-term arrangements.

The DfE’s pilot is therefore a useful opportunity not just to test the commercial model, but to test whether the contractual framework works in practice for the schools and providers who will ultimately rely upon it.

A promising development but one to approach with care

The move towards greater use of renewable energy across the education estate is clearly significant, and private investment could provide schools with an opportunity to improve their energy efficiency without the same level of upfront capital expenditure.

Standardised documentation could also make future projects quicker and more straightforward; the challenge will be finding the right balance.

The DfE intends its pilot to gather that experience before it rolls out the documents more widely, and other sectors will likely watch the outcome with interest. As with any new standardised contractual framework, feedback from those using the documents in practice will be important in making sure they are workable, proportionate and clear to all parties.

For schools, academy trusts, and other education bodies considering a solar PPA, it is important to note that the fact that a document is described as “standardised” does not mean its terms should simply be accepted without proper consideration. The PPA and the associated land arrangements need to be understood as a whole, particularly given the potentially long-term nature of the commitment.

We are closely following the DfE’s PPA pilot, and can advise schools, academy trusts and other education bodies on the property and contractual aspects of solar installations and PPAs, including the associated land arrangements. Please contact Jen Rayner should you wish to discuss the DfE’s new approach to funding solar photovoltaic (PV) installations on schools and colleges.