Solar Canopies: Building the foundations of a robust financial model

A solar canopy is a raised structure built above parking spaces to support solar panels. Solar canopies can allow local authorities to generate low carbon electricity on existing land or assets, power EV charging infrastructure to support adoption, and export to neighbouring buildings.  

Where a project is of sufficient scale to enable substantial electricity generation to offset the use of grid power, pay back on investment can be attractive for local authorities. Project financials can be skewed by site specific capital costs and longer-term uncertainty around the savings or income generated. Building a well-structured financial model to understand the sensitivity of projects to changes in assumptions is a critical part of the business case.  

Although, historically, most UK solar canopy schemes have been delivered with some capital grant, local authorities typically now need to fund them by borrowing against future project revenues. The National Wealth Fund has recently worked with several authorities to explore whether projects could be delivered without grant, and to understand what the key prerequisites or site-specific conditions are to enable this.

Financial viability depends on site-specific characteristics and energy cost assumptions

We found that the ability of a solar canopy scheme to cover capital costs through borrowing was highly dependent on the specific features of each site.

While solar panel efficiency continues to improve relative to cost, wider construction requirements (such as the canopy and related groundworks, foundations, and drainage) remain key cost drivers and often determine overall payback timescales. In addition, grid reinforcement needs and onsite battery storage can add significant costs.

We also identified optimistic capital assumptions in some early feasibility studies, highlighting the need for up-to-date cost analysis. Energy price volatility can make revenue forecasts difficult to predict with certainty, underlining the importance of robust financial modelling and detailed sensitivity analysis. 

Income generation and avoided costs play a central role

Electricity generated by solar canopies can be sold via electric vehicle charge points, consumed in nearby local authority buildings, supplied to local commercial customer via private wire or exported to the grid. Each option carries different pricing assumptions and infrastructure requirements, and the mix has a material impact on project revenues and avoided costs. On site battery storage can help smooth out intra-day and seasonal generation patterns and should be designed and managed to achieve a specific outcome.

EV charging improves revenue potential but increases model risk

Where EV charging formed a significant revenue stream, projects often showed shorter payback periods. However, this also increased project risk, as financial performance will be more dependent on assumptions about EV uptake, utilisation rates and charger type. In scenarios where charging demand exceeded solar and battery output (e.g. at night or in winter) grid electricity will have to be imported which needs to be accurately modelled.  

Financing assumptions and lifecycle costs shape affordability

Where authorities assessed whether projects could be financed through borrowing, interest costs and repayment periods played a significant role in determining affordability. Longer financing periods created a need for replacement of key assets such as batteries, inverters and EV charge points, which must be incorporated into financial modelling to avoid overstating long-term returns.  

Sensitivity analysis is essential for credible decision making

Across all projects, sensitivity testing proved critical. Small changes in assumptions (such as electricity prices, EV charging behaviour, capital costs or inflation) could significantly impact the long-term outcomes. The National Wealth Fund recommended authorities test a wide range of upside and downside scenarios, enabling them to understand risk exposure and assess the robustness of proposed schemes.  

Future technology improvements could strengthen project viability. As solar panel efficiency continues to improve relative to cost, the viability of solar canopy schemes is likely to increase. Even where current analysis indicated that grant support would be required, authorities that had progressed project development work (such as feasibility testing and early modelling), were better positioned to act quickly if conditions shifted, for example through reduced capital costs or improved financing terms.  

Conclusions 

Our work across several authorities demonstrated that although solar canopies can offer clear decarbonisation and localisation benefits, their financial performance depends on careful assessment of site conditions, capital costs, offtake arrangements and EV charging assumptions. Authorities that invested early in defining robust assumptions, scrutinising feasibility evidence and testing multiple sensitivity scenarios were better equipped to understand long-term viability and determine whether a solar canopy scheme should progress. Together, these elements formed the foundations of a strong financial model and enabled more confident, evidence-based decision making. 

If you would like to discuss your solar canopy project with us, please email us.