Category: Tax

Climate Change Agreements and Solar PPAs

A Climate Change Agreement cuts the levy on electricity by 92%. What that does to the CCL saving from on-site solar, and to the PPA case.

Energy-intensive businesses often hold a Climate Change Agreement, which cuts the Climate Change Levy they pay. If you are one of them, the CCL saving that makes on-site solar look attractive to other businesses mostly disappears, so it is worth checking the numbers before you count it.

What a Climate Change Agreement is

Climate Change Agreements are voluntary agreements between UK industry and the Environment Agency to reduce energy use and carbon dioxide emissions. In return, operators receive a discount on the Climate Change Levy. The Environment Agency administers the scheme for the whole of the UK.

Source: GOV.UK — Climate change agreements. Verified 6 Oct 2026.

How big the discount is

From 1 April 2026 the main rate of CCL on electricity is £0.00801 per kWh. A business with a Climate Change Agreement pays a reduced rate set at 8% of the main rate on electricity, which is a 92% reduction.

Rates: HMRC — Climate Change Levy: changes to rates from 1 April 2026. The £ figures are this site's arithmetic on those rates.

A worked example

Suppose a manufacturing site would use 500,000 kWh a year of on-site solar. Without an agreement, the levy it avoids is about £4,005 a year at the main rate. With an agreement, paying 8% of the main rate, it avoids about £320. The electricity saving from the PPA tariff itself is unchanged, so the difference between the two cases is the £3,685 of levy the agreement already removes.

This site's arithmetic on the rates in HMRC — Climate Change Levy: changes to rates from 1 April 2026.

What it means for a solar PPA

• The unit price carries the case. With the levy mostly gone, an on-site PPA has to beat your delivered grid price on the tariff itself.
• Keep the agreement in view. Solar that cuts your grid imports also changes your measured energy use, so discuss with whoever manages your agreement how the reduction is reported.
• The other benefits remain. Price certainty for part of your demand, no capital outlay and a traceable renewable claim are unaffected by the agreement.

How the levy applies to each PPA structure, and who is outside it altogether, is in our guide to the Climate Change Levy and solar PPAs.