Compliance

Climate Change Levy exemption: does solar PPA electricity pay CCL?

There has been no general climate change levy exemption for renewable electricity since 1 August 2015, but how your solar power is supplied still decides whether the levy is charged on it. Grid power, and a sleeved PPA delivered by a licensed supplier, carry CCL at £0.00801 per kWh from 1 April 2026. Solar supplied directly to you by the generator, on your own site or down a private wire, has no CCL to account for under HMRC's rules.

What this means

The Climate Change Levy is a tax on electricity, gas and solid fuels supplied to businesses and public bodies in the industrial, commercial, agricultural and public-service sectors. It is charged through your energy bill at the main rate, £0.00801 per kWh of electricity from 1 April 2026. Renewable electricity lost its blanket exemption in 2015, so what now matters for a solar PPA is the route the power takes: direct from the generator, or through a licensed supplier.

Actions to take

• Ask every PPA provider who the legal supplier of the electricity will be: the provider's own project company under a licence exemption, or a licensed supplier.
• Compare like with like: an on-site PPA tariff against a grid price that includes CCL, a sleeved PPA price plus the levy.
• If you hold a Climate Change Agreement, value the CCL saving at the reduced rate, 8% of the main rate.
• If you are a charity, check how much of your use is non-business: those supplies are outside the main rates of CCL and qualify for reduced-rate VAT.

Which solar PPA structures pay the Climate Change Levy?

HMRC's rule turns on who supplies the electricity and whether anyone sits between the generator and you. An auto-generator or an exempt unlicensed supplier has no CCL to account for on self or direct supplies of renewable source electricity, and photovoltaics count as renewable source electricity. A direct supply means a contract involving only the generator and the customer, with no intermediary taking ownership of the electricity. Renewable electricity supplied by a licensed supplier, or by any other third party, is a taxable supply.

The condition matters. Where the provider's own project company supplies you under a supply licence exemption, the supply is direct. If a deal routes the power through a licensed supplier or another intermediary that takes ownership of it, the units become taxable. Ask the provider who the legal supplier is.

Source: HMRC Excise Notice CCL1/3, section 3.12 (updated 24 March 2026). Verified 6 Oct 2026.

What the CCL difference is worth

From 1 April 2026 the main rate of CCL on electricity is £0.00801 per kWh, which is £8.01 per MWh. Multiplied out, that is £801 for every 100,000 kWh of solar your site uses directly instead of buying from the grid, and £2,002.50 for 250,000 kWh. The figure is small next to the unit price, but it is real money a sleeved PPA or a green tariff does not save.

It also matters when you compare offers. This site's PPA calculator compares your tariff with a delivered grid price taken from DESNZ figures that include CCL, which is the right comparison for an on-site deal. For a sleeved deal, remember the levy is added on top of the PPA price.

Rate: HMRC — Climate Change Levy: changes to rates from 1 April 2026. The £ figures are this site's arithmetic on that rate. Grid price basis: DESNZ Quarterly Energy Prices, table 3.4.2 (including CCL, excluding VAT).

One site, four ways to buy the same solar

Take a site that would use 250,000 kWh a year of solar output, and set the unit prices aside. Only the levy is compared here, at the main rate from 1 April 2026.

For a business with a Climate Change Agreement the bottom two rows fall to about £160, so the difference between the routes is much narrower. Over a 20-year PPA term, the main-rate difference adds up to around £40,000 at today's rate, before any change to the rate itself.

This site's arithmetic on the main rate in HMRC — Climate Change Levy: changes to rates from 1 April 2026. Rates are set annually and can change.

Questions to ask before you sign

• Who is the legal supplier? The provider's project company under a licence exemption, or a licensed supplier. The answer decides whether CCL is charged.
• Is the quoted tariff before or after CCL? On a direct on-site supply there should be no levy to add; on a sleeved deal it will appear on top.
• How will invoices show it? A sleeved supplier's invoice should show CCL as a separate line, as your current energy bill does.
• What if the structure changes? If the provider later routes supply through a licensed supplier, the levy would start to apply; the contract should say who bears it.
• Are you a charity? Give the provider your qualifying-use certificate, which affects VAT, and confirm how much of your use is non-business.

If you hold a Climate Change Agreement

Climate Change Agreements are voluntary agreements between UK industry and the Environment Agency to reduce energy use and carbon emissions; in return, participants receive a CCL discount. From 1 April 2026 the reduced rate for electricity is 8% of the main rate, a 92% reduction. For a CCA holder the CCL saved by on-site solar is therefore much smaller, roughly £0.64 per MWh, so the case for a PPA rests almost entirely on the unit price. Climate Change Agreements and solar PPAs works through the numbers.

Sources: GOV.UK — Climate change agreements; HMRC — Climate Change Levy: changes to rates from 1 April 2026. The per-MWh figure is this site's arithmetic.

The renewable exemption that ended in 2015

Until 2015, renewable electricity could be exempt from CCL wherever it was supplied, evidenced by Levy Exemption Certificates issued through Ofgem. That scheme is closed: certificates were only issued for renewables generated before 1 August 2015, and transitional arrangements ended on 1 April 2018. That is why a REGO-backed green tariff still carries CCL today, and why the structure of a PPA, not the colour of the electricity, now decides the levy. Our post on whether green tariffs avoid the Climate Change Levy covers the history.

Sources: Ofgem — Climate Change Levy (CCL) exemption; GOV.UK — Climate Change Levy.

Who does not pay CCL at all

• Domestic users. CCL is not levied on energy supplied to individuals and households.
• Charities, for non-commercial activities. A church or charity's non-business use is outside the main rates, so for those supplies the PPA saving comes from the unit price alone.
• Businesses using small amounts of energy. Supplies within the small-quantity (de minimis) limits are excluded.
• Some other supplies. Energy not used in the UK, certain good-quality CHP supplies, and fuel used to generate electricity in generating stations of 2 MW or more are among the listed exemptions.

Everyone else in the industrial, commercial, agricultural and public-service sectors pays the main rates, and the levy appears on the business energy bill.

Source: GOV.UK — Environmental taxes, reliefs and schemes for businesses: Climate Change Levy; HMRC — Climate Change Levy: changes to rates from 1 April 2026. Verified 6 Oct 2026.

VAT is a separate question

CCL is not the only tax on a PPA invoice. Electricity supplied under a PPA is charged VAT under the same fuel and power rules as any other supply, so most businesses pay the standard rate while charities' non-business use and very small supplies qualify for a reduced rate. From 1 October 2026 to 31 March 2027 qualifying supplies of electricity in Great Britain are zero-rated. VAT on solar PPA electricity sets out the rates and the certificate a charity needs.

Sources for the figures on this page

FAQs

Climate Change Levy exemption: does solar PPA electricity pay CCL? FAQs

Is solar electricity exempt from the Climate Change Levy?

Not as a category: the renewable exemption only covers electricity generated before 1 August 2015. But HMRC says an auto-generator or exempt unlicensed supplier has no CCL to account for on self or direct supplies of renewable electricity, so solar supplied directly to you by the generator carries no levy, while solar delivered by a licensed supplier does.

Do I pay CCL on a solar PPA?

It depends on the structure. On-site and private wire PPAs supplied directly by the provider's project company under a licence exemption carry no CCL on the solar units. A sleeved PPA is delivered by a licensed supplier, so the levy is charged, and a virtual PPA leaves your normal, taxable supply in place.

What is the Climate Change Levy rate in 2026?

From 1 April 2026 the main rate for electricity is £0.00801 per kWh, which is £8.01 per MWh. Businesses with a Climate Change Agreement pay 8% of the main rate on electricity.

Who is exempt from the Climate Change Levy?

The main rates do not apply to domestic users, to charities' non-commercial activities, or to businesses using small amounts of energy. Energy-intensive businesses with a Climate Change Agreement get a 92% reduction on electricity rather than an exemption.

Do green tariffs avoid the Climate Change Levy?

No. Green tariff electricity is supplied by a licensed supplier, which makes it a taxable supply. The certificates that once exempted renewable electricity were only issued for generation before 1 August 2015.

How much CCL does on-site solar save?

At the main rate, £801 for every 100,000 kWh of solar your site uses directly instead of buying from the grid. For a Climate Change Agreement holder the saving is about 8% of that.

Does a sleeved PPA avoid the Climate Change Levy?

No. A licensed supplier takes the solar farm's output and supplies it to you, which HMRC treats as a taxable supply, so the levy is charged on top of the PPA price.