In this feature
- Put the assumptions on the page
- Self-consumption is the hinge
- Compare avoidable costs consistently
- Indexation changes the long view
- Test the downside without losing the opportunity
- What to request with a proposal
Put the assumptions on the page
The financial attraction of a PPA is strongest when leaders can see how the benefit is calculated. A quoted saving without consumption assumptions, a price basis or a clear definition of costs is difficult to evaluate. A model with visible inputs gives the board something it can challenge, revise and compare with the school's own evidence.
This feature uses an illustrative school scenario, not a market quotation or DfE offer. Assume annual generation of 100,000 kilowatt-hours, onsite use of 70%, an avoidable grid unit cost of 25p and a PPA unit price of 15p. These numbers are chosen to explain the calculation. They are not a forecast of output, a promise of price or a claim about a particular school.
At those assumptions, 70,000 kilowatt-hours would replace grid imports. The avoided purchase cost would be £17,500 and the payment for that onsite electricity £10,500, leaving a £7,000 gross annual difference before other costs. The interactive model alongside this article lets leaders change the inputs and see how quickly the result moves.
Self-consumption is the hinge
The school does not obtain the same value from every unit generated simply because it appears on an annual output estimate. The model above counts the electricity used onsite to displace purchases. It assigns no export benefit to the school, because that entitlement would need to be established in the agreement. This is a conservative modelling boundary, not a statement that exports have no value to any party.
If onsite use falls to 50%, the gross difference becomes £5,000 at the same prices. If it rises to 90%, the difference becomes £9,000. That sensitivity explains why holidays, opening hours and future building use matter so much. A design should respond to the overlap of demand and generation rather than maximise output in isolation.
Interval data provides a better starting point than an annual total. It can reveal daytime base load, weekend use and changes during the summer break. Leaders should ask how a proposal has used that information, and whether it accounts for efficiency measures that may reduce future consumption. DfE's energy guidance supports understanding current and projected usage. [efficiency]
Compare avoidable costs consistently
The school's delivered bill includes more than wholesale energy. Some charges may reduce with imports; others remain or change in a different way. A comparison should therefore identify the avoidable cost relevant to the displaced electricity, rather than assume that every pound on the bill disappears in proportion to onsite generation.
Tax and levy treatment also need a consistent basis. If one figure includes a charge and the other excludes it, the apparent saving can be misleading. The finance lead should document the basis of both prices, with appropriate advice where treatment depends on the school or agreement. A clear comparison is more valuable than a superficially precise number.
The latest national non-domestic average provides context, not a substitute for that work. Schools renew at different times and have different agreements. A school can use national evidence to understand the wider market while basing its decision on its own tariff and the actual alternative available when it considers commitment.
Indexation changes the long view
A price that is attractive in year one can evolve. To illustrate, a 15p starting rate increasing by 2% annually would be about 21.8p in year twenty. That is a mathematical scenario, not a prediction of inflation or contract terms. Its purpose is to show why leaders need the adjustment mechanism as well as the starting number.
Compare grid and PPA paths separately. The calculator offers flat, falling and rising grid-cost scenarios alongside a chosen PPA escalation rate. These are sensitivity tests. They show whether the proposition depends on a particular future, and where the margin becomes narrower or negative. They do not tell the school which future will occur.
A full appraisal should also consider degradation, interruptions, changing demand and costs outside the electricity price. Our simplified tool holds generation and onsite use constant to isolate the price effect. The displayed results are undiscounted gross differences over 15, 20 and 25 years. They are not net present values and should not be described as a complete investment appraisal.
Test the downside without losing the opportunity
A downside scenario is useful because it shows what the school is being asked to rely on. If a reasonable change in assumptions removes most of the benefit, the board needs to understand why. The answer may be to change the design, improve the evidence or examine a different structure, rather than abandon generation altogether.
For example, improving the match between output and demand may be more valuable than increasing the array. Coordinating efficiency work first can make the eventual design more appropriate. Clarifying which party receives export income can resolve an important ambiguity. These are practical ways to strengthen a project through assessment.
The aim is a financial case that remains understandable when circumstances change. A school should be able to explain which inputs drive the result, how reliable they are and what would trigger a review. That helps governors distinguish a robust opportunity from one that works only under an optimistic combination of assumptions.
What to request with a proposal
Ask for the generation calculation, consumption-match analysis, price schedule and breakdown of other obligations. Request a comparison with a realistic alternative on the same basis, including the period covered. Ask who carries the consequences of lower output, metering problems or temporary closure, and ensure the answer matches the contractual wording.
Then create a short assumptions register. Mark each input as measured, professionally estimated, quoted or illustrative. State the source and date. An actual school bill has a different status from a generic tariff assumption; an engineer's site model has a different status from a national average. Keeping those categories visible improves the quality of the decision.
The financial promise of school solar is that a suitable roof and demand pattern can produce recurring budget benefit. The strongest case does not need inflated projections. It needs a comparison that the school can reproduce, a project that fits the estate and terms that remain acceptable through the agreement. That is the standard our readiness and governance features ask leaders to apply.
Illustrative financial model
Test the assumptions
Change the inputs to explore the relationship. These are scenarios, not tariffs, offers or forecasts. The 25p grid and 15p PPA defaults are illustrative. This first-pass model holds generation constant; the electricity desk tests decline, costs, export rights and purchase obligations.
| Period | Illustrative total |
|---|---|
| 15 years | £80,919 |
| 20 years | £94,878 |
| 25 years | £101,182 |
Calculation: generation × onsite share × (grid price − PPA price). Annual changes compound from year two. Excludes export income, degradation, downtime, fees, roof work, tax differences and discounting. Negative results mean PPA electricity costs more under these assumptions. A full appraisal is needed for a decision.
Open the full-term stress testPut the feature to work
Your next leadership discussion
- Replace illustrative inputs with dated school records before approval.
- Compare prices on the same tax, levy and charging basis.
- Use sensitivity tests and a full appraisal alongside the contract.
Questions to resolve
- Which assumptions create most of the projected benefit?
- Would the arrangement remain acceptable if grid prices fall?
Evidence you can follow
Sources and publication record
Development period: September 2026 · financial assessment. . Evidence checked .
This is retrospective analysis of the stated development period. Later context is separated from original events. Recommendations are School Connection’s assessment. Case studies use published government accounts, not independently audited outcomes or new interviews. No supplier is endorsed.
- Department for Education · Checked 9 October 2026
Energy efficiency guidance for the school and FE college estate
Consumption, interventions and onsite-generation guidance.
- Department for Energy Security and Net Zero · 29 September 2026; April–June observation period
Quarterly Energy Prices: September 2026
Non-domestic average 24.51p/kWh including CCL, excluding VAT; not a school tariff or July–October price series. See report pp 7–8 and tables 3.4.1/3.4.2.
- Department for Education · Published 16 July 2026; checked 9 October
Funding for installing solar photovoltaic panels on schools and colleges
Authoritative current guidance on selection, templates, approvals, roof condition and wider-access ambition.
Source boundary: an announced event is not verified attendance; a passed deadline is not an award. No unpublished meeting minutes, market-response summary, final approved template or school-specific tariff forecast is represented as established evidence.