Britain's Solar Push - £13 billion for households, a catalyst or crowd-out risk?

Energy Secretary Ed Miliband will set out the new scheme this month, when he announces a £13 billion investment to reduce carbon emissions in Britain’s homes. This plan, first reported in the Times, marks a major shift for the Government as it seeks to implement its Warm Homes Plan and replace the ECO scheme. It will see a massive amount of new funds pumped into reducing the carbon emissions of British homes, with a major emphasis on rooftop solar, has been billed as nothing short of a domestic energy revolution.

Backed by headlines in December from the Times and Guardian, the promise is bold: millions of households supported to install solar, often alongside batteries, heat pumps and insulation, with the potential to create so-called “zero-bill homes” - with green subsidies meaning some homeowners pay almost nothing for energy.

On paper, it is an attractive vision. Lower bills, lower emissions, visible progress on clean power, and a strong political message that the benefits of net zero can be felt at the kitchen table. But beneath the optimism sits a serious question that is already being debated across the energy and finance sectors:

Will generous public grants for rooftop solar accelerate the transition, or could they unintentionally slow one of the UK’s most successful routes for private investment into net zero?

An Ambitious Offer for Households

The proposal builds on Labour’s Warm Homes Plan, rooted in its manifesto commitment of around £13.2 billion, reportedly boosted following the Autumn Budget. While initial focus is on fuel-poor and low-income households, the signals suggest a much broader reach over time.

Support is expected to include a mix of grants and loans for:

• Rooftop solar PV

• Home batteries

• Heat pumps

• Insulation and efficiency upgrades

Planning rules have already been eased to allow plug-in balcony solar units, reinforcing the sense of a “rooftop revolution”. The programme also aligns neatly with the government’s wider Solar Roadmap, which targets 45–47 GW of solar capacity by 2030, with rooftops playing a central role.

The intended benefits are clear:

• Annual bill savings of £300–£500 for many households

• Greater energy security

• Fairer access to clean technology

• A highly visible symbol of Clean Power by 2030

It is very hard to argue with the ambition, but does this significant investment run a risk of slowing or cutting off private sector investment in this area, particularly for solar PV?

Why Private Finance Has Worked for Solar

Solar PV is not an emerging technology. It is mature, de-risked and increasingly cheap investment, with clear paybacks and this is precisely why it has become one of the UK’s most investable net zero assets.

Over the past decade, private finance has quietly driven much of the growth in rooftop solar:

• Banks and green lenders have financed solar across social housing portfolios using lease structures or long-term power purchase agreements.

• Pension funds and institutional investors have aggregated rooftop systems on public, commercial and housing association buildings into stable, long-duration portfolios.

• Energy service companies (ESCOs) have deployed solar through shared-savings and long-term contracts, removing upfront costs for building owners.

In 2025 alone, the UK saw around 206,000 small-scale solar installations, the vast majority delivered without direct public grants, supported instead by falling technology costs and modest export revenues under the Smart Export Guarantee.

Solar has become the “easy win” of decarbonisation: understandable to banks, attractive to investors and beneficial to households.

The Risk: Public funds create a waiting game

The fear now being voiced is a familiar one in infrastructure markets. We have already seen it with the Public Sector Decarbonisation Scheme - local authorities who secured funding decarbonised, those who didn't, held off investments until they did secure a public grant.

If households, or housing associations, know that generous grants are coming, many will pause. Why pay, or borrow, now, if the government might cover most of the cost next year or the year after?

Developers and investors may also hesitate, holding projects back in anticipation of public-backed schemes with lower risk and simpler economics. This dynamic, known as crowding out, is not hypothetical. It has been seen before when major grant programmes are signalled well in advance.

If grants end up covering most of the £5,000–£10,000 upfront cost of a typical system, private lenders may find there is little role left for them in the mainstream residential market, particularly for middle-income households who could otherwise finance installations privately.

To be clear, this outcome is not inevitable. Much will depend on the details, due in early 2026. Ministers have indicated that the programme will prioritise households and tenures that private finance struggles to reach – renters, social housing, and the fuel poor. If that remains the case, the risk is manageable.

Although, we do question whether private finance has struggled to reach social housing - last year Barclays UK Corporate Bank and Lloyds Banking Group both committed to deliver £500 million of lending to the social housing market for retrofitting homes. What happens to those schemes when the £13 billion comes in to play? Will any of the funding be dependent upon securing private funding to expand potential offerings?

The warning is that if the scheme drifts toward universal subsidy, private capital could quickly step back, or we could lose some of the investments that help to de-risk the larger retrofit projects (e.g., replacing gas heating).

A Question of Design, Not Ambition

Most of the sector agrees on one point: solar is exactly the technology where public funding should unlock, not replace, private investment.

Industry bodies and green finance groups have consistently argued for a more blended approach, including:

• Targeted and tapered support, focused on low-income households and gradually reducing for those able to pay.

• Blended finance models, combining grants with on-bill finance or standardised PPAs rather than upfront giveaways.

• Aggregation at scale, bundling thousands of rooftop projects into portfolios that pension funds and insurers can invest in.

• Public funding for early risk, such as project development, data, and performance guarantees – leaving capital deployment to the private sector.

Handled well, public money can act as a catalyst. Handled poorly, it becomes a substitute - when the government starts to talk about funding of this scale it must be utilised to access, deploy and mobilise private capital.

Why This Matters Beyond Solar

The stakes go far beyond rooftop panels. The Committee on Climate Change (CCC) estimated that the cumulative investment cost for the UK to reach net zero emissions by 2050 could be approximately£1.4 trillion in real terms. we need hundreds of billions to fully decarbonise housing, transport, heat and infrastructure.

Public funding alone will never be enough.

Solar has been one of the clearest examples of how private capital can flow at scale into local net zero delivery. If policy design inadvertently pushes that capital to the sidelines, it sets an uncomfortable precedent for harder-to-finance technologies such as deep retrofit, heat networks or energy storage.

A Promising Policy - but it needs to unlock private capital

Labour’s solar push has the potential to be genuinely transformative: cutting bills, accelerating deployment, creating jobs and making net zero tangible for millions of households.

But the outcome will hinge on whether it can unlock private capital at scale.

If grants are carefully targeted, tapered over time and integrated with private finance, the programme could accelerate both deployment and investment. If not, it risks stalling a market that has been one of net zero’s quiet success stories, and we will see a repeat of previous grant scheme mistakes, showing that achieveing net zero is only viable if you secure a government grant.

The details expected in January will be decisive. Solar should remain a gateway for private finance into net zero, not the point at which that gateway quietly closes. The ambition is welcome. Now the challenge is to ensure it builds a market, rather than replaces one