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The Iran war – and the energy crisis it has triggered – has fired a rocket under the Labour Government’s need to wean Britain off fossil fuels.
Solar is currently a relatively small part of the UK’s energy mix, accounting for just 6.5% of our electricity supply in 2025. But that’s still significant, and crucially it’s rising. According to the national energy operator (Neso), at the end of January 2026 there was 21.8 GW of solar capacity in the UK across 1,951,000 installations. For context, that’s a lot more than our nuclear capacity which is 6.5GW in the UK, though it provides a more stable, constant supply of power. The solar uptick marks an increase of 13% in the space of a year.
The capacity added over the last 12 months includes Cleve Hill solar farm in July, at 373 MW – this is the largest operational solar farm in the UK.
Between 2016 and 2021, the number of new monthly solar installations averaged about 3,000 per month. Over the past 12 months that has soared to 23,000 installations per month. Roughly 15,500 households every month in the UK are fitting solar panels.
And over the course of 2025, 268,000 installations came online, the most new installations in any year. The 2.7 GW of new capacity added in 2025 was the highest annual figure for a decade.
However, some clouds are on their way.
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Nearly 98% of Europe’s solar imports came from China as of mid-2025, and European manufacturers remain 30–40% more expensive than Chinese competitors. So what China does on tax rates and tariffs matters.
China’s Ministry of Finance has confirmed that the 9% VAT export rebate on solar panels will be removed completely from 1st April 2026. That is in effect, a one-tenth subsidy for Chinese panels, the source of nearly all our cheap panels in the UK.
For battery products, the rebate will be reduced from 9% to 6% from the same date, then removed entirely from 1st January 2027. Again, China is a major supply of UK batteries.
Alongside this policy change, some raw material costs for solar are also rising. The price of silver – an excellent electricity conductor – hit an all-time high in mid-January, double the level it was in September 2025, and nearly 200% higher than the year before. In late December 2025, four leading Chinese silicon wafer manufacturers (the silicon product that is the basis of panels) jointly raised quoted prices by an average of 12%.
More pertinently for the UK, the Treasury is gearing up for its own tax hike. The current 0% VAT relief on solar installations is set to last until 31 March 2027, after which the VAT rate will return to 5%. You can pretty much guarantee installers will add it to their quotes. On a solar and battery system for a three-bedroom home costing around £11,300, the shift from 0% to 5% VAT would add roughly £565, according to one provider.
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Heating Up
Frank Gordon, Director of Policy at the Renewable Energy Association, told Byline Times they would be “greatly concerned” about any increase in the cost of solar installations, as higher upfront prices risk slowing uptake.
“This comes at a time where the combination of supply-side cost pressures and the planned end of VAT relief in 2027 could create a significant barrier for households considering solar.”
Renewable firms and the industry body are opposing the withdrawal of the 0% VAT rate in March 2027 “strongly supporting” its extension, to make sure people aren’t priced out. It’s a call backed by major installer Geo Green Power. But some perspective is needed.
As the firm’s managing director James Cunningham tells me: “The price of a solar installation has fallen dramatically in the last three years largely due to the sudden growth in the market during the energy crisis and an increase in manufacturing capability to meet demand – the industry literally tripled in the space of around three years – and that increase in output with new players entering the market has reduced prices and kept them low.”
There are cost pressures coming down the track, but we now have a competitive installation market in the UK that should keep it in check.
But there is a potentially much more seismic – and positive – change coming which could turbo-charge solar installations in the UK.
The Government has just quietly (or at least, with little media coverage) announced that so-called ‘plug in solar’ will soon be legalised.
This is exactly what it sounds like – people will be able to put solar panels on their balconies and gardens, and plug them directly into their mains supply. The property then draws on that energy first to power the house or flat, reducing energy bills.
If that sounds far-fetched, then realise that it is already a big deal in countries like Germany.
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Solar Flare
Plug-in solar was first legalised – or rather, regulated (as it was already happening) in Germany in 2019, allowing balcony solar systems to use standard electrical plugs and feed into the grid.
The rules