Solar PPA vs Buying Outright: Which Suits Your Business?

Each route trades upfront cost against long-term savings and control:

• Buying outright: you pay the full installed cost, own the system from day one and keep all the savings. Typical cost is £700 to £1,100 per kWp in 2026.
• Asset finance or hire purchase: a lender funds the purchase and you repay over a fixed term, often three to seven years. You usually own the equipment, either from the start or at the end of the agreement.
• Leasing: a lessor owns the system and you pay a fixed rental for its use, with options at the end of the term to extend, buy or return it.
• Power purchase agreement: a funder pays for, installs, owns and maintains the system. You buy the electricity it generates at an agreed price per kWh, typically for 15 to 25 years.

The first two routes give you an asset on your balance sheet and the associated tax relief. The last two keep the asset off your hands, with the funder or lessor taking the ownership benefits in return for providing the capital.

Under an on-site PPA, a specialist funder designs and installs a solar system on your roof at its own cost. It owns and maintains the equipment for the length of the agreement, and you agree to buy the electricity the system generates at a fixed or indexed rate per kWh. PPA rates are commonly quoted at around 10p to 15p per kWh, compared with the 24p to 29p per kWh most UK businesses paid for grid electricity in 2026.

You continue to buy grid electricity for whatever the solar system cannot supply, from your normal supplier. Surplus generation is usually exported, with the export income going to the funder.

A typical PPA involves:

• A site assessment and credit check on your business
• A long-term agreement, usually 15 to 25 years
• A lease or licence giving the funder access to your roof
• Maintenance, monitoring and insurance of the system by the funder
• Options at the end of the term, such as transfer of the system to you, extension or removal

Funders tend to prefer larger systems on financially strong businesses with long occupation, because they are recovering their investment over many years through your electricity payments.

Take a 100kWp system costing £90,000 that generates 95,000 kWh a year, with 90% used on site, grid electricity at 25p per kWh and exports at 5p.

• Buying outright: the business saves about £21,375 a year on grid electricity and earns about £475 from exports, roughly £21,850 a year. Payback is around four years, after which almost all the saving is retained.
• Asset finance: similar annual savings, minus loan repayments. Over a five-year term at typical commercial rates, repayments of roughly £21,000 a year would be broadly covered by the savings, leaving the business owning the system outright afterwards.
• PPA at 12p per kWh: the business buys 85,500 kWh of solar at 12p instead of 25p, saving 13p per kWh, or about £11,100 a year, with no upfront payment. The funder keeps the export income.

Over 20 years, ownership delivers roughly twice the annual saving of the PPA in this example, before allowing for maintenance and an inverter replacement, which the owner pays for and the PPA funder covers. The PPA business, however, has committed no capital and taken no performance risk.

These figures are illustrative only.

The capital allowances on a solar system go to whoever owns it, and that changes the comparison more than many proposals admit.

• Buying outright: your business owns the system and can usually claim the Annual Investment Allowance, deducting qualifying spend of up to £1 million from taxable profits in the year of purchase. For a company paying corporation tax at 25%, that is worth up to £22,500 on a £90,000 system.
• Hire purchase and many asset finance agreements: the business is generally treated as the owner for tax purposes and can usually claim the allowances, even though it is still paying the lender.
• Leases: treatment depends on the type of lease. Under many leases the lessor owns the equipment and claims the allowances, reflecting that in the rental.
• PPA: the funder owns the system and claims the allowances. Your business claims nothing for the equipment.

A PPA proposal that compares its rate against grid prices but ignores the tax relief you would get from ownership understates what you are giving up. Ask your accountant to model the after-tax cost of ownership alongside any PPA offer before you decide.

A PPA is a legitimate and often sensible choice. It tends to suit organisations that fit one or more of these:

• Cannot or prefer not to commit capital: businesses prioritising cash for growth, or organisations with tight capital budgets such as some charities and public bodies.
• Cannot use the tax relief: loss-making businesses or organisations that pay little or no corporation tax lose much of the ownership advantage.
• Want no performance risk: under a PPA the funder carries the cost of faults, inverter replacement and underperformance.
• Have large roofs and long occupation: funders favour sites where a substantial system can run for the full term.
• Need to cut carbon now: a PPA delivers on-site renewable electricity immediately, which supports sustainability reporting without a capital project.

Ownership tends to suit profitable businesses that own their premises or hold long leases, have cash or access to finance, and want the largest possible long-term saving from their roof.

A PPA lasts 15 to 25 years, so its terms matter more than the headline rate. Check each of these before signing:

• Price indexation: many PPAs increase the rate each year in line with an inflation index or a fixed percentage. A rate rising by 3% a year is about 80% higher by year 20 than at the start.
• Minimum purchase or take-or-pay: whether you must pay for electricity even if your demand falls, for example after a shift change or partial closure.
• Roof access and repairs: who pays to remove and refit the system if your roof needs repair or replacement during the term.
• Sale or relocation: what happens if you sell the building or move out. Some agreements require the buyer or new occupier to take on the PPA, which can complicate a sale.
• Early termination: the cost of buying out the agreement early, and how it is calculated.
• End of term: whether the system transfers to you, is removed at the funder's cost, or the agreement rolls over.

Take legal advice on the agreement and the associated roof lease.

Asset finance sits between buying outright and a PPA, and for many businesses it is the most practical route.

• Hire purchase: you pay a deposit and fixed instalments, and own the system at the end. You are generally treated as the owner for capital allowances from the start.
• Finance lease: the lessor owns the system and you pay rentals covering most of its value. At the end you may extend at a low rental or share sale proceeds.

Terms of three to seven years are common, and on a well-matched site the energy savings can be similar to or greater than the repayments from the first year. After the term, the business keeps the savings for the rest of the system's 25-year or longer life.

Unlike a PPA, asset finance leaves you responsible for maintenance and performance, so budget for an operation and maintenance contract and an inverter replacement. Ask finance providers to quote the total amount payable, not just the monthly figure.

Tenants face an extra layer of decisions, whichever payment route they choose. You will need the landlord's consent to install solar on the roof, and the landlord will want to know who owns the system, who insures it, who is responsible for roof damage and what happens at the end of your lease.

The remaining length of your lease often decides the route:

• Long lease, 10 years or more: ownership or asset finance can work well, because the payback period fits comfortably within the lease.
• Medium lease: asset finance with a short term, or a PPA aligned to the lease, may suit better.
• Short lease: a PPA or a landlord-funded installation, with electricity sold to you, may be the only practical option.

Agree in writing what happens to the system when the lease ends, whether it is removed, sold to the landlord or transferred to the next tenant. Read more on our real estate and property portfolios page.

To decide fairly, put the options side by side over the same period, using the same assumptions. For each route, work out:

1. The upfront cost, if any
2. The annual saving against your current grid price, using your expected on-site use
3. The annual payments to the lender, lessor or PPA funder
4. Maintenance, insurance and inverter replacement costs you would carry
5. The value of any capital allowances, after tax
6. Any price indexation over the term
7. The position at the end of the term, including who owns the system

Totting these up over 20 years gives the lifetime net saving for each route.

Run the comparison with flat grid prices as well as rising ones, because a PPA's value depends heavily on what grid electricity costs over the next 20 years. If the PPA only looks attractive on the assumption of steep price rises, the ownership routes are probably the safer choice. Our commercial solar payback guide explains the ownership calculation in detail.

The best way to choose is to get real, written numbers for each option on your own site. Many commercial installers can quote for outright purchase and arrange asset finance through partner lenders, and some also work with PPA funders. Others specialise in just one route.

When you request quotes from installers and funders:

• Ask each installer to price the system for outright purchase, even if you are leaning towards finance or a PPA, so you have a baseline
• Ask finance providers for the total amount payable and the ownership position at the end
• Ask PPA funders for the starting rate, indexation, term, end-of-term options and any minimum purchase obligation
• Send everyone the same 12 months of half-hourly consumption data

Our guides to commercial solar costs, comparing quotes and commercial solar grants cover the rest of the picture. When you are ready, compare quotes from up to three MCS-certified commercial installers.