Solar PPA vs Buying Outright: Which Is Right for Your Business?
Compare the three main ways to pay for commercial solar: buying outright, finance, or a power purchase agreement (PPA). With pros, cons and a side-by-side example.
At a glance
Key takeaways
- Buying outright gives the biggest long-term savings and lets you claim capital allowances (tax relief on the cost).
- A solar PPA lets you start saving with no upfront cost. You pay only for the electricity you use.
- Finance spreads the cost, often with repayments covered by your savings.
- PPAs usually suit larger sites with strong daytime demand and long-term occupancy.
The Three Main Options
There are three common ways businesses pay for commercial solar. Each one balances upfront cost, long-term savings and responsibility differently.
Buy outright
You pay for the system, own it from day one and keep all the savings.
Solar PPA
A funder pays for and owns the system. You buy the power it generates at a lower rate.
Asset finance
You spread the cost over monthly payments and own the system at the end.
Leasing
You rent the system for a fixed term, with flexible options at the end.
Buying Outright
Buying your system outright gives you the highest return over its lifetime. Once it has paid for itself, often in 3 to 7 years, the power it makes costs you close to nothing for the rest of its 25+ year life.
- Pros: the biggest savings, capital allowances, full control, and it adds value to your property.
- Cons: you need the money upfront, and you’re responsible for maintenance and insurance.
How a Solar PPA Works
With a power purchase agreement (PPA), a funder pays for, owns and maintains the solar system on your roof or land. You agree to buy the electricity it makes at a rate below what you pay for grid power. The rate is either fixed or index-linked (it rises each year in line with an index such as inflation).
- Pros: no upfront cost, savings from day one, and the funder looks after maintenance and performance.
- Cons: lower overall savings than buying, a long contract (often 15 to 25 years), and the funder claims the capital allowances, not you.
Funders usually want a minimum system size, a good credit record, and either a long lease left on the site or ownership of it. Check what happens if you move, sell or extend the building.
Finance and Leasing
Asset finance and leasing sit between buying and a PPA. You spread the cost over a set term. In many cases the monthly payments are lower than your energy savings, so you save more than you pay from the start.
With asset finance (such as hire purchase) you usually own the system at the end and may still be able to claim capital allowances. See our finance page for more.
Side-by-Side Comparison
| Buy outright | Finance | Solar PPA | |
|---|---|---|---|
| Upfront cost | Full system cost | Low or none | None |
| Who owns it | You | You (usually at the end) | The funder |
| Long-term savings | Highest | High | Moderate |
| Capital allowances | Yes | Often | No |
| Maintenance | Your responsibility | Your responsibility | Funder’s responsibility |
| Contract length | None | Typically 3 – 10 years | Typically 15 – 25 years |
Worked Example: 250 kWp System
A manufacturer installs a 250 kWp system (kWp is its peak output). It generates about 225,000 kWh a year, uses 85% on site (about 191,000 kWh) and pays 27p/kWh for grid electricity.
Buying outright (around £190,000)
Solar PPA (£0 upfront, power at 15p/kWh)
These are illustrative figures. Actual PPA rates, system costs and savings depend on your site, energy use and the funder’s terms.
Which Is Right for You?
- Choose to buy if you have the money available, want the highest return and can use capital allowances.
- Choose finance if you want to own the system but would rather protect your cash flow.
- Choose a PPA if you want savings without spending capital, and you’ll stay at the site for the long term.
We regularly model all three options for clients, so you can decide using real figures. Learn more about our solar PPA service.
Frequently Asked Questions
What happens at the end of a solar PPA?
It depends on the contract. Common options are extending the agreement, buying the system at a reduced price, or having it removed.
Is there a minimum size for a PPA?
Most funders have a minimum system size, so PPAs generally suit medium and large commercial sites. We can tell you quickly whether your site is likely to qualify.
Can I get capital allowances with a PPA?
No. Because the funder owns the system, they claim any allowances. You benefit through a lower electricity price instead.
Does a PPA price go up?
Some PPAs have a fixed price. Others rise each year in line with an index, such as inflation. Always check how the price can rise before you sign.
Keep Reading
Related Guides
Get Started
Find the Best Way to Fund Your Solar
We’ll model buying, finance and PPA options for your site so you can decide with confidence.