Advisory service
PPA & Financing Advice
Should you buy the system outright, lease it, or sign a solar power purchase agreement (PPA) and simply buy the power? We model each route and explain where the risk and reward sit. Then we help you negotiate terms that work for your balance sheet.
There are three broad ways to fund commercial solar: buy it outright, lease the equipment, or sign a power purchase agreement (PPA). Under a PPA, you simply buy the electricity it produces. Each option moves the balance of capital, risk and reward differently. The right answer depends on your cost of capital and your appetite for owning the asset.
We model all three and explain a solar PPA in plain terms — tariff, term, indexation and end-of-term options. We also review the heads of terms or contract before you commit. The goal is a funding route you understand well enough to defend. That means no surprises buried in the indexation or buy-out clauses.
The tax treatment is part of that comparison too. Buy outright, and the system typically qualifies for a 100% first-year deduction under the Annual Investment Allowance. Solar is special rate expenditure, so it's this allowance that shelters the cost, not 'Full Expensing'. Above the AIA's £1m annual cap, the 50% special rate first-year allowance takes over instead. 'Full Expensing' applies only to main-rate plant and machinery.
Under a PPA, by contrast, you own no asset and claim no capital allowances at all. You simply pay an agreed rate per kWh, usually below your current grid tariff. That rate runs for a fixed term — in the UK, commonly ten to twenty-five years.
That trade-off — an immediate tax deduction on one side, a zero-capital, fixed-price contract on the other — looks different for every organisation. It depends on cost of capital and balance-sheet appetite. That's exactly why we model it side by side, rather than apply a rule of thumb.
What it delivers
- A side-by-side comparison of outright purchase, lease and on-site PPA
- A plain-English explanation of PPA structure — tariff, term, indexation and end-of-term options
- The balance-sheet and cash-flow implications of each route
- Review of heads of terms and PPA contracts before you sign
- Support negotiating tariff, length and buy-out clauses with the funder or developer
Outcomes
- The funding route matched to your cost of capital and appetite for risk
- PPA terms you understand and can defend
- No nasty surprises buried in indexation or buy-out clauses
Sources & further reading
Frequently asked questions
What is a solar PPA?
Under a power purchase agreement (PPA), a funder installs and owns the system on your roof or land and sells you the electricity it generates — usually below grid price — over a fixed term. You get the power without the capital outlay.
Is a PPA always cheaper than buying outright?
No. Outright purchase usually gives the best lifetime return if you have the capital; a PPA trades some of that return for zero upfront cost and transferred risk. We model both so the choice is clear.
Further reading
Insights on ppa & financing advice
Talk to us about ppa & financing advice
An initial consultation is free and carries no obligation. Tell us about your organisation and the site or estate you're weighing up.