Compare · PPA or purchase
Solar PPA vs Buying Solar Panels: Which Is Better for Your Business?
Last updated 15 October 2026 · Figures indicative
Short answer: Buying solar outright gives the biggest total saving over 20 years, but it needs capital — about £212,500 for a 250kWp system — and you carry maintenance and performance risk. A solar PPA needs no capital and saves from day one. When your capital costs 8% a year or more, the PPA can come out ahead on net present value (NPV), even though buying wins on total undiscounted savings.
Solar PPA vs buying: 12 factors
| Factor | Solar PPA | Buy outright |
|---|---|---|
| Upfront cost | £0 to install | £850–£1,050/kWp at 100kWp |
| What you pay | 10–14p/kWh for solar used | Nothing per kWh after purchase |
| Lifetime saving | Moderate | Highest |
| Payback | Saving from day one | 3–7 years |
| Ownership | Provider | You |
| Maintenance & insurance | Provider | You |
| Performance risk | Provider | You |
| Export income | Usually provider | You |
| Tax relief | None on the asset | AIA or 50% FYA may apply |
| Balance sheet | Usually off (check IFRS 16) | Fixed asset |
| Commitment | 15–25 years | None beyond warranties |
| Moving site | Transfer or buy out | Asset stays with building |
20-year worked example: 250kWp buy vs PPA
A 250kWp warehouse system generating 900 kWh/kWp in year one. Both columns use the same assumptions: 80% self-consumption, grid electricity at 26p/kWh rising 2% a year, a PPA rate fixed at 12p/kWh, and 0.5% a year panel degradation. Buy: £850/kWp (£212,500 upfront), O&M £10/kWp/yr and a £15,000 inverter in year 12. The PPA column is the net saving against buying the same electricity from the grid: (grid rate − 12p) × solar used. Export income and tax relief excluded.
NPV (net present value) converts each future year's saving into today's money by discounting it at your cost of capital — here 8% a year — so savings that arrive later count for less.
| Year | Buy: net saving (£) | Buy: cumulative (£) | PPA: net saving vs grid (£) | PPA: cumulative (£) |
|---|---|---|---|---|
| Year 1 | £44,300 | −£168,200 | £25,200 | £25,200 |
| Year 2 | £44,997 | −£123,203 | £26,005 | £51,205 |
| Year 3 | £45,705 | −£77,498 | £26,820 | £78,026 |
| Year 5 | £47,152 | £16,078 | £28,481 | £134,152 |
| Year 10 | £50,963 | £263,159 | £32,816 | £289,455 |
| Year 12 | £37,568 | £352,487 | £34,627 | £357,798 |
| Year 15 | £55,067 | £515,165 | £37,431 | £467,262 |
| Year 20 | £59,485 | £803,623 | £42,347 | £669,040 |
| Measure | Buy outright | Solar PPA |
|---|---|---|
| Capital needed | £212,500 | £0 |
| Payback | 5 years | Immediate |
| 20-year net saving (undiscounted) | £803,623 | £669,040 |
| NPV at 8% | £268,565 | £306,770 |
Figures from market data as of October 2026; capital cost at the lower end of the indicative range for 250kWp. Tax relief on purchase would improve the buy case.
Verdict for this example: buying ends about £134,583 further ahead on total undiscounted savings, but needs £212,500 upfront. Discounted at 8%, the PPA's NPV (£306,770) beats buying (£268,565) — so if your capital costs 8% or more, or could earn more elsewhere in the business, the PPA is the stronger choice.
When buying wins
- You have capital (or cheap finance) and a hurdle rate below the project's return.
- You pay corporation tax and can use capital allowances.
- You own the building or have a long lease.
- You're comfortable managing maintenance contracts.
When a PPA wins
- Capital is better used in the core business.
- You want savings from day one with no performance risk.
- You're a tenant, or may move within the payback period.
- Your board wants energy savings without a capex approval cycle.
The hybrid: a PPA with a buy-out option
Many PPAs let you buy the system part-way through. Starting on a PPA and buying out in, say, year 7–10 can combine early savings without capital with ownership once cash allows. Ask for the full buy-out schedule up front and model it alongside both options.
Questions to ask your FD
- What hurdle rate must a capex project meet?
- Can we use AIA or the 50% FYA this year?
- How would IFRS 16 / FRS 102 treat the PPA?
- How long will we occupy this building?
- Do we want energy price certainty, maximum saving, or both?
Related: commercial solar costs, PPA rates and the savings calculator.
Related reading: our complete guide to solar power purchase agreements, commercial solar cost per kWp, leases, loans and asset finance for solar, what no upfront cost solar includes and model your own site in the calculator.
PPA vs buying FAQs
Can we switch from a PPA to ownership later?
Usually, yes. Most UK solar PPAs include a buy-out schedule that lets you purchase the system at set prices during the term, typically falling each year. Many also allow transfer for a nominal fee at the end. Check the schedule before signing if ownership is a likely goal.
Which is better for a tenant?
A PPA is often better for tenants: there is no capital tied up in a building you don't own, and many agreements can transfer to the next occupier. Buying can still work on a long lease if the landlord agrees and the payback is well within the remaining term.
How does each affect EBITDA?
PPA payments are usually an operating cost, so they reduce EBITDA slightly while lowering overall energy spend. Buying is capital expenditure: energy costs fall and EBITDA rises, with depreciation below the line. If a PPA is assessed as a lease under IFRS 16, treatment changes — ask your accountant.
Sources
- GOV.UK — Greenhouse gas reporting: conversion factors (DESNZ)
- legislation.gov.uk — The Non-Domestic Rating (Plant and Machinery) (Amendment) (England) Regulations 2022, SI 2022/405
- HMRC — Capital allowances: Annual Investment Allowance and first-year allowances
- Energy Networks Association — G98 and G99 connection requirements
- European Commission JRC — PVGIS photovoltaic yield tool
Price ranges for larger systems, running costs, batteries and PPA rates are indicative market ranges from UK installer, funder and market sources; no official series exists above 50kWp.
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