Guide · Solar PPA

Solar Power Purchase Agreements (PPAs) Explained for UK Businesses

Last updated 15 October 2026 · Figures indicative

Short answer: A solar power purchase agreement (PPA) is a long-term contract in which a third party installs and owns a solar system on or near your site, and your business agrees to buy the electricity it produces at a set price per kWh. You avoid capital cost and maintenance; the provider earns its return from the electricity you buy.

What is a solar PPA?

A solar PPA has two parties. The off-taker is your business — the site that uses the electricity. The provider (sometimes called the developer or funder) pays for the design, panels, inverters, installation and grid connection, owns the system, and maintains it for the length of the contract.

In return you agree to buy the electricity the system generates at an agreed rate per kWh, usually for 15–25 years. Because there is no capital outlay, a PPA is often described as "no upfront cost" solar. That is accurate only alongside the other half of the deal: you pay for the electricity generated, under a long-term agreement.

The saving comes from the gap between your PPA rate and your grid tariff, on every kWh of solar you use on site. Any kWh you still need at night, on dull days or above the system's output still comes from your normal supplier.

Types of solar PPA

Most UK businesses considering solar on their own roof are looking at an on-site PPA. The other structures matter mainly for larger organisations or sites without suitable space.

Main types of solar PPA in the UK
Type	Where the solar is	How power reaches you	Typical user
On-site / behind-the-meter	Your roof, car park or land	Directly into your building, before your grid meter	Most commercial and industrial sites
Private wire	Neighbouring land you don't occupy	A dedicated cable to your site	Factories, farms, campuses with nearby land
Sleeved	A solar farm elsewhere	Over the public grid, 'sleeved' through a licensed supplier	Large multi-site energy users
Virtual / corporate	A solar farm elsewhere	Financial contract only; you keep your normal supply	Corporates buying for carbon and price hedging

How solar PPA pricing works

The provider sets a price that recovers its investment and return over the term. Four structures are common:

Fixed: the same p/kWh for the whole term. Simple and predictable; usually starts slightly higher.
Indexed: rises each year by a set percentage or in line with RPI or CPI. Starts lower, but compare the whole-term cost.
Stepped: agreed increases at set points, for example every five years.
Discount-to-grid: a percentage below your grid rate. Savings are guaranteed relative to the grid but you share in price volatility.

Rates are lower for bigger systems, sunnier sites, longer terms and stronger credit profiles.

Typical UK solar PPA rates in 2026

UK on-site commercial rooftop PPAs typically price at 10–14p/kWh, with large industrial systems often at 8–12p/kWh. Typical business grid unit rates are around 24–28p/kWh.

Indicative, October 2026. Indicative UK on-site commercial rooftop PPA range; subject to site survey, term and credit. Typical UK business 1-year fixed unit rates (market averages ≈25–27p, Aug 2026); varies by size, region and contract.

What's included in a solar PPA

System design, structural assessment and DNO grid application
Panels, inverters, mounting and installation by an MCS-certified installer
Operation and maintenance (O&M), including cleaning and repairs
Remote monitoring and a generation meter for billing
Insurance of the system

Check whether roof repairs, legal fees and any grid-upgrade costs are included — these are the most common items that fall to the business.

Contract terms to check before you sign

Term: length, and whether you can extend.
Indexation: fixed, percentage or inflation-linked, and any cap.
Minimum take: whether you must pay for a minimum volume regardless of use.
Buy-out schedule: prices to take ownership at each year.
End-of-term options: extend, buy, or removal and making good the roof.
Assignment and novation: what happens if you sell, move or the lease ends.
Roof works: who pays to lift and replace panels if the roof needs repair.
Insurance and liability: who covers what, including roof damage.
Performance guarantees: how underperformance is measured and remedied.
Termination: events of default and early-termination fees.

Benefits of a solar PPA

No capital expenditure — cash stays available for the core business.
A lower rate than grid electricity on the solar portion, usually from day one.
Price certainty on part of your energy bill for many years.
Maintenance, monitoring and insurance handled by the provider.
Metered renewable generation to support Scope 2 reporting.

Disadvantages and risks

A PPA is not right for every business, and it is worth being clear about the trade-offs:

Lower lifetime saving than buying. The provider takes a return, so if you have capital, buying outright usually saves more over 25 years.
A long commitment. 15–25 years is a long time; moving or selling needs the contract to transfer or a buy-out.
Indexation risk. If grid prices fall and your PPA rate rises, the saving can narrow.
Export value goes to the provider on most on-site PPAs.
Roof and access obligations for the whole term.
Funder criteria mean smaller or newer businesses may not qualify.

Who a solar PPA suits — and who it doesn't

PPAs suit businesses with around 500m² or more of suitable roof, roughly 80,000 kWh a year or more of mostly daytime use, at least 15 years' tenure and stable accounts. Warehouses, factories, cold stores and schools are typical.

They suit less well where use is mainly at night, the lease is short, the roof needs replacing soon, or the business has capital and wants the full saving.

PPA vs buying vs leasing vs asset finance

Summary comparison of ways to get commercial solar (indicative, 2026)
Option	Upfront cost	Who owns	Who maintains	Lifetime saving
Solar PPA	None	Provider	Provider	Moderate
Buy outright	£850–£1,050/kWp	You	You	Highest
Lease	Low or none	Lessor, then often you	Varies	Moderate–high
Asset finance / loan	Low deposit	You	You	High after repayment

Landlords and tenants

On leased buildings, the tenant usually signs the PPA with the landlord's licence for alterations, provided enough of the lease remains. Alternatively, the landlord signs the PPA and sells the power on to tenants — useful for multi-let estates. Either way, agree in writing what happens when the lease ends.

Tax, accounting and business rates

PPA payments are generally treated as an energy operating cost. Because you don't own the system, capital allowances such as AIA or full expensing don't apply to you under a PPA — they apply if you buy. Some PPAs may be assessed as a lease under IFRS 16 or FRS 102; ask your accountant to review the contract. Exempt to 31 March 2035 (England) for on-site rooftop solar and storage. This is general information, not tax advice.

Carbon, Scope 2 and REGOs

Solar you use on site directly reduces the grid electricity you buy, which lowers your location-based Scope 2 emissions. At 0.2 kgCO₂e/kWh, every 100,000 kWh of solar used avoids around 20 tCO₂e. For off-site PPAs, check who holds the REGOs (Renewable Energy Guarantees of Origin), as they matter for market-based reporting.

Steps to get a solar PPA

Check eligibility: roof area, energy use, tenure and accounts.
Share 12 months of half-hourly data for a desktop design.
Site and structural survey.
Proposal and contract review.
DNO grid application.
Installation and commissioning.
Monthly billing for the solar you use.

The full process and timescales are set out in how a solar PPA works.

Key terms

Off-taker: The business that buys the electricity under the PPA.
kWp: Kilowatt-peak — the rated output of a solar system in ideal conditions.
DNO: Distribution Network Operator — the company that runs the local grid and approves connections.
G99: The grid-connection standard for larger generators, requiring DNO approval before connection.
Self-consumption: The share of solar generation used on site rather than exported.

Go deeper on each part of a solar PPA: how a solar PPA works, step by step, 2026 UK solar PPA rates per kWh, what commercial solar costs to buy, solar PPA vs buying outright over 20 years, how no upfront cost solar is funded, every commercial solar finance option compared, how to choose a solar PPA provider, private wire and sleeved PPAs, MW-scale industrial solar and adding commercial battery storage.

Solar PPA FAQs

Is a solar PPA a loan?

No. A solar PPA is an agreement to buy electricity, not borrowing. You don't own the system and don't make repayments for it — you pay only for the electricity it generates. Some PPAs can still be treated as a lease for accounting purposes, so ask your accountant how IFRS 16 or FRS 102 applies to your agreement.

Does a solar PPA go on the balance sheet?

Often not, because you buy electricity rather than an asset — but it depends on the contract. If the agreement gives you control over the use of a specific system, it may be assessed as a lease under IFRS 16 or FRS 102. Your accountant should review the draft contract before signing.

Can we buy the system later?

Usually, yes. Most UK solar PPAs include a buy-out schedule that sets a price for taking ownership at points during the term, falling over time. At the end of the term the system can often be transferred for a nominal or reduced fee. Check the schedule before you sign.

What is indexation in a solar PPA?

Indexation is how the PPA rate changes each year. A fixed rate stays the same for the whole term; an indexed rate rises by a set percentage (for example 2.5%) or in line with RPI or CPI. Indexed contracts usually start at a lower rate, so compare the total cost over the term.

What if generation is lower than forecast?

You pay only for the kWh the system actually generates and you use, so lower generation means a smaller bill — but also a smaller saving, as you buy more from the grid. Some contracts include a performance guarantee; check how shortfalls are measured and what remedy applies.

What happens to exported power?

Surplus electricity is exported to the grid. Under most on-site PPAs the export income belongs to the provider, which is one reason they can offer a low rate. Sites that use most of the generation themselves get the best value; batteries can store surplus for later use.

Do we need planning permission?

Often not for rooftop systems. In England, many non-domestic rooftop installations fall under permitted development rights, subject to conditions such as listed buildings and conservation areas. Scotland, Wales and Northern Ireland have their own rules. Ground-mounted systems are more likely to need planning permission.

Can a tenant sign a solar PPA?

Yes, if the landlord consents and your lease has enough years remaining — usually 15+ years, or the PPA can transfer to the next occupier. Many solar PPAs are signed by tenants with a landlord's licence for alterations; some landlords sign the PPA themselves and sell the power to tenants.

Sources

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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