Solar PPA vs buying outright
The same roof, the same panels, two entirely different commercial arrangements. One needs no capital and gives you a lower unit rate. The other needs capital and gives you the whole saving. Here is how they actually compare.
The short version
Under a Power Purchase Agreement, an energy investor pays for the system, owns it and maintains it, and you buy the electricity it generates at an agreed rate. Under a purchase, you pay for the system, own it from day one and keep every unit it produces.
Neither is universally better. The honest test is whether you have capital available, whether solar is the best thing that capital could be doing, and how long you expect to occupy the building.
Compared on the things that matter
- Upfront cost. A PPA needs none. A purchase needs the full capital cost, or asset finance against it.
- What you pay after that. Under a PPA, an agreed rate per unit generated, typically below your current tariff. Under a purchase, nothing beyond running costs, because you already own the asset.
- Who owns the system. The investor, until title passes to you at the end of the PPA term. Under a purchase, you do, immediately.
- Maintenance, monitoring and insurance. The owner's responsibility under a PPA, so not yours. Yours under a purchase.
- Balance sheet. A purchased system is an asset you hold, with the capital allowances that follow. A PPA is an energy supply arrangement rather than an asset.
- Lifetime return. Better under a purchase, assuming you have the capital and stay in the building. A PPA trades some of that upside for having no capital requirement.
When a PPA is usually the better answer
When capital is scarce, or when it has better uses. A manufacturer choosing between solar and a new production line is not really choosing between two energy options, and for most businesses the production line wins. A PPA removes that competition entirely.
It also suits organisations whose budgets do not accommodate capital projects easily, which is why schools, academy trusts and care groups often end up here. And it suits anyone who would rather not take on responsibility for maintaining a system for twenty-five years.
When buying outright is usually the better answer
When the capital exists and is not needed elsewhere, ownership produces the stronger long-term return. Payback on a commercial system is commonly in the region of five to eight years depending on size and your current tariff, after which the electricity is effectively free for the remaining life of the equipment, which typically runs well beyond that.
Purchase is also the answer for smaller sites. Funded agreements carry fixed costs for the investor whatever the system size, so below a certain scale they stop being viable for them while a purchase still stacks up perfectly well for you.
The middle path
Asset finance sits between the two. You borrow against the system and own it from the outset, spreading the cost rather than paying it up front. You keep the asset and the full saving, and you take on the maintenance. It suits businesses that want ownership but not the cash outlay, and it is worth asking about if neither of the two main routes quite fits.
What actually decides it
In practice the deciding factor is rarely a spreadsheet preference. It is whether the site is large enough for funding to be offered at all, and whether your occupation of the building is long enough to see either route through. Both are established in the assessment rather than guessed at.
We model both routes against your actual consumption and give you indicative figures for each, so you compare like with like on your own building. Where funding is not available for a site, we will say so and tell you whether purchase still works.
Related reading
- What is a solar Power Purchase Agreement?
- Solar PPA terms: length, price and exit
- What does a solar PPA cost?
- Commercial solar funding options
- Common questions about fully funded commercial solar
The first step
A free desktop assessment. We use your site address and a recent electricity bill to model what your roof could produce and what it could be worth. No site visit, no cost, no obligation.
Common questions
Which is cheaper overall, a PPA or buying?
Over the full life of the system, buying outright usually produces the better return, because after payback the electricity costs you nothing. A PPA is cheaper from day one in cash terms, because there is nothing to pay upfront. Which matters more depends on whether the capital is available and what else it could be doing.
Can we start with a PPA and buy the system later?
Many agreements include a buy-out provision, though the terms vary by contract. It is a fair question to put to the funder directly before signing, and worth doing if ownership is a longer-term aim.
Does a PPA show on our balance sheet?
A PPA is generally treated as an energy supply arrangement rather than an owned asset, but accounting treatment depends on the specific contract and your own auditors. We would not want to state anything definitive here that your accountant should be confirming.
What if our site is too small for a PPA?
Then purchase is usually still viable on the same roof. There is a practical minimum below which funded agreements stop working for the investor, and the assessment tells you which side of that line you fall on at no cost.