Comparison · Capital purchase vs PPA

Capital purchase vs PPA — UK commercial solar 2026

Capital purchase and PPA are the two ends of the commercial solar finance spectrum: own the asset outright versus rent the electricity. The lifetime cost difference is large — typically £400-700k more saved over 25 years on a 250 kWp system through capital purchase versus PPA. The decision is rarely about lifetime cost; it's about whether capex and operational ownership fit your business model.

Headline answer

Capital purchase wins decisively on lifetime cost (£400-700k more saved over 25 years on a 250 kWp project). PPA wins on capex (zero) and operational simplicity (developer manages everything). Choose capital purchase where capital is available and tax allowances can be used; PPA where capital is constrained or you prefer outsourcing.

Side-by-side

CriterionCapital purchasePower Purchase Agreement (PPA)
Upfront capex£200k for 250 kWp system£0
Year-one cash position (after FYA)-£135k (capex less FYA tax saving less Y1 generation)+£12-18k (PPA discount on consumed solar)
25-year cumulative cash benefit£1.0-1.2m (profitable trading company)£450-650k (PPA developer captures the difference)
Tax allowance capture50% FYA + special-rate pool, worth ~£40k lifetimeDeveloper captures; priced into PPA tariff
Operational responsibilityOwner — site monitoring, O&M, inverter replacement at year 12Developer — fully outsourced
Contract lengthNo contractual lock-in20-25 year PPA term
Property tenure required10+ years preferred (system stays on roof)20+ years preferred (PPA term)
Tariff visibilityAvoided cost on grid tariff (~22p/kWh, escalates with grid)Fixed PPA tariff (~16p/kWh) with RPI or fixed escalator
Best forProfitable companies with available capital + 10yr+ tenureCapital-constrained operators or covenant-restricted property owners

Which one for which situation

  1. Are you a profitable trading company with available capital and 10+ years of expected occupation?

    If yes, capital purchase delivers £400-700k more lifetime saving on a 250 kWp project. The decision is straightforward — capital purchase wins.

  2. Is capital genuinely unavailable (covenant-blocked, working capital constrained, or strategic preference)?

    If yes, PPA delivers a project that wouldn't otherwise happen. Lifetime cost is higher but the alternative is "no project" — and reduced grid spending is reduced grid spending. PPA is the right answer.

  3. Do you have 20+ years of tenure or property control?

    PPAs need 20-25 year offtaker certainty. If you're unsure of long-term occupation, PPA structure becomes risky — you may be obliged to continue purchasing electricity at the PPA tariff after you've moved out, or face break fees. Where tenure is unclear, capital purchase or a shorter-term green loan are safer.

  4. Does ESG positioning matter materially to your customers / investors?

    Both deliver on-site renewable provenance, but capital purchase delivers the strongest customer-facing position because you own and operate the generation directly. For data centres, food producers, and other supply-chain-sensitive businesses, this can be material.

Capital purchase vs Power Purchase Agreement (PPA) FAQs

Why is the lifetime saving on capital purchase so much higher than PPA?
PPA developers capture the difference as their return on capital. They fund the £200k installation expecting to recover their capital plus a 12-15% return over the 20-25 year contract. That return comes from the spread between grid electricity cost (~22p) and the PPA tariff (~16p) — about 6p/kWh. Over 25 years × ~150 MWh/year × 6p/kWh = £225k of margin to the developer that you would otherwise capture as your saving.
Is PPA worth it for businesses without capital constraints?
Generally no, on lifetime cost grounds. Most profitable trading companies that could afford capital purchase will outperform PPA economics by £400-700k on a 250 kWp project over 25 years. PPA exists primarily for capital-constrained or covenant-restricted scenarios. The "free solar" framing in marketing is accurate but obscures the economic structure.
Can I exit a PPA early?
Most PPAs include buyout provisions, typically from year 7 or year 10 onward, at depreciated book value or replacement cost. Early exit often means paying out the developer's remaining return — meaningful but not punitive on later-term exits. Pre-year-7 exits usually require negotiating a full payout and sometimes aren't economically attractive vs continuing the PPA.
Do PPAs make sense for charities and not-for-profits?
Often yes, because charities can't capture FYA / AIA tax allowances (no taxable profit to offset). Without tax allowance capture, the lifetime cost gap between capital and PPA narrows substantially — the charity loses £25-40k of FYA value either way. PPA structure also bypasses charity capex constraints. We frequently recommend PPA structures for charity solar where the tax position doesn't support direct ownership.
How does the property landlord-tenant split interact with this comparison?
For tenant-occupier capital purchase: requires landlord consent and lease length to support 10+ year payback. For tenant-occupier PPA: even longer lease horizon needed (20-25 years), often impractical. For landlord capital purchase or PPA: standard structuring. The split adds a layer but doesn't change the underlying capital-vs-PPA economics.

Capital purchase (full page)

The default for profitable trading companies. Strongest lifetime economics.

Power Purchase Agreement (full page)

Zero-capex, developer-funded structure. Mechanics, contract terms, market map.

Capex vs PPA decision framework

Five variables that decide which structure fits your situation.

Need this comparison run on your specific numbers?

We model both structures side-by-side using your postcode, half-hourly demand profile, accounting position, and balance sheet preferences. Five working days from enquiry to indicative comparison.

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