Commercial Solar PPA (Power Purchase Agreement)
A third party owns and operates the system on your roof; you buy the electricity at a fixed rate. Zero capital, zero responsibility, lower savings ceiling.
15–25 years; commonly 20 years
PPA tariffs in 2026 typically run 7p–13p per kWh, indexed annually to inflation (RPI or CPI, sometimes capped). Compared with grid electricity at 23p–30p/kWh, the saving is real but the absolute saving per kWh is roughly half what self-funded solar delivers (because the PPA provider keeps the difference as their return on capital).
Not directly applicable — host puts in zero capital. The IRR is technically infinite. Total saving and net present value of avoided cost are the relevant metrics.
How it works
A Power Purchase Agreement is the classic 'no-capex solar' option. The pitch is compelling: a developer installs solar on your roof at no cost to you, and you buy the electricity at a fixed rate well below grid. You save money from day one with no investment risk. The reality requires more careful inspection. The PPA provider is making an investment with their capital and earns a return on that investment — typically 7%–10% IRR over the 20-year contract. That return comes out of the difference between what your solar generates and what you pay for it. In economic terms, you're paying the provider to take the investment risk and ownership responsibilities off your hands. For a profitable trading business, that's an expensive trade — capital purchase delivers roughly £600k–£900k more lifetime saving on the same physical system than a typical 20-year PPA. For a capex-constrained business, a tenanted property, or a charity that can't use tax allowances, a PPA can be the right structure. The key things to negotiate: the tariff and its escalation mechanism (RPI-capped is preferable to uncapped), exit rights if you sell the business or building, change-of-control provisions, the residual position at year 20, who is responsible for roof access and any incidental damage, and what happens if the system underperforms warranted output. PPA contracts run 50–80 pages — they reward careful legal review.
Worked example: 250kWp on a £200,000 commercial system
£0
Year-one PPA payments ~£24k (240MWh at 10p). Avoided grid cost ~£60k (240MWh at 25p). Year-one saving: ~£36k. Net year-one cash position: positive £36k.
+£600k to +£1.0m cumulative saving over 25 years (lower than ownership routes because the PPA provider captures the FYA, the capital appreciation, and a margin on the energy).
Not directly applicable — host puts in zero capital. The IRR is technically infinite. Total saving and net present value of avoided cost are the relevant metrics.
Saves cash from day one with no investment risk. Saves less in absolute terms than ownership over the asset life.
Best fit
- ● Capex-constrained businesses with strong electricity demand
- ● Tenanted commercial properties (where landlord and tenant struggle to align on capital)
- ● Charities, sports clubs, and community organisations
- ● Companies prioritising operational expense over investment
- ● Sites where the customer wants no responsibility for the asset
Not suitable for
- ○ Profitable companies with capital available (capital purchase always wins economically)
- ○ Sites with very short occupation horizon (<5 years)
- ○ Buildings where the host doesn't have a 15–25 year operational horizon
- ○ Customers who want to retain export revenue or future flexibility
Pros
- Zero capital outlay
- Zero O&M responsibility — provider handles all maintenance, monitoring, insurance, inverter replacement
- Predictable tariff for 15–25 years
- Hedges against grid electricity inflation
- Operating expense only — simple P&L treatment
- Provider absorbs all technology risk
- Suitable for tenanted property where landlord won't fund capital
Cons
- Lifetime saving 30–50% lower than ownership routes
- Long-term commitment to one provider — exit costs can be substantial
- Host must allow access to the roof for 20+ years — restricts flexibility on the building
- PPA tariff escalation can outpace grid prices in some scenarios
- Complex contract — careful negotiation on indexation, exit rights, change of control
- Provider's covenant matters — what happens if they go bust?
- End-of-term residual options are negotiable but rarely favour the host
Developer market map
Five categories of UK PPA developer with typical tariff ranges, contract structures, and best-fit profiles.
UK PPA developer market map →Mechanics
Ownership model
A third-party developer (the PPA provider) owns, installs, operates, maintains, and insures the solar system on the host's roof. The host signs a long-term contract to purchase the electricity generated by that system at an agreed tariff (the 'PPA price'). The host pays nothing upfront and has no ongoing capital or O&M obligation. At end of term, options vary: hand-back, buy-out at fair value, or extend.
Balance sheet treatment
Under modern accounting standards (FRS 102, IFRS 16), some PPAs are reclassified as embedded leases and capitalised. Many on-site solar PPAs structured as electricity supply contracts remain off-balance-sheet, but this requires careful drafting and accounting review.
Tax treatment
PPA payments are operating expenditure, fully deductible against trading profits in the year incurred. The host does NOT claim FYA, AIA, or capital allowances. The PPA provider, who owns the asset, captures those benefits and prices them into the PPA tariff.
Who offers it
Specialist commercial PPA providers, energy companies, infrastructure investment funds, and independent power producers. PPA quality varies enormously — we screen providers on covenant, track record, contract terms, and tariff structure before recommending.
Compare with other finance routes
Capital Purchase
Pay cash, own the asset, claim the full tax relief — the simplest structure and almost always the most economic over 25 years.
Green Loans
Borrow against the project, retain ownership, smooth the cash impact — green loans typically charge 6–9% APR for solar specifically.
Operating Lease
The leasing company owns the system; you pay a fixed annual rent. Off-balance-sheet, fully expensable, but you don't get the FYA.
Direct comparisons
Capital Purchase vs PPA
Own vs offtake — when capital constraint makes PPA the answer.
PPA vs Green Loan
Third-party ownership vs debt-funded ownership economics.
PPA vs Operating Lease
Generation contract vs equipment rental.
Solar Lease vs PPA
Fixed monthly vs pay-per-kWh — covenant and contract considerations.
Frequently asked questions
What's a typical UK PPA tariff for commercial solar?
How long are PPA terms?
Why does capital purchase deliver more lifetime saving than PPA?
Can I exit a PPA early?
What happens at end of PPA term?
What is a commercial solar PPA?
What discount on electricity do I get with a commercial solar PPA?
Is a solar PPA or operating lease better for a commercial property?
Who owns the solar panels under a commercial PPA?
What happens to a solar PPA if I sell the building?
UK commercial solar PPA developer market in 2026
The commercial solar PPA market in the UK has consolidated around a set of specialist developers and a small number of larger energy companies offering on-site PPA products. Understanding who the active developers are, their typical project profiles, and how they structure their offers is essential for commercial property owners and businesses considering a no-capex solar route.
The developer comparison below reflects the commercial on-site PPA market — not ground-mounted utility PPAs. Profiles, rates and minimum system sizes are 2026 estimates; always obtain direct proposals before committing.
| Developer | Min system size | Typical PPA rate | Contract term | Specialisation |
|---|---|---|---|---|
| Anesco | 100kWp | 8p–12p/kWh | 15–25 years | Education, public sector, industrial rooftops |
| RenEnergy | 50kWp | 8p–12p/kWh | 15–20 years | Mid-market commercial; flexible exit clauses |
| Lightsource bp | 250kWp+ | 7p–10p/kWh | 20–25 years | Large industrial; portfolio landlords |
| NextEnergy Capital | 200kWp+ | 7p–11p/kWh | 20 years | Property portfolios; fund-backed installations |
| Gridserve | 100kWp+ | 8p–13p/kWh | 15–20 years | EV-integrated commercial; logistics |
| Low Carbon | 250kWp+ | 7p–10p/kWh | 20–25 years | Large-scale commercial; PSDS bundle capability |
| Solarplicity / Ionna | 50kWp+ | 9p–13p/kWh | 15–20 years | SME commercial; simpler contract structures |
| Your Energy (E.ON) | 100kWp+ | 8p–12p/kWh | 20 years | E.ON supply customers; integrated billing |
How commercial solar PPA rates are set in 2026
PPA rates are not market-listed prices — they are negotiated on a project-by-project basis. Understanding the three factors that drive PPA rate offers helps you negotiate more effectively and evaluate competing proposals.
Factor 1: System yield and location
Solar irradiation in the UK ranges from approximately 850 kWh/kWp/year in northern Scotland to 1,150 kWh/kWp/year in the south-west of England. Higher-yield locations allow developers to offer lower per-kWh rates while maintaining their target IRR — expect south-facing UK commercial systems to attract materially better PPA rates than shaded north-facing roofs.
Factor 2: Host credit quality and lease certainty
The developer relies on 20+ years of PPA income. A FTSE-listed company or NHS Trust as the host offers near-zero counterparty risk; a small SME with a 3-year lease introduces significant uncertainty. Better host credit and longer lease term = lower PPA rate offered. Landlord consent complexity also affects what developers will bid.
Factor 3: Export fraction and grid connection
A system sized at 80% self-consumption is more attractive to a developer than one with 50% export (because the developer earns less from exported units, which go to the grid at SEG rates rather than the premium PPA host rate). DNO export limits also reduce project economics — expect a higher PPA rate or a smaller system offer on constrained grid connections.
| PPA component | Typical negotiation range | Leverage point |
|---|---|---|
| Opening tariff rate | 7p–13p/kWh | Competitive tender; multiple developer proposals |
| Annual escalation | RPI, CPI, RPI-capped at 5%, or fixed % | Negotiate cap; RPI-uncapped can be painful in high-inflation years |
| Contract term | 15–25 years | Shorter terms acceptable at slightly higher rates for risk-averse hosts |
| Exit provisions | Change of control, sale of building, early termination fee | Negotiate exit rights at year 10 or on building sale; key for property-owning businesses |
| Residual ownership | Developer or host at end of term | Negotiate transfer to host at year 20–25 for residual value |
| Performance guarantee | None, 90% P90, or full performance guarantee | Large systems can negotiate developer-backed performance bonds |
Commercial solar PPA vs capital purchase: the 25-year economic comparison
The economic trade-off between PPA and capital purchase is predictable and consistent across project sizes. Understanding it helps set the right expectations before choosing a route.
| Metric | PPA (20yr, 10p/kWh) | Capital purchase (AIA-funded) | Green loan (5%, 12yr) |
|---|---|---|---|
| Year 1 saving per kWp | £130–£180 | £220–£280 (after AIA) | £160–£210 |
| 25-year net saving (200kWp) | £180k–£260k | £780k–£950k | £550k–£700k |
| Upfront capital required | £0 | £150k–£200k | £0 (loan-funded) |
| Balance sheet treatment | Off-balance-sheet (operating) | Capitalised asset | Capitalised asset + loan |
| AIA / FYA available | No (developer claims) | Yes — full year 1 relief | Yes — borrower claims |
| Best for | Capex-constrained; tenanted buildings; charities | Profitable trading companies with capital | Profitable companies without available capital |
Commercial Solar PPA Rates 2026: What You Actually Pay
The rate in a commercial solar Power Purchase Agreement is the price per kWh you pay the developer for the electricity their system generates on your roof. It is set below your grid import tariff — that discount is the entire saving in a PPA. This section sets out current UK commercial solar PPA rates, how they are structured, and how to compare a PPA rate against buying outright.
Typical commercial solar PPA rates by system size, 2026
| System size | Typical PPA rate | Discount to grid | Term | Annual escalator |
|---|---|---|---|---|
| 50–100kWp | 14–18p/kWh | 10–20% | 15–20 yr | RPI or fixed 2–3% |
| 100–250kWp | 12–16p/kWh | 15–25% | 15–25 yr | RPI or fixed 2–3% |
| 250–500kWp | 10–14p/kWh | 20–30% | 20–25 yr | RPI-linked typical |
| 500kWp–1MWp+ | 8–12p/kWh | 25–35% | 20–25 yr | RPI-linked typical |
Indicative 2026 ranges for rooftop commercial solar PPAs. Actual rates depend on site consumption profile, roof condition, covenant strength of the offtaker, system size and grid import price. Larger systems with high, steady daytime consumption secure the lowest rates.
How commercial solar PPA rates are built up
A PPA rate is engineered backwards from the developer's required return. Four levers set the number you are quoted:
1. Your grid import price
The PPA rate is anchored to your current import tariff. If you pay 30p/kWh, a 20% discount PPA is 24p. Sites on cheap fixed contracts see smaller absolute savings.
2. Self-consumption rate
The proportion of generation you use on site. Higher self-consumption (a steady daytime load) means more of the output is sold to you at the PPA rate, improving developer economics and lowering your rate.
3. Covenant strength
The developer is lending against your creditworthiness over 20+ years. A strong balance sheet or a long lease unexpired secures a keener rate; weaker covenants attract a risk premium.
4. The escalator
PPA rates rise annually — either by RPI or a fixed 2–3%. A lower starting rate with a higher escalator can cost more over 25 years than a higher start with a fixed escalator. Always compare on lifetime cost.
Commercial solar PPA providers in the UK
The UK commercial solar PPA market is served by specialist funds and developers rather than high-street banks. Providers fall into three groups:
| Provider type | Examples of who operates here | Best for |
|---|---|---|
| Large infrastructure funds | Lightsource bp, Atrato Onsite Energy, NextEnergy, Bluefield | Large rooftops and ground-mount, 500kWp–5MWp, strong covenants |
| Specialist onsite developers | Custom Solar, Aura Power, Eden Renewables, Kontena, Sunsave Commercial | Mid-size rooftops 100–500kWp, multi-site retail and industrial portfolios |
| Energy supplier PPA arms | EDF, E.ON, Centrica Business Solutions, SmartestEnergy | Bundled supply-plus-onsite-generation deals, half-hourly metered sites |
Provider names are listed to illustrate the market structure; we are independent and do not take developer commissions. Because PPA rates and terms vary widely between providers for the same site, running a competitive process across two or three is the single best way to secure a keen rate. We compare PPA offers against each other and against ownership routes on a like-for-like lifetime-cost basis.
Is a PPA rate actually cheaper than owning?
Over 25 years, ownership (cash, green loan or hire purchase) almost always beats a PPA on total cost, because you keep the capital allowances and pay no developer margin. A PPA wins on simplicity, zero capital, and zero maintenance risk — not on headline cost. Compare the PPA rate against your cost of owning before signing a 25-year contract.
How a Commercial Solar PPA Contract Works, Clause by Clause
A commercial solar PPA is not one document: the typical suite is a 50–80 page agreement plus a roof lease granted to the developer's SPV for the full term. Each clause below shows the market-standard position to hold out for.
| Clause | What it does | What to check |
|---|---|---|
| Term | Fixes how long you must buy the output — 15–25 years is standard | Match the term to your realistic occupation horizon, not your lease break date |
| Tariff & escalator | Sets the p/kWh price and its annual uplift — RPI/CPI-linked or fixed 2–3% | Cap index-linked escalators; compare offers on lifetime cost, not year-one rate |
| Availability guarantee | Developer warrants the system is operational for a stated share of the time, commonly 95–98% | Shortfalls should trigger tariff credits; a PPA with no availability clause shifts outage risk to you |
| O&M obligations | Developer maintains, monitors and cleans the system throughout the term | Confirm inverter replacement is expressly the developer's cost — it is the largest mid-life expense |
| Insurance | Developer insures the array; you maintain buildings cover noting the SPV's interest | Check who pays if roof repairs force panel removal — lift-and-shift costs are negotiable |
| End-of-term options | Extend, buy at fair market value, or removal | Removal and making-good should be at the developer's cost, in writing |
| Buyout schedule | Pre-agreed termination sums by contract year, usually from year 7–10 | Early-year sums approximate the developer's remaining income; insist the table is a signed appendix, not 'to be agreed' |
| Assignment & change of occupier | Governs novation if you sell the building or assign your lease | Buyer step-in should be automatic subject to a covenant test — not at the developer's discretion |
The roof lease outlasts everything else
The developer's SPV usually takes a lease of your roof for the full term — and leases over seven years are registrable at the Land Registry in England & Wales, so it binds any future buyer. Redevelopment, extension or refinancing may then need the developer's consent — factor it into any disposal plan before you sign.
Is Your Site PPA-Ready? The Checklist Funders Apply
Developers decline or re-price more sites than they fund. Score your site against the criteria every funder's investment committee applies:
| Criterion | What funders look for | Why it matters |
|---|---|---|
| Roof tenure | Freehold, or a lease with 15+ years unexpired (landlord joined in where needed) | The SPV needs secure roof rights for the whole term; short tenure is the commonest deal-killer |
| Consumption profile | Steady daytime load, 12 months of half-hourly data, roughly 60%+ of generation used on site | Exported units earn the developer far less than units sold to you, so weak daytime demand raises your tariff |
| Covenant strength | Typically three years of filed accounts plus a credit assessment | The tariff prices your default risk over 20+ years; weak covenants are priced, not refused |
| Roof condition | Remaining roof life at or beyond the term, and structural capacity for roughly 12–15kg/m² of added load | A mid-term re-roof means lift-and-shift costs; funders routinely decline aged roofs |
| System size | Most funders' floor is around 50–100kWp; the keenest rates sit above 250kWp | Legal, metering and management costs are broadly fixed, so small systems rarely stack up |
| Grid connection | DNO export headroom and a realistic G99 approval prospect | Export limits shrink project revenue and push the offered tariff up |
My lease has 12 years left — can I still get a PPA?
Sometimes, but expect a shorter term at a higher tariff, or a requirement that your landlord grants the roof lease directly. On tenanted buildings a landlord-side PPA is often the cleaner structure — compare it against an operating lease.
What if my site fails one criterion?
One weak line rarely kills a deal — it moves the offered tariff up rather than ending the conversation, which is exactly when you should re-run the numbers against capital purchase or a solar lease.
We review PPA heads of terms against these market-standard positions and model every offer against the ownership routes on lifetime cost — independent, no developer commissions. Request a PPA contract and readiness review.
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