Comparison · PPA vs Green loan

PPA vs green loan — UK commercial solar 2026

PPA and green loan are the two most common alternatives to capital purchase for UK commercial solar. They differ fundamentally — green loan keeps you as owner with debt to repay, PPA makes the developer the owner with you as electricity offtaker. Both deliver "no upfront cost" but on entirely different economic terms.

Headline answer

Green loan keeps ownership and tax allowance value with you (worth ~£40k lifetime on a £200k system). PPA shifts everything to the developer — including all the lifetime saving (~£400-600k). Green loan wins decisively on lifetime cost; PPA wins on operational simplicity and contract structure flexibility.

Side-by-side

CriterionPower Purchase AgreementGreen loan
OwnershipDeveloper owns; you offtake electricityYou own outright (lender holds security)
Upfront capex£0£0 (financed)
Monthly cost (£200k system)~£2,375 PPA cost (depends on consumption)£3,019 fixed loan repayment
Term20-25 years7-10 years (loan paid off)
After loan/PPA termPPA may renew or system reverts to buildingYou own outright; full electricity savings flow to you
FYA captureDeveloper capturesYou capture (worth ~£25k year 1)
25-year cumulative cash benefit£450-650k£999k
Operational responsibilityDeveloper (full)You (monitoring, O&M, inverter replacement)
Best forCapital-constrained or operationally-simple preferenceProfitable trading companies wanting tax capture without capex

Which one for which situation

  1. Are you a profitable trading company that can use FYA / AIA in the period?

    If yes, green loan captures the £25k year-one tax saving (and ~£12-15k of special-rate pool tail). PPA gives that to the developer. Lifetime cost gap widens by £40k+ in favour of green loan.

  2. Can you commit to 7-10 years of property occupation and operational responsibility?

    If yes (long-tenure occupier with facilities team), green loan is straightforward. If no (uncertain occupation, no in-house operational capacity), PPA shifts those obligations to the developer at the cost of lifetime saving.

  3. Is your bank covenant or working capital position constrained?

    Green loan adds debt to your balance sheet (typically 80-100% LTV, fully amortising over 7-10 years). For tight covenants, this can be problematic. PPA is off-balance-sheet always and avoids new debt — sometimes the only way to deploy solar without breaching covenants.

  4. How much do operational simplicity and predictability matter?

    PPA delivers true outsourced operation — no inverter replacement, no monitoring portal management, no O&M coordination. Green loan keeps you operating the asset. For organisations with no internal energy/facilities team, PPA simplicity may be worth the lifetime cost premium.

Power Purchase Agreement vs Green loan FAQs

Why is PPA so much more expensive than green loan over the lifetime?
PPA developer captures all the lifetime saving as their return. Green loan only costs you the interest on the borrowed capital — typically £40-65k extra vs capital purchase. PPA costs you the entire developer margin — typically £400-600k extra. The structural difference: green loan is debt against an asset you own; PPA is rent on an asset you don't.
Are PPA payments tax-deductible like green loan interest?
PPA payments are typically classified as electricity costs (operating expense) and fully tax-deductible. Green loan interest is also tax-deductible. Both reduce taxable profits. The PPA opex deduction provides similar tax relief mechanics; the difference is on capital allowances (which only the green loan captures).
Can I switch from PPA to green loan / capital purchase later?
Most PPAs include buyout provisions, typically from year 7-10 onward, at depreciated book value or replacement cost. You could buy out the PPA developer and refinance with a green loan if your capital position improves. Pre-year-7 buyouts usually aren't economic vs continuing the PPA.
What if my electricity demand falls during a PPA term?
Most PPAs include "take-or-pay" minimum offtake provisions — you commit to purchasing a minimum percentage of generation regardless of actual consumption. If your demand drops below that minimum, you pay for unconsumed generation. Worth modelling worst-case demand scenarios at PPA contract negotiation.
How do PPA exit clauses work in green loan refinance?
Standard PPA buyout: pay developer the depreciated book value (typically year 7+) or replacement cost (rare). Refinance: secure green loan for the buyout amount, replace PPA contract with loan-secured ownership. Usually adds 2-3 percentage points to lifetime cost vs original capital purchase, but recovers most of the operational ownership benefit.

PPA (full page)

Mechanics, contract terms, market map for UK commercial solar PPA.

Green loans (full page)

Specialist green-debt funding with FYA capture and ownership preserved.

Capital purchase vs PPA

The other big PPA comparison — own outright versus rent.

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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