Pay monthly commercial solar — UK 2026 finance options
Five UK commercial solar finance structures convert capex into monthly payments — green loan, finance lease, operating lease, asset finance hire purchase, and PPA. They deliver different combinations of monthly cost, contract length, ownership outcome, and tax allowance capture. The best monthly-pay route depends on which trade-off you prefer.
Monthly payment comparison (£200k system)
| Structure | Monthly | Term | Total cost | Own at end? |
|---|---|---|---|---|
| Asset finance HP | £3,153 | 7 years | £264,852 | Yes |
| Green loan (mainstream) | £3,019 | 7 years | £253,596 | Yes |
| Finance lease | £2,777 | 8 years | £266,592 | Yes (option) |
| Operating lease | £2,940 | 8 years | £282,240 | No (option) |
| PPA (per consumed kWh) | ~£2,375 | 20-25 years | ~£600-720k | Sometimes |
Lower monthly payment = longer total commitment + higher lifetime cost. PPA has the lowest variable monthly but the longest contract horizon. Green loan has competitive rate and ownership preserved at term end.
Net monthly position after savings
Monthly payment alone is misleading. Net monthly position factors in electricity savings the system generates:
| Structure | Monthly cost | Monthly savings | Net monthly |
|---|---|---|---|
| Asset finance HP | -£3,153 | +£3,617 | +£464 |
| Green loan | -£3,019 | +£3,617 | +£598 |
| Finance lease | -£2,777 | +£3,617 | +£840 |
| Operating lease | -£2,940 | +£3,617 | +£677 |
| PPA | -£2,375 | +£3,617 (avoided cost) | +£1,242 (effective) |
All five structures are net cash positive from month 1 on a typical 250 kWp system. Monthly savings (£3,617) exceed monthly payments across all structures. PPA appears most positive month-to-month because no payment outflow exceeds avoided cost — but lifetime cost is highest.
Related questions
Which monthly-pay structure is fastest to set up?
Can I get longer terms for lower monthly payments?
What happens to the monthly payment if interest rates change?
Is the monthly payment tax-deductible?
Which monthly-pay route is best for charities?
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How pay-monthly commercial solar actually works
Every commercial solar installation can be structured as a pay-monthly arrangement — either through an asset finance (hire purchase) facility, a green loan, an operating lease, or a power purchase agreement (PPA). The payment structure and what you are actually paying for differs between these options. Understanding the distinction is critical to making the right financing decision.
Monthly payment options compared
| Finance type | Monthly cost (500kWp system) | What you own | FYA benefit? | Balance sheet |
|---|---|---|---|---|
| Hire Purchase (5yr, 8.5%) | ~£10,200/month | Asset at end of term | Yes — full 50% FYA | On-balance-sheet (asset + liability) |
| Green Loan (10yr, 7.5%) | ~£5,900/month | Asset from day 1 | Yes — full 50% FYA | On-balance-sheet (loan liability) |
| Operating Lease (15yr, implicit 9%) | ~£4,800/month | Nothing (lessor retains) | No | Off-balance-sheet (if qualifying) |
| Power Purchase Agreement | Per-kWh (not fixed monthly) | Nothing (developer retains) | No | Off-balance-sheet |
A 500kWp system generating 450,000kWh per year at a self-consumption rate of 75% saves approximately £81,000 per year in avoided electricity costs — or £6,750 per month. Under a green loan at £5,900/month, the project is cash-flow neutral from day 1. Under hire purchase at £10,200/month, the project is cash-flow negative by ~£3,450/month in the early years, but becomes significantly positive after the 5-year term ends (projected saving £6,750/month for years 6–25).
Which monthly payment structure suits your business?
Best for cash-flow neutrality from day 1: Green loan or operating lease
If your primary objective is to install solar with no net cash outflow from the first month, a 10–15 year green loan (monthly payment calibrated to match electricity savings) or an operating lease is the right structure. The longer the term, the lower the monthly payment — but the higher the total cost of finance over the installation's life.
Best for lowest total cost over 25 years: Capital purchase or short-term HP
Businesses willing to accept a higher monthly cash outflow (or deploy capital upfront) for a limited period achieve the best 25-year economics. A 5-year HP structure at £10,200/month costs £612,000 in total payments (including interest) versus the £520,000 system cost — adding £92,000 of finance cost to own the asset outright after 5 years. For the remaining 20 years, the solar generates ~£6,750/month in electricity savings with zero financing cost.
Best for off-balance-sheet treatment: Operating lease or PPA
Businesses with covenant constraints on gearing ratios, or those preferring not to show additional liabilities on the balance sheet, should explore operating leases or PPAs. Under FRS 102 Section 20, qualifying operating leases are off-balance-sheet. PPAs are off-balance-sheet by nature (the solar asset belongs to the developer).
Monthly cashflow model: 500kWp system
| Period | Monthly electricity saving | HP payment (5yr, 8.5%) | Net HP cash flow | Green loan payment (10yr) | Net green loan cash flow |
|---|---|---|---|---|---|
| Month 1–60 (years 1–5) | £6,750 | £10,200 | -£3,450 | £5,900 | +£850 |
| Month 61–120 (years 6–10) | £7,960 (3% escalation) | £0 (HP paid off) | +£7,960 | £5,900 | +£2,060 |
| Month 121–180 (years 11–15) | £9,220 | £0 | +£9,220 | £0 (loan paid off) | +£9,220 |
| Month 181–300 (years 16–25) | £10,700 avg | £0 | +£10,700 | £0 | +£10,700 |
Pay monthly solar: how each finance product structures your payments
Monthly payments for commercial solar vary significantly by product type. Green loans, hire purchase, and operating leases all deliver monthly payment structures — but with different economics, ownership outcomes, and tax implications. Understanding what you are paying for each month is essential to choosing the right product.
| Finance product | Typical monthly payment (100kWp) | What you own | Monthly saving (energy) |
|---|---|---|---|
| Green loan (7%, 7yr) | £1,300–1,500/month | System from day one (100% AIA yr1) | £2,100–2,400/month saving |
| Asset finance HP (5.5%, 5yr) | £1,550–1,700/month | System on final payment (AIA from install) | £2,100–2,400/month saving |
| Finance lease (15yr) | £700–900/month | Nothing (lessor owns) | £2,100–2,400/month saving |
| Operating lease (12yr) | £750–1,000/month | Nothing (lessor owns) | £2,100–2,400/month saving |
| PPA (£0.09/kWh) | Variable ~£700–800/month | Nothing (developer owns) | £1,500–1,800/month saving (PPA discount) |
For a 100kWp system, the green loan and HP products cost £1,300–1,700/month but deliver £2,100–2,400/month in energy savings — net positive from month one, with full ownership and AIA tax relief. The lease and PPA products cost less per month but deliver lower long-term value because you never own the asset.
Cash flow timeline: green loan vs PPA comparison
| Year | Green Loan net monthly (saving - repayment) | PPA net monthly (PPA saving only) | Green Loan cumulative advantage |
|---|---|---|---|
| Year 1 | £600–1,100/month positive (net of AIA saving) | £800–1,000/month positive | Loan: AIA = £22,000 extra benefit |
| Year 3 | £750–950/month positive | £840–1,050/month positive | Loan: +£12,000 cumulative |
| Year 7 | £2,100–2,400/month (loan repaid) | £900–1,100/month positive | Loan: +£80,000 cumulative |
| Year 10 | £2,310–2,640/month (energy inflation) | £950–1,150/month | Loan: +£180,000 cumulative |
| Year 20 | £2,700–3,000/month (20yr) | £1,100–1,300/month | Loan: +£500,000 cumulative |
Monthly payment structures in practice
Monthly green loan repayment
Loan repayments are fixed monthly amounts — typically calculated on a straight-line amortisation. Example: £120,000 loan at 7% APR over 7 years = £1,808/month, total repaid £152,000 (£32,000 interest). After AIA saving of £30,000 in year 1, net cost = £122,000.
Monthly HP payment structure
HP payments include a capital element and interest element. The capital element is not a business expense; interest is deductible. Both are fixed monthly. Example: £120,000 HP at 5.5% over 5 years with 10% deposit: deposit £12,000, monthly payment £2,000.
Monthly PPA payment calculation
PPA payments vary with generation. In July (peak solar), a 100kWp system might generate 12,000 kWh; at £0.09/kWh = £1,080 PPA bill. In January (low solar), generation might be 3,500 kWh; PPA bill = £315. Annual average ~700–800/month for a 100kWp system.
VAT treatment of monthly solar finance payments
Green loan / HP VAT
VAT is charged on the system purchase (supply and install) at 20%. On HP, VAT applies to the goods element of each instalment. For business customers with VAT registration, this VAT is fully reclaimable on the next VAT return — effectively a cash flow item only.
PPA VAT
PPA electricity supplies are subject to VAT (typically 20% for commercial customers, though some may qualify for 5% if non-business use). PPA VAT is treated the same as grid electricity VAT — recoverable for VAT-registered businesses.
PSDS grant-funded projects
No VAT on PSDS grant-funded installations for eligible public bodies — they are outside the scope of supply for VAT purposes. Confirm with your accountant for specific structures.
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