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PPA questions answered
Solar PPA Questions Answered
Straight answers to the questions UK businesses actually ask before signing a solar power purchase agreement — what a PPA is, what a fair tariff looks like, how the accounting works, and how much a solar farm really earns.
What is a solar power purchase agreement?
A solar power purchase agreement (PPA) is a long-term contract under which a third-party investor funds, owns and operates solar generation on your site, and you buy the electricity it produces at a fixed price — typically 9–18 p/kWh versus 28–32 p/kWh grid import. No capital outlay; the provider carries the asset and the maintenance.
Key takeaways
- A PPA lets you buy on-site solar electricity at 9–18 p/kWh with zero upfront capital — the provider owns and maintains the system.
- A 1 MWp UK rooftop array generates roughly 950,000 kWh a year; its value depends entirely on whether you self-consume it (worth far more) or export it.
- A well-structured PPA is usually treated as an operating expense and can sit off balance sheet — but always confirm with your auditor under IFRS 16.
- A 'good' 2026 PPA tariff is 9–14 p/kWh for a 250 kWp+ investment-grade on-site deal on a 20–25 year term; smaller deals sit higher.
- You don't sign with a single provider blind — an independent adviser matches your site, size and covenant to vetted funds across the market.
What is a power purchase agreement, in plain English?
A solar power purchase agreement is best understood as a way to buy electricity, not equipment. An investor pays for the solar panels, installs them on your roof or land, owns them, insures them and maintains them for the life of the contract. In return, you agree to buy the electricity those panels generate at an agreed price per unit (pence per kilowatt-hour) for 15 to 25 years. You put in no capital and take on no maintenance — you simply swap part of your grid bill for a cheaper, fixed solar bill.
The crucial distinction from owning a system outright is where the asset sits. Under a PPA the generator (or the special-purpose company funding it) owns the kit; you only ever own the kilowatt-hours you consume. That single fact drives almost everything else — the tariff, the term, the accounting treatment and your exit options. For the full step-by-step process from indicative quote to end-of-contract, see how a solar PPA works.
What is a good PPA tariff in 2026?
A genuinely competitive 2026 UK commercial solar PPA tariff is 9–14 p/kWh in year one for a 250 kWp or larger on-site deal, signed by an investment-grade off-taker on a 20–25 year term. Smaller systems and weaker covenants sit higher — a 50 kWp deal is typically 16–20 p/kWh because the fixed legal and survey costs are spread over fewer units.
Set your benchmark against grid import, not against zero. Most commercial users pay 28–32 p/kWh from a supplier, so even a 16 p/kWh PPA is a meaningful saving on every self-consumed unit. Two contracts at the same headline rate can also cost very differently over 25 years depending on the escalator — the annual uplift baked into the price. We break down the bands by size, structure and sector on the PPA rates page.
How much money does a 1 MW solar farm make in the UK?
A 1 MWp (1,000 kWp) solar array in the UK generates around 950,000 kWh a year — but what that is worth depends entirely on what you do with those units, so here is the honest range rather than a single headline figure.
- If you self-consume it behind your own meter, each unit displaces grid electricity worth roughly 28–32 p. Displacing all 950,000 kWh is therefore worth about £266,000–£304,000 a year in avoided grid cost at full self-consumption — before the PPA tariff you pay for those units is deducted.
- If you export it to the grid (Smart Export Guarantee or a wholesale-linked export tariff), units are worth far less — commonly 5–15 p/kWh, so the same output earns roughly £48,000–£143,000.
The gap between those two numbers is the entire reason on-site PPAs prize a strong daytime load: a unit you use yourself is worth two-to-five times a unit you sell. Assumptions: ~950 kWh per installed kWp per year for a well-sited UK array, before degradation. For how surplus is priced, see SEG vs PPA export tariffs.
How much could I sell my solar generation for?
If you generate more electricity than you can use on site, the surplus is sold rather than self-consumed — and it is worth markedly less. In 2026 the realistic range for exported commercial solar is 5–15 p/kWh, depending on whether you are on a fixed Smart Export Guarantee tariff or a wholesale-linked export deal, and on your metering.
Put concretely: a unit you consume on site displaces ~30 p of grid import, while the same unit exported might fetch 8 p. That roughly four-fold difference is why a well-matched PPA sizes the system to your demand profile rather than maxing out your roof. Sites with low daytime load — schools in summer, seasonal hospitality — are often better suited to an in-front-of-meter PPA structured around export. If you are weighing selling power versus renting your roof for a flat fee, compare PPA vs roof rental.
Is a PPA on or off balance sheet?
A well-structured solar PPA is usually treated as an operating expense — you pay for electricity as you consume it, much like any utility bill — which means it can sit off balance sheet. That is one of the main reasons finance directors favour PPAs over outright purchase or asset finance: no capital line, no depreciation schedule, no debt against the company.
The caveat is real and worth stating plainly. Under IFRS 16, if the contract is judged to convey the right to control an identified asset, it can be reclassified as a lease and brought on balance sheet. The drafting matters: who controls the panels, who bears performance risk, and how the offtake volume is defined. Always confirm the treatment with your own auditor before signing — and read our PPA tax and accounting guide and PPA vs operating lease for the detail.
Where can I find affordable PPAs for commercial buildings?
There is no single "cheapest provider" — the most affordable PPA is the one whose funder is the right match for your system size, sector and covenant strength. The UK market splits into a few distinct lanes, and quoting the wrong one wastes weeks:
| If you are… | The right lane | Typical deal size |
|---|---|---|
| A single-site factory, warehouse or hotel with your own roof | Specialist commercial rooftop solar funds | 100 kWp – 5 MWp |
| A tenant or multi-site business without roof rights | Utility / supplier corporate-PPA desks (sleeved) | 1 MWp – utility scale |
| An investment-grade corporate buying farm output | Independent power producers (corporate / virtual) | 5 MWp+ |
Rather than approach funds cold, most off-takers go through an independent adviser who explains the mechanics, sets realistic tariff expectations and introduces you to vetted providers — paid a disclosed referral fee, with no commission bias toward one fund. That is exactly what this service does; see the PPA provider types page for who is active in each lane.
How long does a solar PPA last, and what happens at the end?
Most UK commercial solar PPAs run 15 to 25 years. Term length is the single biggest lever on tariff — a longer term lets the investor recover their capital over more years, so the price per unit falls; a shorter term pushes it up. The term has to outlast your tenure on the site, which is why short-lease tenants are a poor fit for on-site deals.
Solar panels routinely produce for 30 years or more, so when a 20-year PPA ends the system still works. You typically have three options: extend at a renegotiated (usually lower) tariff, buy the system at fair market value and own it outright, or have the provider remove it at no cost to you. Get the buy-out formula and assignment-on-sale clauses agreed up front — see end-of-contract options and why PPAs run 15–25 years.
Do I need good credit to get a PPA, and what does it cost me upfront?
The upfront cost to you is, in the headline sense, nothing — the investor funds the entire system. Your only direct cash outlay is legal review, typically £8,000–£25,000 depending on deal size, which is modest against a six-figure system you didn't have to buy.
Credit, however, matters enormously. The provider is effectively lending against 15–25 years of your electricity payments, so they underwrite your covenant — your financial strength as the off-taker. A stronger covenant (investment-grade rating, a parent-company guarantee, a long unbroken trading history) unlocks a lower tariff because it lowers the funder's risk. A weaker covenant doesn't necessarily kill the deal, but it widens the rate or may require a guarantor. We explain how this works, and how to negotiate when your covenant is the constraint, in off-taker covenant.
Still have a question we haven't answered?
These are the questions we are asked most often, but every site is different — your roof, your load profile, your lease, your covenant and your sector all change the answer. The fastest way to a precise figure is an indicative tariff against your actual consumption and postcode, which a vetted provider can return within one to two weeks.
Tell us your annual kWh, roughly your roof or land area, and your sector, and we'll point you to the right lane and the right funders — independently, with the referral fee disclosed. Request an indicative PPA quote or contact the team with a specific question. You can also browse answers by sector or by comparison.
FAQs
Frequently asked questions
What is a solar power purchase agreement?
A solar PPA is a long-term contract where a third-party investor funds, owns and maintains solar generation on your site, and you buy the electricity it produces at a fixed price — typically 9–18 p/kWh versus 28–32 p/kWh grid import — with no capital outlay from you.
What is a good PPA tariff in 2026?
A competitive 2026 UK commercial solar PPA tariff is 9–14 p/kWh in year one for a 250 kWp+ on-site deal with an investment-grade off-taker on a 20–25 year term. Smaller systems and weaker covenants sit higher, around 16–20 p/kWh.
How much money does a 1 MW solar farm make in the UK?
A 1 MWp UK array generates roughly 950,000 kWh a year. Self-consumed, that displaces grid power worth about £266,000–£304,000 annually before the PPA tariff is deducted; exported instead, the same output earns far less — roughly £48,000–£143,000 at 5–15 p/kWh.
How much could I sell my solar generation for?
Exported commercial solar typically sells for 5–15 p/kWh in 2026 via a Smart Export Guarantee or wholesale-linked tariff — markedly less than the ~30 p a self-consumed unit is worth, which is why PPAs are sized to your own demand.
Is a PPA on or off balance sheet?
A well-structured PPA is usually treated as an operating expense and can sit off balance sheet. But under IFRS 16 it can be reclassified as a lease and brought on balance sheet if it conveys control of the asset — always confirm with your auditor.
Where can I find affordable PPAs for commercial buildings?
There's no single cheapest provider; the best price comes from matching your size, sector and covenant to the right lane — rooftop funds, supplier sleeved desks or utility-scale developers. An independent adviser introduces you to vetted funders on a disclosed referral fee.
What does a solar PPA cost me upfront?
The investor funds the whole system, so there is no capital outlay. Your only direct cost is legal review, typically £8,000–£25,000 depending on deal size, plus the per-unit tariff you pay for the electricity generated.
How long does a solar PPA last?
Most UK commercial solar PPAs run 15 to 25 years. At the end you can extend at a renegotiated tariff, buy the system at fair market value, or have the provider remove it at no cost to you.
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