PPA vs Cash Purchase
PPA wins on cashflow and admin burden; cash wins on long-run cost if you have the capital and a 20-year occupancy horizon.…
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PPA vs the alternatives — eight head-to-head comparisons
A PPA isn't always the right answer. We compare PPA against every realistic UK alternative — cash purchase, operating lease, grant-funded ownership, roof rental, on-site vs sleeved, escalator types, self-finance and corporate-vs-utility structures.
Key takeaways
- A PPA is £0 upfront and the provider carries performance risk; buying outright costs £40k–£400k+ but wins on lifetime cost.
- Owned solar runs ~4–6 p/kWh lifetime; a PPA runs 9–18 p/kWh; grid import is 28–32 p/kWh.
- Compare the 25-year cumulative cost, not the year-1 headline — the escalator decides the winner.
Compare PPA UK: every route side by side
The fastest way to compare a solar PPA against the alternatives for a UK commercial site:
| Route | Upfront cost | Unit cost | Performance risk | You own the asset? |
|---|---|---|---|---|
| Solar PPA | £0 | 9–18 p/kWh | Provider | No (buy-out option at end) |
| Cash purchase | £40k–£400k+ | ~4–6 p/kWh (LCOE) | You | Yes |
| Operating lease | £0 (fixed monthly) | Fixed regardless of output | You | No |
| Grant-funded | Part-funded | Lowest lifetime | You | Yes |
| Roof rental | £0 (you earn rent) | You keep grid supply | Provider | No |
Indicative — your numbers depend on system size, covenant, term and DNO context. Use the calculator to model your site.
Same site, three routes — a worked 25-year comparison
A 250 kWp commercial rooftop generating ~237,500 kWh/yr, self-consuming 80%, against a 30 p/kWh grid baseline:
| Route | Upfront | Year-1 electricity cost | 25-yr cost (indicative) | Own the asset? |
|---|---|---|---|---|
| Solar PPA (12 p/kWh) | £0 | ~£28,500 on PPA units | Lowest cashflow risk; ~£0.8–1.1m incl. escalator | No (buy-out option) |
| Cash purchase | ~£200,000 | ~£11,400 (LCOE) | Lowest lifetime cost if capital available | Yes |
| Operating lease | £0 | Fixed monthly regardless of output | Higher than PPA if under-performing | No |
Indicative only — model your own site with the PPA calculator or see 2026 PPA rates.
Does your site suit a PPA — or should you buy?
A PPA likely suits you if…
- You have little or no capital to allocate to solar
- You want the provider to carry performance & O&M risk
- You have 15+ years of tenure but don't want to own the asset
- You need cheaper, predictable power fast, off balance sheet
Buying outright is likely better if…
- You have the capital and want the lowest lifetime cost
- You'll occupy the site for 20+ years and want the residual value
- You can use 100% capital allowances / AIA in year one
- You're comfortable managing O&M and performance risk
All eight detailed comparisons
PPA vs Operating Lease
PPA shifts performance risk to the provider; operating lease keeps you in control of the asset but exposes you to under-performance.…
PPA vs Grant-funded Solar
Grants tie you to direct ownership and a heavier compliance burden but cut LCOE the most. PPA gets you started immediately with no capital.…
PPA vs Roof Rental
Roof rental gives you ~£5-15k/MWp/year in cash but no power. PPA gives you 30-50% cheaper electricity. Pick based on whether you use the kWh…
On-site PPA vs Sleeved PPA
On-site is cheaper per kWh and lower risk but limited to a single site. Sleeved suits multi-site businesses and tenants without roof rights.…
Fixed vs RPI/CPI-linked PPA Escalator
Fixed gives you certainty; inflation-linked feels safer if you believe grid power will keep rising at RPI+. Run both scenarios before signin…
PPA vs Self-financed Solar (Asset Finance)
Asset finance gives you the system for £0 down then ownership; PPA gives you cheaper kWh but no asset. Pick based on whether you want the lo…
Corporate PPA vs Utility PPA
CPPA gives you the cheapest tariff for investment-grade off-takers; utility PPA suits anyone who needs the supplier's balancing and credit s…
Two more worked scenarios
The 25-year example above takes a single rooftop. Real portfolios rarely look like that. Below are two further illustrative comparisons — a multi-site retailer and a ground-mount farm — using round, defensible figures for shape only, not quotes. Your own numbers turn on roof or land size, tariff, covenant strength and site count; get those on a no-obligation quote.
A multi-site retail estate: sleeved PPA vs corporate PPA vs buying each site
Picture a retailer with, say, 25 stores — a mix of freehold and leasehold, some with generous flat roofs and some with almost none. Three routes can decarbonise the estate, and they are not mutually exclusive.
| Route | Upfront capital | Who owns the kit | Which sites it covers | Suits an estate that… |
|---|---|---|---|---|
| Sleeved (on-site) PPA | None — developer funds each array | The PPA provider, for the term | Only stores with a suitable, owned-or-long-leased roof | Wants zero CapEx and has enough large freehold roofs |
| Corporate (off-site) PPA | None — you contract for a remote farm's output | The generator; you buy the electricity via the grid | Every site on your supply, including small-roof and leasehold stores | Needs estate-wide cover and green claims, not on-site kit |
| Buy each site | High — CapEx per store | You, outright | Only the sites you choose to fund | Has capital and wants to keep every unit of saving |
Many estates blend them: on-site PPAs on the large freehold roofs, a corporate PPA to green the remaining load, and outright purchase where a store has cheap capital and a long lease. See solar PPAs for retail for the sector detail.
A ground-mount farm: on-site PPA vs land lease vs self-finance
A landowner with a spare field faces a different choice — because one route makes you an energy buyer, one makes you a landlord, and one makes you the owner-operator.
| Route | Your outlay | What you get | Land & asset | Suits a farm that… |
|---|---|---|---|---|
| On-site PPA | None | Cheaper power behind the meter for the farm's own load | Developer owns the array on your land; you keep using its power | Has high on-site demand (dairy, cold store, glasshouse) |
| Land lease | None | Fixed rent per acre; no cheaper electricity | You are a landlord; developer exports to the grid | Has low on-site demand but spare, grid-connectable land |
| Self-finance | High CapEx (or asset finance) | All savings plus SEG export income; you own it | You own both land and array | Has capital and wants the full return and the asset |
The deciding factor is usually on-site demand: a PPA or self-finance only beats a land lease when the farm can actually consume most of what the array makes. A dairy or packhouse can; a grazing holding often cannot — the notes on solar PPAs for farms go deeper.
A decision tree: which route fits you
No table decides this for you, but a short sequence of questions narrows it fast. Work down the list in order — the first answer that clearly fits your situation usually points to your route.
- Do you have — and want to deploy — capital? If you hold the cash (or cheap asset finance) and want the full lifetime return, lean towards buying or leasing. If protecting capital matters more, keep reading — a PPA needs none.
- How long is your tenure on the site? On-site routes typically run 10–25 years. Own the freehold or hold a long lease and any route works; if your remaining lease is short, an on-site PPA or purchase may not fit, but a corporate off-site PPA can still cover you.
- Do you want to own the asset? If owning the generation — and carrying the balance-sheet asset — is the goal, that points to purchase or lease. If you only want cheaper, greener power with no maintenance responsibility, a PPA fits.
- Is there grant funding you qualify for? Public-sector, community and some rural sites can access grant-funded routes that beat every commercial option — check this before signing anything else.
- One site or many? A single strong site suits on-site PPA, purchase or lease. A multi-site estate with mixed roofs usually needs a sleeved or corporate PPA to reach every location.
- How strong is your covenant? PPA pricing hinges on your off-taker covenant — a strong balance sheet earns a keener tariff, while a weaker covenant can tip the maths back towards self-finance or grant funding.
These questions interact — most real decisions turn on two or three at once. If you land on a PPA, choosing between a fixed or floating escalator is a separate call. We can walk the whole tree with your actual figures on a quick call.
The tax and accounting angle across routes
How a route lands in your accounts often swings the decision as much as the headline unit price. The high-level picture below is general information, not tax or accounting advice — confirm the detail with your accountant or auditor:
- Buying (CapEx): the spend is capital expenditure that usually qualifies for the Annual Investment Allowance — 100% relief on up to £1m of qualifying plant in the year. Solar PV normally sits in the special-rate pool, so expenditure above the AIA cap attracts the 50% first-year allowance rather than 100% full expensing. You also carry the asset and its depreciation on your books.
- Leasing: under IFRS 16 a lessee brings almost all equipment leases on-balance-sheet as a right-of-use asset and a matching lease liability, with depreciation and interest replacing a single rental charge. (UK GAAP under FRS 102 is moving the same way for periods from January 2026.)
- PPA: a well-structured on-site PPA is a contract to buy power, not to own kit, so it is typically treated as an operating or service cost and stays off-balance-sheet — no asset, no debt, no gearing impact. The catch is the IFRS 16 embedded-lease test: if the contract effectively hands you control of an identified asset, it can be pulled back on-balance-sheet.
We cover the mechanics in PPA financing, and the balance-sheet question specifically in is a solar PPA on the balance sheet?. If off-balance-sheet treatment or capital allowances are central to your decision, flag it on your enquiry and we will factor it into the route we recommend.
Market reference
Notable UK corporate PPAs (the route the biggest buyers chose)
| Off-taker | Sector | Structure | What's publicly reported |
|---|---|---|---|
| Amazon | Logistics / data centres | Corporate PPAs (multiple) | Repeatedly reported as the world's largest corporate buyer of renewable energy, with a portfolio of UK and European solar and wind PPAs. |
| Tesco | Retail / supermarkets | Corporate solar PPAs | Has publicly contracted large-scale UK solar generation via long-term corporate PPAs as part of its net-zero programme. |
| Sainsbury's | Retail / supermarkets | Corporate solar PPA | Publicly committed to sourcing renewable electricity through power purchase agreements with UK solar developers. |
| Marks & Spencer | Retail | Corporate renewable PPA | Part of M&S 'Plan A' net-zero commitments, sourcing renewable power via long-term agreements. |
| Nestlé UK | Food & drink manufacturing | Corporate solar/wind PPA | Publicly reported renewable PPAs covering UK manufacturing operations. |
| IKEA / Ingka | Retail | On-site + corporate PPA | Long-running renewable strategy combining on-site solar with off-site corporate PPAs across its UK estate. |
Publicly reported from each company's own sustainability disclosures — market reference only; we are not party to these deals.
FAQs
Comparing PPAs — FAQs
What's the best way to compare PPAs in the UK?
Compare on five axes: upfront cost (a PPA is £0 capex; cash is £40k–£400k+), unit electricity cost (PPA 9–18 p/kWh vs owned solar ~4–6 p/kWh vs grid 28–32 p/kWh), who carries performance risk (the provider under a PPA, you if you own), balance-sheet treatment, and flexibility on exit. Run the 25-year cumulative cost, not just year-1.
Is a solar PPA better than buying outright?
A PPA wins on cashflow and admin: zero capital, no O&M burden, provider carries performance risk. Buying outright wins on lifetime cost if you have the capital and a 20-year+ occupancy horizon. Grant-funded ownership (PSDS/IETF) can beat both on lifetime cost where you qualify. The right answer depends on your capital, tenure and risk appetite.
Is a PPA cheaper than a lease?
Usually in risk terms: a PPA charges per kWh generated so you only pay for delivered output and the provider carries under-performance, whereas an operating lease charges a fixed monthly amount regardless of generation. Under IFRS 16 a lease typically sits on the balance sheet; a carefully structured PPA can stay off it.
Before you choose a route
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