Comparison

Fixed vs RPI/CPI-linked PPA Escalator

PPA escalator types compared — fixed % vs RPI vs CPI vs zero. Modelling 15-year cumulative cost under each.

Side-by-side comparison

	Fixed escalator	RPI/CPI-linked
Year-1 tariff	13.5 p/kWh	12.5 p/kWh
Year-25 tariff	13.5 p/kWh (fixed)	26.2 p/kWh (RPI at 3%)
25-yr cumulative cost	£801,000	£1,099,000
Inflation hedge	No	Yes (rises with RPI)
Predictability	High	Lower
Provider preference	Slightly higher tariff	Often offered slightly lower
Best for	Strong covenants, certain forecasts	Off-takers wanting inflation hedge

The escalator is the clause that ages your contract

Every PPA tariff moves over its life, and the escalator sets how. A fixed escalator locks the annual step at a set percentage; an RPI or CPI-linked one lets the tariff track inflation. On the worked example here, fixed opens slightly higher at 13.5p/kWh while the inflation-linked version starts lower at 12.5p — so the floating deal looks cheaper on day one. Day one is not where this is decided.

Where the two paths end up

Wind the clock forward 25 years and the gap is dramatic. The fixed tariff is still 13.5p; the RPI-linked one, at 3% inflation, has climbed to roughly 26.2p. Cumulatively that's about £801,000 under the fixed escalator against £1,099,000 inflation-linked — a near-£300k spread driven entirely by which box you tick and what inflation actually does.

So it's really a bet on inflation

Fixed buys certainty: you can budget the energy line for two decades and it won't surprise you. Inflation-linked only pays off if grid power keeps rising faster than your fixed rate would have — a reasonable hedge if you believe wholesale prices climb at RPI-plus, a costly one if they don't. Providers know this, which is why fixed usually carries a slightly higher opening tariff and floating is dangled a touch lower.

Don't pick on the headline rate

Model both curves against your own inflation view and covenant strength before signing — strong covenants and confident forecasts lean fixed. Run the two scenarios in the savings calculator, check how escalators feed into pricing, and compare the wider routes in the funding hub.

FAQs

Comparison FAQs

Which option should I pick?

Fixed gives you certainty; inflation-linked feels safer if you believe grid power will keep rising at RPI+. Run both scenarios before signing. Run your specific numbers in our PPA calculator before deciding.

Can the two be combined?

Sometimes. SEG income always layers on top of either route. Capital allowances combine only with cash or self-finance — and note solar is a special-rate asset, so it does NOT qualify for full expensing; the correct 100% route is the Annual Investment Allowance (up to £1m/year). PPA + grant rarely stack — most grants exclude PPA structures.

Where can I read more about the underlying mechanics?

Our mechanics hub covers 10 deep-dives on PPA structure, pricing, escalators, term, end-of-contract, off-taker covenant, EPC, O&M and M&V.