Comparison

PPA vs Cash Purchase

Solar PPA vs buying outright — capital outlay, IRR, balance sheet, ownership, control. Decision framework for UK commercial off-takers in 2026.

Side-by-side comparison

	Solar PPA	Cash purchase (CapEx)
Upfront capital required	£0	£75,000-£900,000 typical
Year-1 cashflow impact	Lower (PPA tariff replaces grid bill)	Major outflow, offset by AIA relief (solar is a special-rate asset — AIA, NOT full expensing)
Ownership of asset	Provider for term, then options	Day 1
O&M responsibility	Provider	You
25-year cumulative cost (250kWp)	~£1.05m (with 2.5% escalator)	~£700k (cash + 1% annual O&M)
Balance sheet treatment	Off-balance-sheet (typically)	On-balance-sheet asset + depreciation
Performance risk	Provider	You
Exit flexibility	Termination + buy-out clauses	Sell with building

Start with the cheque you'd have to write

The single biggest fork here is capital. Buying a 250kWp array outright lands somewhere between £75,000 and £900,000 depending on scale, paid before a single kilowatt-hour is generated. A PPA asks for nothing upfront — the funder builds and owns the system, and you simply buy the power it produces. If your capital is already earmarked for production kit, stock or acquisitions, that difference is effectively the whole conversation.

Long-run arithmetic favours the buyer

Over a 25-year horizon the ownership route is usually cheaper. That same 250kWp system works out around £700,000 in cash including roughly 1% annual maintenance, versus close to £1.05m under a PPA carrying a 2.5% escalator. You pay a premium for handing performance risk, O&M and inverter replacement to someone else — money well spent if you'd rather not run a power station, wasted if you would.

The tax point is easy to get wrong

A cash buyer can claim capital allowances; a PPA off-taker cannot, because they never own the asset — the allowances sit with the funder. Crucially, solar PV is a special-rate asset, so it is excluded from full expensing and the 100% first-year allowance for main-rate plant. The correct 100% route is the Annual Investment Allowance (up to £1m), with a 50% first-year allowance on any balance above that cap. Model the relief on your real tax position, not a headline percentage.

So which fits you?

• Choose cash if you hold the capital, expect 20-plus years in the building, and want the lowest lifetime cost.
• Choose a PPA to protect working capital, keep the system off balance sheet, and offload maintenance and generation risk.

Weigh both against your own numbers using the savings calculator, read the wider funding comparison hub, then check how PPA tariffs are actually priced before you commit.

FAQs

Comparison FAQs

Which option should I pick?

PPA wins on cashflow and admin burden; cash wins on long-run cost if you have the capital and a 20-year occupancy horizon. 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.