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.
Quick answer: Solar PPA or Cash purchase (CapEx)?
Solar PPA vs Cash purchase (CapEx): PPA wins on cashflow and admin burden; cash wins on long-run cost if you have the capital and a 20-year occupancy horizon.
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 |
Our verdict
PPA wins on cashflow and admin burden; cash wins on long-run cost if you have the capital and a 20-year occupancy horizon.
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.
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.
Want to model your specific site?
Our calculator runs both scenarios with your actual kWh, tariff and site assumptions.
Open calculatorIf you take the PPA route the allowances sit with the funder that owns the asset, so the only tax question left is your own deduction — the tax treatment of PPA payments covers the corporation-tax and VAT position.
Councils, NHS trusts and academies have a third option that changes the arithmetic entirely — when grant funding beats both looks at where grant money wins and where the wait makes it unusable.
At the small end the cheque is not necessarily out of reach — what 50 kWp costs to buy outright puts the capex reference at £42,000–£55,000 against a year-one PPA tariff of 16–20 p/kWh.
Buying outright leaves every regulatory change on your own balance sheet, whereas a PPA lets you negotiate who carries change-in-law risk across a 15–25 year term.
For most boards the capital requirement is the deciding factor at this scale, so start from the cash equivalent of a 5 MWp PPA.
Any comparison needs a capital figure to work from, and our indicative costs by system size gives the per-kWp basis used throughout this page.
If the PPA column wins, the next question is where the money actually comes from, which our guide to PPA financing answers.
Check what your roof could earn under a PPA
PPA vs Cash Purchase — tell us about your site and we'll return an indicative p/kWh tariff for it. Reply by email within one working day.