Solar Lease vs PPA: Which Is Better for a UK Business?
Solar lease vs PPA for UK businesses: who owns the panels, who carries the performance risk, how each hits the balance sheet from 2026, and which suits your site.
Quick answer: Solar PPA or Solar lease?
Solar PPA vs Solar lease: A PPA charges only for the power the system generates and leaves the asset and its performance risk with the provider. A solar lease gives you the system for a fixed rental, so you keep all the output but carry the risk if it under-performs. From 2026 most UK leases also sit on the balance sheet.
Side-by-side comparison
| Solar PPA | Solar lease | |
|---|---|---|
| What you pay for | Each kWh generated, at the agreed tariff | A fixed rental for use of the equipment |
| Who owns the system | The provider, for the term | The lessor; you have the use of it |
| Who gets the electricity | You buy what it generates | You: all the output is yours |
| Performance risk | The provider's | Yours: the rental is due whether or not the panels perform |
| Maintenance | The provider's | Set by the lease; often yours unless a service contract is bundled |
| Balance sheet | Depends on whether the contract contains a lease; ask your auditor | On balance sheet under IFRS 16, and under FRS 102 for periods from 1 January 2026, unless short-term or low-value |
| Capital allowances | Not yours: you do not own the asset | Depend on how the lease is structured; ask your tax adviser |
| End of term | Extend, buy the system, or have it removed, as the contract sets out | Return the equipment, extend, or buy at an agreed value |
| Best for | No capital, no performance risk, a known price per unit | Businesses that want all the output and will manage the system |
Our verdict
A PPA charges only for the power the system generates and leaves the asset and its performance risk with the provider. A solar lease gives you the system for a fixed rental, so you keep all the output but carry the risk if it under-performs. From 2026 most UK leases also sit on the balance sheet.
Two different things get called a solar lease
In an equipment lease a finance company buys the panels and leases them to you for a fixed rental; the system is on your roof and all of its output is yours. In a roof lease, sometimes sold as rent-a-roof, you lease your roof to a developer who owns the panels and pays you rent or offers cheap power. This page compares the first with a PPA; the second is covered in PPA vs roof rental.
Who carries the risk
The single biggest difference is what happens in a poor year. Under a PPA you pay per kilowatt-hour generated, so a cloudy year or a failed inverter costs the provider, not you. Under a lease the rental is fixed, so if generation disappoints you still pay the same amount while getting less electricity. A lease gives you more control over the asset in exchange for taking that risk.
The balance sheet changed in 2026
For companies reporting under IFRS, IFRS 16 already requires lessees to recognise an asset and a liability for leases longer than 12 months unless the asset is of low value. For the many UK companies that report under FRS 102, the Financial Reporting Council's Periodic Review 2024 removes the old distinction between operating and finance leases for lessees: for accounting periods beginning on or after 1 January 2026, most leases go on the balance sheet as a right-of-use asset and a lease liability. The old assumption that an operating lease stays off balance sheet no longer holds.
A PPA is not automatically off balance sheet either. The question is whether the contract gives you control of the use of an identified asset, which is the test for whether it contains a lease. Many PPAs are structured as contracts to buy electricity, but your auditor has to assess the specific contract. Our guide to whether a solar PPA sits on the balance sheet goes into the detail.
What each costs you
A PPA is priced per unit: this site's indicative band for on-site solar PPAs is 8–22 p/kWh in year one, depending on size, structure and your credit. A lease is priced as a rental that depends on the cost of the system, the term and the lessor's cost of finance, and it has to be compared against the value of all the electricity the system produces, less your maintenance and insurance costs. Put both on the same basis, a cost per kWh over the term, before you compare them.
Which suits your site
- Choose a PPA if you want no capital, no performance risk and no maintenance, and are happy for the provider to own the system.
- Consider a lease if you want every unit the system produces, can manage maintenance, and are comfortable carrying the performance risk.
- Consider buying outright if you have the capital and can claim the Annual Investment Allowance; see PPA vs cash purchase.
| Figure on this page | Value | Source | Verified |
|---|---|---|---|
| Lessee accounting under FRS 102 | Most leases on balance sheet for periods beginning on or after 1 January 2026 | FRC — FRS 102 Periodic Review 2024 explainer (June 2026) | 28 Sep 2026 |
| Lessee accounting under IFRS 16 | Assets and liabilities for leases over 12 months unless low value | IFRS Foundation — IFRS 16 Leases | 28 Sep 2026 |
| PPA price and term bands | On-site 8–22 p/kWh; 15–25 years | This site's indicative advisory bands | — |
Comparison FAQs
Is a solar lease better than a PPA?
It depends on who you want to carry the risk. A lease gives you all the output for a fixed rental, but you pay the same in a poor year. A PPA charges only for what is generated and leaves maintenance and performance risk with the provider.
Is a PPA a lease?
Not necessarily. A PPA is a contract to buy electricity, but under IFRS 16 or the updated FRS 102 it can contain a lease if it gives you control of the use of an identified asset. Your auditor decides on the specific contract.
Do leased solar panels go on the balance sheet?
Usually, from 2026. IFRS 16 already puts leases longer than 12 months on the balance sheet unless the asset is low-value, and the updated FRS 102 does the same for most leases in accounting periods beginning on or after 1 January 2026.
Who maintains leased solar panels?
The lease decides. Often it stays with the business using the system unless a service contract is bundled in. Under a PPA the provider maintains the system because it owns it.
What happens at the end of a solar lease?
Typically you return the equipment, extend the lease, or buy the system at an agreed value, as the lease sets out. Under a PPA the end-of-term options are set by the PPA itself.
Want to model your specific site?
Our calculator runs both scenarios with your actual kWh, tariff and site assumptions.
Open calculatorIf you want generation risk to stay with the provider rather than drift back to you, insist the array is measured against the performance ratio test with a make-good remedy attached.
Fixed legal, metering and survey costs are spread across far fewer kilowatt-hours in the 50 kWp band, which is why small deals price higher whichever funding route you take.
Comparing a lease payment with a per-kilowatt-hour tariff is easier once you know what the kit itself is worth, and indicative capex by system size gives a cash reference for every band from 50 kWp upwards.
The deduction profile differs too: a lease creates its own rental and allowance position, while how HMRC treats per-kWh payments follows the service-contract logic of a PPA.
A lease and a PPA also diverge on insolvency and change of site ownership, both of which are governed by the step-in and novation provisions.
At this size the capital sum is large enough that the decision becomes genuinely financial rather than practical — compare what a 2 MWp system costs either way.
A lease and a PPA both avoid buying the system outright; the real difference is who owns and funds the asset over the term.
Get a p/kWh figure for your own building
Solar Lease vs PPA: Which Is Better for a UK Business? — tell us about your site and we'll return an indicative p/kWh tariff for it. Reply by email within one working day.