On-site PPA: how an on-site solar PPA works

An on-site PPA is the simplest and most common commercial solar power purchase agreement: a funder builds and owns a PV system on your own roof or land, and you buy the electricity it generates at a fixed per-unit price for 15 to 25 years.

How the asset sits on your site

In an on-site PPA the physical solar array — panels, mounting system, inverters, isolators, cabling and a dedicated generation meter — is installed on your own premises but legally belongs to the provider's special-purpose vehicle (SPV), not to you. The kit is bolted to your roof or pinned to your land, yet on the balance sheet it is the funder's asset for the life of the contract. That separation is the whole point of the structure: the investor takes the capital cost, the performance risk and the long-tail maintenance burden, and in exchange sells you the output.

Electrically, the generation meter sits between the array and your main distribution board. Every kilowatt-hour the system produces is recorded there, and that figure — not your grid bill — is what you are invoiced against at the PPA tariff. Power flows first to your own loads; only the surplus your building cannot absorb spills back through your supply point. Because the panels are physically on your site, the energy reaches your equipment without travelling across the public network, which is exactly why the tariff (typically 9-18 p/kWh in year one) undercuts the 21-25 p/kWh most commercial off-takers pay for grid import. The provider also installs remote monitoring so generation, faults and performance ratio are tracked continuously — you can see what you are buying in close to real time.

Who owns it, who maintains it, who carries the risk

Ownership is the line that separates an on-site PPA from buying a system outright or financing one. Under a PPA the SPV owns the array throughout the term. You own nothing but the contractual right to buy its output — and, crucially, the obligation to pay for the units generated. This has three practical consequences worth being clear-eyed about.

• Maintenance is not your problem. The provider funds and manages all operations and maintenance — inverter replacement (you will need at least one over a 25-year term), panel cleaning, fault call-outs, insurance and component warranties. See our O&M agreement guide for what a well-drafted maintenance annex covers.
• Performance risk transfers to the funder. If the system underproduces, the provider earns less, not you. Many contracts back this with a performance-ratio guarantee, verified through measurement and verification.
• You take consumption and tenure risk. The two risks that stay with you are using the power and staying on the site. If your operation contracts or you vacate, you may still be liable under the contract — which is why diligence on demand and lease length matters before you sign.

The build itself is delivered by a third-party EPC contractor appointed by the SPV. Their workmanship becomes your roof's reality for two decades, so their quality and insurance are a legitimate part of your due diligence even though you are not their direct customer.

Behind-the-meter vs in-front-of-meter — where your power flows

Almost every on-site PPA is structured ‘behind the meter’, meaning the solar feeds your loads before your supply point and only the surplus is exported. That arrangement is what makes the tariff cheap, because power you consume on site never incurs network use-of-system charges, the Balancing Services Use of System levy, or the supplier margin that loads every imported unit. The more of your generation you can swallow on site, the more of those charges you avoid.

A distinct variant is the in-front-of-meter PPA, where generation exports to the grid and you take the kWh back through your supply meter under an export-and-import structure. That route attracts network charges and therefore prices higher (typically 13-22 p/kWh), but it suits sites — schools over the summer holidays, seasonal hospitality, warehouses with off-peak loads — whose daytime demand simply cannot absorb the array. At the other extreme, a fully behind-the-meter PPA on a private wire (8-14 p/kWh, the lowest band on the market) makes sense only for continuous-process industrials whose daytime load is a near-perfect match for the panels. Most commercial off-takers sit between these two poles, and which side of the meter your deal lands on is the single biggest lever on your tariff.

Rooftop, ground-mount and car-park canopy: the three on-site formats

"On-site" covers any array on your own premises, and the format changes what the contract has to cover. There are three, and many larger sites combine them.

• Rooftop. The commonest commercial on-site PPA: panels on a warehouse, factory, school or office roof, feeding the building behind the meter. The contract grants a roof licence or lease, and the roof's condition and remaining life become part of the deal — a roof that needs replacing within the term should be replaced first.
• Ground-mount. Panels on spare land within the site boundary, usually connected by private cable to the main supply point. It suits sites with more land than roof, such as farms, distilleries and some logistics parks, and the contract takes the form of a lease of the land for the term.
• Car-park canopy. Panels on a steel canopy over parking bays. The structure costs more than roof mounting, which shows in the tariff, but it turns open parking into generating space and can share a connection with EV chargers.

The format also decides how planning, insurance and access are handled, which is why each needs its own schedule in the contract. For a single-building rooftop deal the economics are driven, as ever, by how much of the output you use on site.

Why self-consumption percentage drives the economics

The figure that makes or breaks an on-site PPA is the share of generation you actually consume on site — the self-consumption percentage. Here is why it dominates. A unit you self-consume is worth the difference between your grid import price (say 30 p) and the PPA tariff (say 13 p) — a saving of around 17 p. A unit you cannot use and have to export earns only the Smart Export Guarantee or PPA export rate, often just 4-8 p. So a self-consumed unit is worth two to four times an exported one.

This is why the structure rewards a good demand-to-generation match rather than simply a big roof. A continuously running manufacturer, a cold store, a 24/7 hospital or a dairy with refrigeration will consume 70-90% of what the array makes and the deal sings. An office that is dark by 6pm and empty at weekends, or a school that closes exactly when July and August generation peaks, will export a large slice and see the headline saving erode. Before you sign, model your own half-hourly demand against the irradiation profile — a provider who is worth dealing with will do this for you and size the system to your load, not to your roof. Battery storage can lift self-consumption by shifting midday surplus into evening demand, though it adds contractual complexity to the revenue split. For the underlying tariff bands by system size and structure, see the PPA pricing page; this page deliberately does not repeat those tables.

An on-site PPA example: a 250 kWp warehouse roof

This example is modelled, not observed — it describes no real site. A 250 kWp rooftop array at 900 kWh per kWp generates 225,000 kWh in its first year. If the warehouse uses 75% of that on site, 168,750 kWh displace grid electricity and 56,250 kWh are exported.

At a 13 p/kWh PPA tariff against a delivered grid price of 24.1 p/kWh, the displaced units save £18,731 in year one. Export income adds £3,375 at an assumed 6 p/kWh — but only if the contract assigns it to the warehouse rather than the provider. Over a 20-year term with a 2.5% escalator, 0.5% annual panel degradation and a flat grid price, the modelled saving comes to about £243,500.

Change any of those inputs — the tariff, the escalator, the share used on site — and the answer moves; our solar PPA calculator runs the same arithmetic on your own figures.

Roof, land and lease requirements before you can sign 

Because the funder is committing capital to your premises for up to 25 years, the site itself has to pass diligence before any tariff is firm. Three requirements come up on almost every on-site deal.

Two contractual points sit alongside the physical diligence. First, a sale-of-business or change-of-control clause: if you sell the company or the property, the PPA must be assignable to the buyer, and a prospective purchaser will scrutinise it in due diligence — so negotiate the assignment terms up front, not at exit. Second, sub-50 kWp roofs and listed buildings with planning blockers rarely clear the funder's minimum deal economics. If your roof is small, a sleeved PPA or grant-funded route may fit better than forcing an on-site structure.

What does an on-site PPA cost in 2026?

On this site's indicative bands, a behind-the-meter on-site PPA runs about 8–14 p/kWh in year one and an in-front-of-meter deal about 13–22 p/kWh, because exported-then-imported power picks up network charges. Larger systems and stronger covenants sit at the bottom of each band; small systems and weaker covenants at the top.

The useful comparison is your own delivered grid price. DESNZ's figures for the first quarter of 2026 put non-domestic electricity at 21.42–25.00 p/kWh including the Climate Change Levy, depending on consumption band, with an average of 24.14 p/kWh. The gap between the two, multiplied by the units you use on site, is your saving. How tariffs are built — and what else a contract can charge for — is set out in our guide to the PPA tariff.

Grid price: DESNZ Quarterly Energy Prices, table 3.4.2 (non-domestic, including CCL, excluding VAT), Q1 2026, last updated 30 June 2026. Tariff bands are this site's indicative advisory bands, not an official statistic. Verified 26 Sep 2026.

What happens at the end of the term

Solar panels routinely generate for 30 years or more, while on-site PPAs run 15-25, so a well-drafted contract has to say what happens when the term ends and the asset still has years of useful life. There are three standard pathways, and you should confirm which your draft offers before signing rather than discovering the default at year 24.

1. Extend the PPA. Roll the agreement forward at a renegotiated tariff. The capital is long repaid by this point, so a sensible provider can offer a sharply lower rate — often the best-value option if you are staying put.
2. Buy the system at fair market value. Take ownership outright for a residual price, after which every generated unit is effectively free bar maintenance. This is attractive if you want the long-term asset and have the appetite to run it.
3. System removal at no cost. The provider de-commissions and removes the array and reinstates the roof, leaving you where you started. Useful if you are vacating or redeveloping.

The mechanics of these options — buy-out formulas, residual-value calculations and termination triggers — are covered in depth on our end-of-contract options page. The point to carry into negotiation is that all three should be written into the original PPA; you do not want end-of-term outcomes left to the funder's discretion.

Is an on-site PPA the right structure for you?

An on-site PPA is the default recommendation for a single occupier with a substantial roof or available land, secure long-term tenure, and meaningful daytime electricity demand — manufacturers, logistics and 3PL operators, cold stores, hotel groups, multi-academy trusts, NHS Trusts and dairy farms are all natural fits. It is the cheapest and lowest-risk PPA structure precisely because the power never leaves your site and the funder carries the asset.

• You occupy a single site for 15+ years (freehold or long lease)
• You have 200 kWp or more of viable roof or land
• A strong share of your demand falls in daylight hours
• You want cheaper power without the capital outlay or maintenance burden of ownership

If instead you run many smaller sites, rent premises without roof rights, or have a building whose load cannot use much daytime generation, the better fit is usually a sleeved PPA — we set the two side by side in our on-site vs sleeved comparison. To see where on-site sits among all six structures, start from the PPA structures hub, and to put real numbers against your own roof and load, request an indicative on-site PPA tariff or talk to an independent adviser. As an independent advisory and matching service we are paid a disclosed referral fee by the provider, never a commission that biases which structure we recommend.

Sources for the figures on this page

Frequently asked questions

Related on this site

• PPA structures hub — Compare all six PPA structures side by side
• On-site PPA vs sleeved PPA — The two routes head to head
• Solar PPA pricing 2026 — Tariff bands by size, structure and sector
• End-of-contract options — Extend, buy out or remove at term end
• O&M under a PPA — What the provider maintains for you
• Get an indicative tariff — Numbers against your own roof and load

You own nothing but the contractual right to the output, which is why the drafting governing step-in rights over the array matters as much as the headline tariff.

Where the roof will not take the load, a funder will look at land instead — a ground-mount distillery example walks through a 220 kWp array built on six acres rather than an underused maltings roof.

Site diligence widens considerably once the array leaves the building: when land replaces roof at 5 MWp sets out the planning and grid constraints that then dominate the programme.

Because you pay only for metered output on an on-site deal, the performance ratio guarantees in the contract are what stop underperformance quietly becoming your problem.

For a worked example of the structure described above, see an on-site PPA on a working farm, where the array sits on existing barn roofs.

Scale improves the rate materially, and on-site tariffs at 1 MWp shows where that curve begins to flatten.

An on-site deal is only one branch of the market — corporate versus utility PPAs sets out the off-site alternatives and who signs them.

Where no roof or land is available at all, the alternative is not a smaller on-site array but a financial rather than physical structure that hedges price without touching a building.

Businesses whose demand is spread across many sites, or whose roofs are leased, usually weigh an off-site PPA alongside this route rather than instead of it.

Where the roof cannot carry an array at all, the physical alternative is a sleeved PPA, in which a supplier delivers a solar farm's output from elsewhere to the same meters.

Keep going

• Solar PPA Term: Why 15–25 Years and How to Negotiate It
• Behind-the-Meter PPA: Solar Inside Your Private Wire
• The EPC Contractor in a PPA Structure
• In-front-of-Meter PPA Explained
• O&M Under a Solar PPA: What the Provider Covers
• Solar PPA Structures Explained