PPA Mechanics · Structures

On-site Solar PPA Explained

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 28-32 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.

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.

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.

Requirement	What the funder checks	Why it matters
Tenure	Freehold, or a lease with at least as many years remaining as the PPA term (15-25 years)	The asset must outlast the contract; short-lease tenants (under 10 years remaining) are a wrong fit
Roof condition & load	Structural survey of age, remaining life, and capacity to carry the additional dead load of the array	A roof needing replacement mid-term forces a costly de-mount and re-mount; funders avoid it
Grid connection	DNO capacity for a G99 connection above 50 kWp; export limits where relevant	Connection constraints can cap system size or delay the build

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 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.

FAQs

Frequently asked questions

Do I pay anything upfront for an on-site PPA?

No. The provider funds 100% of the capital cost — the panels, inverters, installation and grid connection. You pay only for the electricity the system generates, at the agreed PPA tariff, from the day it is commissioned. Your only meaningful cost is legal fees for reviewing the contract, typically a few thousand pounds.

Who owns the solar panels in an on-site PPA?

The provider's special-purpose vehicle owns the system for the whole term, even though it is installed on your roof or land. You own the right to buy its output. At the end of the 15-25 year term you can usually extend, buy the system at fair market value, or have it removed at no cost.

What's the difference between an on-site PPA and a sleeved PPA?

An on-site PPA puts the array on your own premises and the power feeds your loads directly, so it is cheaper and lower risk. A sleeved (off-site) PPA sources power from a generator elsewhere and routes it to your meters through a licensed supplier — better for multi-site businesses or tenants without roof rights. See our on-site vs sleeved comparison.

What does my building need to qualify for an on-site PPA?

Secure tenure for at least the length of the term (freehold or a long lease), a structurally sound roof with remaining life and load capacity, and enough DNO grid capacity for the connection. Funders also look for 200 kWp+ of viable roof or land and meaningful daytime demand to make the deal economic.

Why does self-consumption matter so much?

Because a unit you use on site is worth the gap between your grid price and the PPA tariff — often 15-20 p — while a unit you export earns only 4-8 p. The more of the generation you consume rather than export, the stronger the saving, which is why a good demand-to-generation match matters more than roof size alone.

Is an on-site PPA behind the meter or in front of it?

Almost always behind the meter — the solar feeds your loads before your supply point and only surplus exports, which keeps the tariff low by avoiding network charges. An in-front-of-meter variant exports everything to the grid and prices higher; it suits sites with low daytime demand such as schools and seasonal venues.

Related on this site

• /mechanics/structure/ — Compare all six PPA structures side by side
• /compare/on-site-vs-sleeved-ppa/ — The two routes head to head
• /mechanics/pricing/ — Tariff bands by size, structure and sector
• /mechanics/end-of-contract/ — Extend, buy out or remove at term end
• /mechanics/om-agreement/ — What the provider maintains for you
• /quote/ — Numbers against your own roof and load