Solar PPA Structures Explained

Not all PPAs are alike. The structure that fits depends on whether you own the roof, how many sites you operate, your treasury sophistication and whether you need REGO certificates or just cheaper kWh.

What is a PPA structure?

A PPA structure is the way a power purchase agreement connects three things: where the generator sits, how the electricity — or only its value — reaches you, and who carries which risk along the way. Two questions sort almost every deal. First, is the generator on your site or somewhere else? On-site structures put the array behind or in front of your own meter; off-site structures buy from a farm elsewhere. Second, is the power physically delivered, or settled financially? A sleeved deal delivers units through a supplier; a virtual deal settles the difference against a strike price and delivers nothing.

The answers decide what the contract can displace on your bill, which is why the tariff bands in the table above differ so much. The off-site routes are compared side by side in our guide to the off-site PPA.

EPC contract vs PPA: what is the difference?

The two are easy to confuse because both appear in every solar deal. An EPC contract — engineering, procurement and construction — is the agreement to design and build the system: it sits between whoever pays for the array and the installer, and it covers the design, the equipment, the build programme and the workmanship warranties. A PPA is the agreement to buy the power the finished system produces.

Under a third-party PPA you normally sign only the PPA (and a roof licence or lease); the provider signs the EPC contract with its chosen installer. If you buy the system yourself, the position reverses: you sign the EPC contract and there is no PPA at all. Either way, it is worth knowing who the installer is — our page on the EPC contractor covers what to ask.

Structure selection FAQs

Choosing a structure

• 2026 PPA rates & tariffs — what each structure costs
• PPA providers & specialists — who offers each structure
• On-site vs sleeved PPA — the most common choice

How PPA structures compare in practice

The six structures above differ commercially, but underneath each one sits the same contractual spine — and that spine, not the label, is what your legal and finance teams actually review. In every structure the generation asset is owned by a special-purpose vehicle set up by the funder, never by you. That is the defining feature of a PPA: you buy kilowatt-hours, you do not buy plant.

Whichever structure you land on, expect broadly the same document stack to arrive for signature:

• The PPA itself — tariff, escalator, term, metering, minimum-generation and availability provisions.
• A roof licence or lease granting the SPV access and quiet enjoyment for the full 15–25 year term.
• A direct agreement between you and the funder behind the SPV, carrying step-in rights if the developer fails.
• The EPC and O&M contracts, which sit between the SPV and its contractors but whose defect and performance obligations you want visibility of.

Two consequences follow from SPV ownership, and they apply across all six structures. First, capital allowances sit with the funder rather than with you — solar is a special-rate asset, so it does not qualify for full expensing; the 100% route is the Annual Investment Allowance up to £1m, and under a PPA you are not the party claiming it. Second, the accounting question is not which structure but whether the arrangement contains a lease, which is set out in how a PPA is treated on the balance sheet. Structure selection then reduces to four site facts: do you control the roof, does your load coincide with generation, do you need REGO certificates, and does your covenant clear the funder's threshold — the last of these being the credit test the funder applies to the off-taker.

Who owns the solar panels under each PPA structure?

In all six structures the generation asset is owned by a special-purpose vehicle set up by the funder, not by you. That is what removes the capital cost from your side of the deal, and it also means the capital allowances sit with the funder. You buy kilowatt-hours under contract; you never buy the plant itself.

PPA for industrial sites in the UK

Industrial sites are the strongest PPA candidates in the UK market, and the reason is arithmetic rather than sentiment. A continuous-process plant, a cold store or a two-shift factory draws a heavy, flat daytime baseload, so most of what the roof generates is consumed on site rather than exported. Self-consumption is what a PPA is priced against: every kilowatt-hour you use displaces grid import at 21–25 p/kWh, while a kilowatt-hour exported earns far less — the published Octopus Panel Power rate is 12 p/kWh, and it only runs to 150 kWp, so larger sites negotiate export instead. That gap is why industrial deals settle toward the bottom of the 9–18 p/kWh indicative band while low-load sites sit at the top of it.

Three site facts decide whether an industrial PPA prices well:

• Half-hourly meter data. Nearly all industrial supplies are HH-metered, so a funder can model self-consumption from twelve months of real data rather than an estimate — which takes risk premium out of the tariff.
• Roof life against contract term. A PPA runs 15–25 years. Portal-frame roofs with under a decade of life left, or ageing asbestos-cement sheets, push the deal towards a re-roof, a ground-mount or a shorter term.
• Connection headroom. Anything above 50 kWp needs a G99 application, and constrained industrial connections are frequently export-limited under G100. Export limitation matters far less when your own load absorbs the generation — one more reason the behind-the-meter route suits manufacturing and processing sites.

The comparison most industrial finance directors actually want is PPA against buying outright. Solar is a special-rate asset and does not qualify for full expensing, so the 100% route is the Annual Investment Allowance up to £1m — and that is only available to the owner of the system. Under a PPA the funder owns the asset and takes the allowances, a real cost to weigh against zero capital outlay; the trade-off is worked through in PPA versus self-financed solar.

Do I need half-hourly meter data to get a PPA quote for an industrial site?

Not for an indicative band, but yes for a firm one. Twelve months of half-hourly data lets a funder model how much generation your site will genuinely consume rather than export. Because self-consumption drives the tariff, and exported units are worth roughly 12 p/kWh against 21–25 p/kWh of displaced import, real data usually prices better than an estimate.

Where a supplier sits between generator and off-taker, the sleeved contract structure adds a third party with its own margin and its own credit requirements.

The special purpose vehicle described above is the same in principle whether the buyer is one factory or a corporate off-take spanning a whole estate.

Strip out the physical supply obligation and you are left with the synthetic structure, which is a hedge rather than an energy contract.

The lease or licence over the roof is what makes an on-site arrangement legally workable, and it is the clause tenants most often trip over.

Structure decides who carries risk; size decides the number you actually pay, and solar PPA rates by size breaks that down band by band with what a 2% or CPI-linked escalator adds on top.

The SPV structure described above is shared by every route in the corporate PPA vs utility PPA comparison, which is the better next read if you are choosing between bilateral off-take and a supplier-billed tariff.

Sleeved and virtual deals both buy from a generator somewhere else, which is why they are grouped together as off-site structures.

Also worth reading

• End-of-Contract Options on a Solar PPA
• How a Solar Power Purchase Agreement Works
• Off-taker Covenant: How Your Credit Affects Your PPA
• Solar PPA Pricing: 2026 Benchmark Tariffs
• Virtual (Synthetic) PPA Explained
• Corporate PPA UK: Commercial Solar PPAs Explained