PPA Mechanics

Solar PPA Term: Why 15–25 Years and How to Negotiate It

Term length is the single biggest driver of tariff. Shorter terms mean higher rates; longer terms tie you in. Most UK PPAs run 15-25 years to give the investor a 7-9% IRR after debt servicing.

Why providers prefer longer terms

A solar PPA is a debt-style instrument: the provider raises capital at 5-7% and recoups it over the term via your kWh payments. The longer the term, the more years to amortise and the lower the tariff they can offer.

Why 15 years is the minimum

Below 15 years the maths typically doesn't work. Capex pay-back at 12-15 p/kWh requires 12-14 years assuming reasonable irradiation. So a 10-year PPA gives the provider just 0-3 years of IRR — most decline.

When 25 years suits you

• You own your site freehold or have a 25+ year lease.
• Your business has long-term visibility (manufacturing, agriculture, healthcare, public sector).
• Your covenant is strong enough to support the provider's funding stack.
• You want the lowest possible p/kWh today.

When 15 years suits you

• You're a tenant with a 15-year lease (matching is common).
• You want flexibility to renegotiate / re-tender mid-asset-life.
• You're using the PPA as a stepping stone before refinancing into ownership.