Should your business use a solar power purchase agreement or buy panels?

An on-site power purchase agreement lets you buy electricity from equipment funded by another party; buying solar puts the capital cost and operating responsibility with your business. East Sussex County Council describes a school arrangement involving a 25-year roof lease [S2]. That is one published example, not a standard term. Compare lifetime costs and exit rights. Checked October 2026.

Last checked 16 October 2026

What is a solar power purchase agreement for a business?

A power purchase agreement (PPA) is an electricity purchase contract between a generator and a buyer. Government guidance distinguishes on-site and private-wire arrangements from contracts involving electricity supplied through the grid [S1]. This guide compares on-site solar with buying the equipment for your own premises.

Solar photovoltaic (PV) panels generate electricity from sunlight. In a funded proposal, ask who funds, owns and maintains the system, what electricity you must buy and what rights the equipment owner needs over your property. Your main task is to compare the proposed obligations with the way your site actually uses electricity.

A farm shop open through the day should test its daytime refrigeration and trading demand. An office should include weekends and shutdown periods. A depot concentrating charging after vehicles return should test how much generation it can use directly. Use your measured demand; do not substitute total annual consumption for the electricity available at the same time as solar output.

How does a fully funded PPA compare with buying solar?

Use the site’s funding terms consistently. A fully funded solar arrangement can involve buying electricity from equipment owned by the funder. That payment structure differs from a charger host receiving a revenue share. East Sussex’s published school model has a third party meet capital costs and charge for electricity through a PPA [S2]. It is evidence of the arrangement, not an offer to your business.

Treat part funded as a description of shared investment. Do not assume a standard solar share or contract exists. Ask for the actual allocation of costs and benefits. For self funded solar, compare the capital cost guide and payback guide against the same system design.

How should you compare PPA prices with buying panels?

Request a common generation forecast and match it to your load. Then compare electricity you would otherwise purchase with the PPA bill or ownership costs. Use only the variable import price actually avoided. Keep standing charges and other costs in the forecast unless a written contract change removes them.

The following is an illustration, not a quote. Every price, quantity and cost is an assumption. It compares annual electricity value before financing and tax, using the same assumed system under both options.

Kilowatt hours (kWh) measure energy. Low / mid / high on-site energy is 50,000 × 40% / 60% / 80%: 20,000 / 30,000 / 40,000 kWh. PPA annual bill difference is on-site energy × (£0.25 − £0.15): £2,000 / £3,000 / £4,000. These are avoided expenditure illustrations, not host income or quoted savings.

Self funded annual benefit before capital recovery is on-site energy × £0.25 − £600: £4,400 / £6,900 / £9,400. Simple payback is capital ÷ annual benefit, giving 9.1–11.4 / 5.8–7.2 / 4.3–5.3 years. Simple return on investment (ROI), annual benefit ÷ capital × 100, is 8.8–11.0% / 13.8–17.3% / 18.8–23.5%. Use unrounded values when repeating the calculation.

No charger, sessions, driver tariff or charging revenue share is assumed in this solar-only comparison. For a part funded offer, replace the capital contribution, ownership costs and electricity payments with its written terms before calculating a return. Check the method with your accountant.

What can make a solar PPA cost more over time?

Ask for a year-by-year payment schedule, including any indexation, fixed fees and payments when your business is closed. Test lower future grid prices, reduced trading hours and an extended roof repair. Request the amount payable if you use less solar electricity than expected, rather than relying on the headline unit rate.

For ownership, add inverter replacement, monitoring, insurance and maintenance interruptions to the comparison. The illustration excludes those extra costs, degradation, VAT, financing and tax. For either route, distinguish forecast generation from contractual remedies when equipment underperforms. Do not interpret an annual forecast as a promise to deliver that output.

Export is another separate line. Ofgem’s Smart Export Guarantee (SEG) guidance sets eligibility and metering conditions [S3]. Verify who can claim and which electricity qualifies before including export income. See the export payment guide.

What happens if you repair the roof, sell or leave?

Give your solicitor the roof condition report, lease, lender requirements and proposed PPA together. Ask who pays to remove and reinstall panels for repairs. Request termination and buy-out schedules, assignment requirements, access rights, insurance responsibilities and end-of-term reinstatement. Get any business-rates allocation written into the cost schedule rather than assuming it is included. Use the commercial roof rental guide to prepare questions about the roof lease alongside the PPA.

The Department for Education publishes a PPA pilot for schools and colleges using private investment [S4]. Its existence does not establish terms or eligibility for your site. Use your own ownership and occupancy position when deciding whether a property commitment fits your plans.

What should you do next?

Prepare your electricity records, roof information, occupancy plans and preferred funding model. Compare the same design under funded and purchased options, then read about solar, batteries and charging together.

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