Commercial solar: buy outright vs PPA

Every commercial solar project comes down to one question before the panels are chosen: who pays for the system, and who owns it. That single decision drives your upfront cost, how much of the saving you keep, your tax position and how you exit in 10 or 20 years.

• Buy outright — you pay the full installed cost, own the asset from day one, and keep 100% of the savings and generation income. Best lifetime return if you have the capital.
• Power Purchase Agreement (PPA) — a third-party funder installs, owns and maintains the system on your roof at no upfront cost. You simply buy the solar electricity it generates at an agreed rate, usually below your grid import price.
• Lease / asset finance — a lender funds the kit and you repay over a fixed term (often 5-10 years). You typically own the system at the end, but interest reduces the net benefit.

The table below compares the three routes across the dimensions that actually change the outcome. Percentages and paybacks are estimates for a typical commercial site and will vary with your load, roof and tariff.

If your business has the capital or can borrow cheaply, buying outright almost always produces the strongest return over the system's life. You keep 100% of every unit you self-consume, all export income, and you claim the capital allowances yourself.

As a 2026 sanity check on cost: installed prices fall as systems get bigger — roughly £1,100-£1,300 per kWp at 10kW, down to about £650-£750 per kWp at 250kW (ex VAT).⁶ A typical UK array generates around 950 kWh per kWp per year,⁵ and commercial sites self-consume roughly 60-85% of what they generate depending on sector and operating hours.

• Payback: commonly an estimated 6-10 years for a well-matched commercial site, shortening where daytime self-consumption is high. Your figure depends on your load, roof and tariff.
• Then: effectively free generation for the remainder of a 25+ year panel life.
• Watch: commercial solar pays 20% VAT — a VAT-registered business normally reclaims it (see the tax section).

Explore indicative costs by size: 10kW, 50kW, 100kW and 250kW.

A PPA removes the capital barrier entirely. A funder pays for and owns the system on your roof; you sign a long-term contract to buy the electricity it produces, typically at a rate below your grid import price, often with a fixed annual escalator.⁴ Maintenance and performance risk sit with the provider.

The trade-off is real, and it is the part PPA marketing tends to skip:

• You do not own the asset, so you cannot claim capital allowances on it.¹
• You keep a smaller share of the total saving — the provider's return is baked into the per-kWh rate you pay.
• Contracts are long (commonly 15-25 years) and place a legal interest over your roof for the term.⁴
• At the end you typically extend, buy the system at fair market value, or have it removed and the roof reinstated.⁴

Weigh the two routes head to head on our buy vs PPA hub, or see how to choose an installer.

Lease or asset finance lets you install solar without a large cash outlay while still ending up as the owner. A lender funds the equipment and you repay over a fixed term, commonly 5-10 years. Once the final payment is made the system is yours, so from that point you keep the full saving.

• Upfront cost: little or none.
• Ownership: usually transfers to you at the end of the term.
• Cost of capital: interest reduces the net return versus buying outright — the gap depends on your rate.
• Tax: the capital-allowance position depends on the lease type (finance vs operating lease); confirm with your accountant.²

Lease/finance suits a business that wants to own the asset and capture the long-term upside, but would rather protect working capital than write a single large cheque.

This is where the funding choice has the biggest hidden effect, and where the rules are widely misunderstood.

VAT. The 0% VAT rate applies to domestic solar only. Commercial solar pays 20% VAT.³ A VAT-registered business normally reclaims that VAT through its return, so it is a cashflow point rather than a permanent cost — but do not expect a 0% invoice on a commercial job.

Capital allowances. Solar PV is classed by HMRC as special-rate plant.² That means it qualifies for the 50% first-year allowance for companies within the charge to Corporation Tax — not the 100% full expensing that applies to main-rate assets.¹ The residual 50% then goes into the special-rate pool and is written down over following years. Many smaller businesses may instead use the Annual Investment Allowance (up to £1m of qualifying spend) to relieve the cost more quickly.¹

There is no single winner — the right route depends on your capital, your appetite for operating a system, and how long you will hold the building.

• Buy outright if you have the capital (or cheap borrowing), want the best lifetime return, and can use the capital allowances. This keeps every pound of saving.
• Choose a PPA if preserving capital and offloading all operational risk matters more than owning the asset, and you are comfortable with a long contract and giving up the tax relief.
• Use lease/finance if you want to own the system and capture the long-term upside, but would rather spread the cost than pay upfront.

Whichever route you pick, the installer quality matters more than the funding label. PlutoHome is a neutral introducer: we match you with one MCS-certified commercial installer — never a scramble of five sales calls. We do not install, finance or own systems.

Next step: request a commercial solar quote, or read up by sector — warehouse, factory or farm.