Buy vs Lease vs PPA for Commercial Solar

There are three ways to put solar on a commercial roof, and the funding route you pick changes the economics more than the panels do. Buy it outright and you keep every pound of saving plus the tax reliefs, but you tie up capital. Lease it or use asset finance and you spread the cost over five to ten years, often paying less in monthly repayments than the system saves from month one. Sign a power purchase agreement (PPA) or a roof lease and you put in nothing — a developer funds, owns and operates the array, and you either buy the power at a discount or collect rent on the roof. This guide compares the three across the things that actually decide the answer: capital, control, who keeps the reliefs, cash flow and how each fits your lease length.

The three routes, in plain terms

Buying (cash plus AIA). You pay the capital cost up front and own the asset outright. A typical commercial install runs around £700–1,100 per kWp ex-VAT (there has been 0% VAT on commercial solar installs since April 2022), so a 100kWp roof is roughly £82,000–110,000 and a 250kWp roof £150,000–240,000. You self-consume the generation, save 24–28p on every unit you’d otherwise have bought from the grid, and export the surplus under a Smart Export Guarantee (SEG) tariff. Payback usually lands at four to eight years, faster on a high-load site running plant through the day.

Leasing / asset finance. A funder buys the system and you repay over a fixed term — operating lease, hire purchase or a secured loan against the asset. You still own (or come to own) and operate the array, so you keep the generation savings and the export income; you just don’t pay the lump sum. Because the energy saving on a well-sized system often exceeds the monthly repayment, leasing is frequently cash-flow positive from the first bill. This is the middle path: control of the asset without the capital hit. There’s more detail on the structures at solarassetfinance.co.uk.

PPA / roof lease. A third-party developer funds, installs, owns and maintains the system at zero cost to you. Under a PPA you buy the electricity it generates at a fixed unit rate — typically below grid price — for the contract term (often 15–25 years), and you only pay for what you use. Under a roof lease (sometimes called sell-the-roof) you rent the roof space to the operator and they keep the generation and export value. Either way you put in no capital and carry no maintenance, but the developer keeps the asset and the tax reliefs. The trade-offs are set out in our guide to the roof lease vs PPA vs licence structures, and there’s a deep dive at solarpowerpurchaseagreements.co.uk.

Side-by-side comparison

The tax line is the one owners most often miss. Solar is a special-rate asset, so it does not qualify for full expensing — full expensing gives only 50% first-year allowance on solar. Instead, solar qualifies for 100% relief under the Annual Investment Allowance (AIA, £1m and permanent). Landlords buying an asset to lease to tenants can’t use full expensing at all and fall back on AIA plus the 6% writing-down allowance. The reliefs flow to whoever owns the asset, which is exactly why a PPA developer — not you — captures them. Solar is also exempt from business rates to 2035 regardless of route. We cover the mechanics in the capital allowances and funding for owners guide.

How to read the table by owner type

Owner-occupier with cash. Buy. You consume the power yourself (self-consumption is the single biggest return driver — 30–50% solar-only, rising to 60–80% with a battery), you bank 100% of the saving, and you claim the AIA in year one. Over 25–30 years no other route comes close on total value. If you’d rather not drain reserves, asset finance gets you the same ownership and reliefs while keeping cash free for the core business.

Owner-occupier or landlord who wants the asset but not the capital hit. Lease or asset finance. You keep ownership economics and the reliefs (on hire-purchase or a secured loan), and a correctly sized system usually pays its own repayments. The rule of thumb: make sure your remaining lease or occupancy comfortably exceeds the finance term. There’s no point committing to an eight-year loan on a building you’ll vacate in five.

Investor landlord under a full-repairing-and-insuring (FRI) lease, where the tenant pays the bills. This is the classic split-incentive problem — you fund the roof but the tenant captures the savings. A PPA or roof lease sidesteps it: the developer funds, the tenant (or you, for common-parts supply) buys cheaper power, and you’ve improved the building’s EPC and green credentials at no cost. We walk through the options in split incentive solved. Just weigh the long contract — a 20-year PPA registered against the title can complicate a future sale or reletting, so check it’s assignable.

Portfolio owner with short unexpired terms or imminent disposals. PPA or roof lease, used selectively. Zero capital, no balance-sheet drag, and the asset transfers with the building. Where you’re holding long and the covenant is strong, buy or finance the better assets and PPA the rest.

Don’t forget the regulatory backdrop

The funding decision doesn’t sit in isolation. Letting commercial property below EPC E has been unlawful since 1 April 2023 under MEES (England and Wales). A proposed minimum of EPC B by 2031 for properties over 1,000 m² was floated on 18 June 2026 but remains a proposal subject to legislation — not law. Solar is one of the few measures that lifts an EPC rating and generates a return at the same time, which is why owners facing MEES exposure increasingly treat it as a building upgrade rather than a discretionary spend. If a tenant or buyer is footing the bill, a PPA delivers the EPC uplift without you spending a penny; if you’re holding the asset long-term, owning the system captures both the compliance benefit and the cash return. See the MEES and EPC guide for commercial property for where the thresholds bite.

Whichever route fits, size the system to your daytime load first — over-specifying for export earns only SEG (around 12–16p) versus the 24–28p you save on self-consumed units. Get an indicative cost for your roof, or request a quote and we’ll model buy, lease and PPA side by side against your actual consumption.

Frequently asked questions

Which option gives the best return?

Buying outright, in nearly every case. You keep 100% of the generation savings and the export income, and you claim the full Annual Investment Allowance in year one. Over a 25–30 year asset life, ownership beats both leasing (you pay finance costs) and a PPA (the developer takes a margin and the reliefs). Leasing closes most of that gap while freeing your capital; a PPA trades the most value for the most convenience. If you have the cash and a long horizon, buy.

Can I switch from a PPA to owning the system later?

Often, yes — many PPAs include a buy-out clause letting you purchase the array at a pre-agreed price at set points, typically after years 5, 10 or 15. The price usually reflects the asset’s remaining value, so it’s rarely a bargain, but it does let you capture the full savings for the back end of the panels’ life. Always read the buy-out terms before signing: the strike price, the trigger dates and what happens to the maintenance obligation all matter.

Does a PPA or roof lease affect selling the building?

It can. A long PPA or roof lease is usually registered against the title and binds successors, so a buyer inherits the contract. A well-drafted, assignable agreement with a creditworthy operator is generally a non-issue and can even be a selling point (cheaper power, better EPC). A poorly drafted one — restrictive access rights, long term, weak operator — can deter buyers or depress the price. Have your solicitor review assignability and step-in rights before you commit.