Commercial Solar PPAs Explained

A commercial solar power purchase agreement (PPA) lets you put a solar array on your roof, or buy solar power from elsewhere, without paying for the system. A developer funds, installs, owns and maintains the kit; you sign a long-term contract to buy the electricity it generates at an agreed rate, usually below what you pay the grid. It is the main route for owners and occupiers who want the bill saving and the carbon reduction but do not want to spend capital, carry the asset on the balance sheet, or take on the technical risk. The trade-off is that you give up the best returns and the tax reliefs to the party who owns the array. This guide explains how a PPA works, the difference between on-site and sleeved structures, the lease-term problem that catches landlords, and how the numbers stack up against owning the system outright.

We run a dedicated resource on this topic at solarpowerpurchaseagreements.co.uk if you want to go deeper on contract mechanics, rate structures and provider due diligence after reading this.

What a commercial solar PPA actually is

A PPA is a long-term electricity supply contract, typically 15 to 25 years, between you and a solar developer (sometimes called the asset owner or the PPA provider). They pay for the system — design, panels, inverters, installation, the G99 grid application, and ongoing operation and maintenance. In return you agree to buy the solar electricity at a fixed price per kWh, often with a small annual escalator linked to inflation or a fixed percentage.

The headline attraction is zero capex. A 250kWp rooftop array that would cost £150,000 to £240,000 to own outright costs you nothing up front under a PPA. You start saving from day one because the PPA rate is set below your grid import price, and because solar generated on your roof avoids the network and policy costs baked into a grid unit. The developer carries the install risk, the performance risk and the maintenance burden — annual inspections, monitoring, the one inverter replacement you can expect around year 10 to 15, occasional cleaning.

The economics for you depend almost entirely on self-consumption — the share of the solar you actually use on site rather than export. A solar-only system self-consumes roughly 30% to 50% of its output; the rest is exported. Under most on-site PPAs you only pay for the units you consume, and unconsumed generation is exported by the developer who keeps the export revenue. So the more of your load that lines up with daytime generation, the more a PPA saves you. Sites with strong daytime demand — manufacturing, cold storage, data-heavy operations — are the best fit. Add battery storage and self-consumption can rise to 60% to 80%, but who funds and owns the battery needs to be written into the contract.

On-site (behind-the-meter) vs sleeved/corporate PPAs

These are two very different structures and the words matter.

On-site, behind-the-meter PPA. The panels sit on your roof (or a car-park canopy, or ground array on your land) and feed your building directly, behind your supply meter. The electricity never touches the public grid before you use it, so you avoid network charges and levies on those units. This is the structure most relevant to a single commercial property and the one this site is mostly about. It needs a physical roof or site, a structural loading survey to BS EN 1991, a DNO connection agreement (G99 is the real bottleneck above roughly 50kW), and a lease or licence over the roof for the developer.

Sleeved or corporate PPA. Here the solar is generated somewhere else entirely — typically a large ground-mount solar farm — and the power is “sleeved” to you through your existing energy supplier across the public grid. You contract for the output of a remote generator, your supplier balances it against your actual consumption, and you get the green attributes (REGOs) and usually a price hedge. A corporate PPA suits organisations with large, multi-site electricity demand that cannot physically host enough generation on their own roofs. It delivers price certainty and procurement-grade renewable claims, but no behind-the-meter saving and no on-site asset.

For most landlords and owner-occupiers with a building and a roof, the on-site behind-the-meter PPA is the relevant model. A corporate PPA is a procurement instrument for large energy buyers, not a property improvement.

The lease-term-vs-PPA-term issue

This is where PPAs catch property owners, and it is worth getting right before you sign anything.

A developer funding a 20-year array on your roof needs to know the array can stay there, generating and being paid for, across the full term. So they will want security of tenure that runs at least as long as the PPA — a roof lease, a licence, or an easement granting them rights over the roof for 20-plus years. That creates several practical issues:

• The PPA term can outlast your tenant’s lease. If you let the building on a 10-year FRI lease but the PPA runs 20 years, the array — and the contract to buy its power — needs to survive a change of occupier. The next tenant inherits a PPA they did not negotiate, which can complicate lettings.
• It can complicate a sale or refinance. A roof encumbered by a 20-year developer lease is a title matter a buyer’s solicitor will scrutinise. Some PPAs include step-in and assignment provisions so the agreement transfers cleanly on sale; check these exist and are reasonable.
• The split-incentive problem. Under a full repairing and insuring lease the tenant pays the energy bills, so the saving from an on-site PPA accrues to the occupier, not the owner who granted the roof rights. Resolving who buys the power — landlord, tenant, or common-parts supply — is the central design question. We cover the options in detail in our guide to the split incentive solved and the mechanics of selling power across a site boundary in landlord, tenant PPAs and private wire.

If you are a landlord, the comparison you actually want to run is PPA against the alternative ways of putting solar on a let building — a roof lease where you sell the roof to a developer, or a licence, or owning the array yourself and selling power to the tenant. Our guide to roof lease vs PPA vs licence sets these side by side.

Who owns the asset, and where the tax reliefs sit

Under a PPA the developer owns the solar array for the life of the agreement. That single fact drives the financial trade-off, because the tax reliefs follow ownership.

When you own a commercial solar installation, it is a special-rate asset that qualifies for 100% relief in year one through the Annual Investment Allowance (the £1m AIA is permanent). Note that solar does not qualify for full expensing — that gives only 50% first-year allowance on special-rate assets, applies to companies only, and is unavailable for assets bought to lease out, so landlords use AIA plus the 6% writing-down allowance. Solar is also exempt from business rates to 2035, and there is no VAT on commercial installation (0% since April 2022). Those reliefs are valuable, and under a PPA you get none of them — they belong to the developer who owns the kit. The developer prices their own reliefs into the PPA rate they offer you, so you see the benefit indirectly as a lower price per unit, but the headline tax wins do not appear on your tax return.

At the end of the PPA term you will usually be offered the option to buy the system for a nominal residual value, extend the agreement, or have it removed. A well-drafted PPA spells out this end-of-term position clearly; check it before signing.

Pros and cons vs owning the array

The honest summary: a PPA is the right answer when you cannot or do not want to deploy capital, when you would rather not carry the technical and performance risk, or when you do not have the appetite to own and run the asset. It removes the barrier to getting solar on the building at all. Owning the array is the right answer when you have capital available, a strong daytime electricity load that drives high self-consumption, a long hold on the asset, and a tax position that can absorb the allowances — because then you capture the full saving, the reliefs and the residual value yourself.

Many owners land somewhere in between by funding the system with solar asset finance — you own the array and keep the reliefs, but spread the cost over a term that the energy saving more than covers. That can beat a PPA on lifetime value while still avoiding a large up-front outlay; our capital allowances and funding guide for owners works through the comparison.

Before deciding, model your actual self-consumption profile, get a structural survey and a DNO connection view, and price all three routes — PPA, finance, and outright purchase — on a like-for-like basis. Start a quote at /quote/, check indicative numbers on our cost page, or read the broader funding picture in grants and funding.

Frequently asked questions

Do I save money from day one under a solar PPA?

Usually yes. The PPA rate is set below your grid import price, so every unit of solar you self-consume costs less than the grid unit it replaces, with no up-front payment to recover. The size of the saving depends on how much of the solar you actually use on site — a building with strong daytime demand saves far more than one that exports most of its generation. There is no capex to pay back, so the saving is immediate rather than deferred over a payback period.

Can I get the tax reliefs if I sign a PPA?

No. The reliefs — 100% Annual Investment Allowance relief, business-rates exemption to 2035, and the rest — attach to whoever owns the asset, and under a PPA that is the developer. They factor their own reliefs into the rate they quote you, so you benefit indirectly through a lower price per kWh, but the allowances do not appear on your own tax return. If capturing the reliefs yourself matters, you need to own the system, whether outright or via asset finance.

What happens to the PPA if I sell the building?

A well-drafted PPA includes assignment and step-in provisions so the agreement, and the developer’s roof rights, transfer to the new owner on sale. In practice a buyer’s solicitor will review the roof lease or licence as a title matter, and a long developer encumbrance can be a negotiation point. Check the assignment terms and the end-of-term options before you sign, and factor the contract into any future sale or refinance from the outset rather than discovering it at the point of disposal.