Lease vs Buy vs PPA — commercial solar funding compared
The three main ways to fund commercial solar in the UK — outright purchase (with or without asset finance), operating lease, or Power Purchase Agreement (PPA) — deliver very different economics, tax outcomes and levels of control. This side-by-side guide covers when each option wins.
Buy (Capex + Full Expensing)
You own the system. Best long-term return. Requires capex.
Profitable limited companies with available capex or asset finance capacity, targeting maximum lifetime saving.
Lease (5–7 yr operating lease)
Monthly rental, no capex, you use the electricity.
Businesses with limited capex who want to preserve cash but retain the electricity benefit — cash-positive from month one.
PPA (Power Purchase Agreement)
Funder owns and maintains; you buy solar power at a discount.
Public sector, charities without corporation tax, or high-consumption private sites wanting zero-capex simplicity and 20–40% below-grid rates.
Side-by-side comparison
| Attribute | Buy (Capex + Full Expensing) | Lease (5–7 yr operating lease) | PPA (Power Purchase Agreement) |
|---|---|---|---|
| Upfront capex | Full | None (small deposit) | None |
| Ownership | You | Funder → transfers | Funder (25 years) |
| Corporation tax relief | 100% Full Expensing | Lease rentals deductible | Not applicable |
| Typical unit price | ~0p (self-generated) | ~0p + monthly rental | 20–40% below grid tariff |
| Maintenance | You (or contracted) | You (or contracted) | Included by funder |
| 25-year IRR | 15–25% | 10–18% | N/A (opex model) |
| Best system size | Any | 50 kWp–1 MWp | 250 kWp–5 MWp |
| Exit / early buyout | N/A (owned) | Buyout schedule | Buyout formula (often at year 5–10) |
Our verdict
Buy wins on lifetime return for any profitable UK limited company that can access capex or asset finance. Lease is the strongest middle option when capex is unavailable but the business wants electricity benefit. PPA is the right answer for public-sector estates, charities, or private sites that need zero-capex simplicity and a proven 20–40% discount to grid.
Related reading
FAQ
Can I switch from PPA to owning the system later?
Most PPAs include a scheduled buyout formula, usually available from year 5 or 10. The buyout price falls each year as the funder recovers their capex.
Which option is best for a school or NHS trust?
For public-sector bodies without corporation tax, a Salix interest-free loan for outright ownership usually beats both lease and PPA. Where Salix is unavailable, a PPA is typically preferred over an operating lease.
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