Solar asset finance vs a PPA
Both fund commercial solar without a big capital outlay. The difference is ownership — and ownership decides who keeps the tax relief and the export income.
A Power Purchase Agreement (PPA) is the simplest pitch in commercial solar: a third party pays for and owns the system on your roof, and you buy the electricity it generates at an agreed rate, usually for 15 to 25 years. No capital, no maintenance worries. Asset finance is different: you fund a system that you own — via hire purchase, an equipment loan, a lease or cash — and repay it over a much shorter term.
The reason the choice matters is that three valuable things follow ownership: the capital allowances, the Smart Export Guarantee income, and the asset itself once it's paid off.
Asset finance vs PPA
| Asset finance You own the system | PPA Third party owns it | |
|---|---|---|
| Upfront capital | Low (deposit only) | None |
| Who owns the system | You | The funder |
| Capital allowances (AIA / 50% FYA) | You claim | Funder claims |
| Smart Export Guarantee income | Yours | Funder’s |
| Contract length | 2–7 years | 15–25 years |
| Electricity cost after the term | Effectively free | Still paying per kWh |
| Adds value to your premises | ||
| Best when | You can use the tax relief | You can’t deploy capital |
Over 25 years, ownership usually wins
Month to month, a PPA can undercut your grid tariff from day one with no capital at all — which is why it appeals. But stretch the view to the full life of the system and the picture changes. The PPA funder builds in a margin on every kWh for 15–25 years, banks the capital allowances your business could have claimed, and keeps the export income. With asset finance you carry a cost for only the 2–7 year finance term; after that, the system generates electricity for your business effectively for free for another 15–20 years, and you've kept the tax relief and export income throughout.
When a PPA is the right call
None of this makes PPAs bad — they're the right answer for some organisations. If your business genuinely can't deploy any capital, can't use the capital allowances (a non-taxpaying body, say), or wants a third party to shoulder all the performance and maintenance risk, a PPA can be the sensible route. The point is to choose with the full comparison in front of you, not just the zero-capital headline.
We model both, in pounds
For every enquiry we build a like-for-like comparison: the PPA over its full term against each asset-finance route, net of the allowances, with payback, total cost and the 25-year position laid out side by side. If a PPA genuinely wins for your situation, we'll tell you. More often, owning the system through finance comes out ahead — and now you'll know by how much.
Asset finance vs PPA FAQs
Is asset finance or a PPA better for commercial solar?
For most profitable businesses, asset finance wins over the asset’s life. A PPA needs no capital but the funder owns the system and keeps the capital allowances and export income, and you buy power back for 15–25 years. With asset finance you own the system, keep the tax relief and export income, and after a 2–7 year term your electricity is effectively free.
Does a PPA really cost more than financing?
Not month to month — a PPA can be cheaper than the grid from day one with zero capital. But over 25 years the funder’s margin, the lost capital allowances and the lost export income usually make a PPA the more expensive route in total. We model both in pounds so you can see the lifetime gap for your site.
When does a PPA make more sense?
A PPA can be the right answer when a business genuinely cannot deploy any capital, cannot use the capital allowances (for example a non-taxpaying body), or wants a third party to take all the performance and maintenance risk. For everyone else, an ownership route via asset finance is usually better value.
Can I switch from a PPA to owning the system?
Often yes — many PPAs include buy-out clauses that let you purchase the system at set points. Whether buying out is worthwhile depends on the buy-out price versus the remaining value. We can model a buy-out funded by asset finance against continuing the PPA.