Commercial solar has a capex problem. A 100 kWp rooftop array for a warehouse or factory can cost £90,000–£120,000 installed, and plenty of finance directors won’t sign that off no matter how good the payback maths looks on paper. That’s the gap Power Purchase Agreements are built to close — and in 2026, with 0% VAT still running on residential systems and commercial energy costs stubbornly high, PPAs have gone from a niche City-of-London structure to something installers up and down the country are being asked about on a weekly basis. This is a guide for installers: how PPAs actually work, how they differ from leasing and straight purchase, who’s writing them in the UK market, and — the bit that matters to your business — what they do to your margin.
What a commercial solar PPA actually is
A Power Purchase Agreement is not a finance product for the site owner in the way a loan or lease is. It’s an energy supply contract. A third-party investor — sometimes called the PPA provider, sometimes an “asset owner” — pays for, installs and owns the solar system on the client’s roof or land. The client pays nothing upfront. In return, they agree to buy the electricity the system generates at an agreed rate per kWh, typically for 10–25 years, usually set below their current grid import price and often with a modest annual escalator built in.
Ownership of the panels, inverters and (increasingly) the battery stays with the investor for the life of the contract. At the end of the term the system is either transferred to the site owner for a nominal or pre-agreed sum, extended, or removed. The client never owns an asset during the contract — they’re buying kilowatt-hours, not kit.
That distinction is the whole point of a PPA and the reason it converts commercial prospects that a straight capex quote never will. A factory owner doesn’t need to understand degradation curves or inverter warranties; they need to know their electricity bill goes down from day one with zero balance-sheet impact. For a detailed breakdown of how PPA pricing and contract structures work in the UK market, solarpowerpurchaseagreements.co.uk is the dedicated resource — worth bookmarking if you’re fielding these enquiries regularly.
PPA vs lease vs outright purchase: the three routes compared
Every commercial solar conversation eventually comes down to one of three ownership models. Installers need to be fluent in explaining the trade-offs, because the “best” option depends entirely on the client’s balance sheet, tax position and appetite for risk — not on which one earns you the fattest margin.
| Outright purchase (capex) | Commercial solar lease | PPA | |
|---|---|---|---|
| Who owns the system | Client, from day one | Leasing company; client uses it | Third-party investor |
| Upfront cost to client | Full install cost | £0 (or small deposit) | £0 |
| What the client pays | Nothing ongoing | Fixed monthly/quarterly lease fee | Per-kWh rate for generated electricity |
| Savings mechanism | Full offset of grid import from year one | Lease payment set below prior energy spend | PPA rate set below grid import rate |
| Who gets Annual Investment Allowance / capital allowances | Client | Leasing company | Investor |
| Who takes performance/generation risk | Client | Client (fixed fee regardless of output) | Investor |
| Typical term | N/A — owned outright | 5–15 years | 10–25 years |
| Best fit | Cash-rich businesses, owner-occupied long-term freeholds | Businesses wanting fixed, predictable costs and eventual ownership | Businesses wanting zero risk, zero capex, immediate savings |
The lease is often confused with a PPA but the mechanics are different in one important way: a lease customer pays a fixed fee regardless of how much the system actually generates, so the generation risk sits with them. A PPA customer only pays for electricity actually produced and consumed, so the generation risk sits with the investor. That makes PPAs a genuinely lower-risk proposition for the client — which is also why PPA rates per kWh tend to be priced a little more conservatively by the investor than a lease fee would be, to cover that risk transfer.
Outright purchase still wins on total lifetime savings for any business that can fund it and plans to occupy the site for 20+ years, because there’s no ongoing per-kWh payment to a third party once the system is paid off — and the client captures 100% of the Smart Export Guarantee income and any capital allowances directly. But for a business without capex headroom, or one unwilling to carry an asset on the balance sheet, that comparison is academic. If they can’t fund it, purchase isn’t on the table, full stop — which is exactly why PPA and lease models exist. Comparing the funding routes side by side, including how corporation tax and capital allowances treatment differs between them, is covered well by commercialsolarfinance.co.uk, which is worth sending prospects to when they’re weighing this decision internally.
Who’s actually writing commercial PPAs in the UK
The UK commercial PPA market is smaller and more concentrated than the residential/commercial installer market. Broadly, three types of organisation are active:
Specialist solar investment funds and asset owners — dedicated PPA providers whose entire business model is buying and holding rooftop and ground-mount solar assets, then contracting the output back to the host site. These are the organisations installers most often end up as subcontractors or approved installation partners for, rather than direct competitors.
Energy majors and utilities running corporate PPA desks, typically for larger portfolios (multi-site retailers, logistics groups, food manufacturers) where the deal size justifies the overhead of a bespoke contract.
Regional installers building their own PPA offer, usually by partnering with a funding partner rather than holding the asset themselves — the installer does the technical delivery and O&M, the funder holds the paper. This is increasingly how mid-sized commercial installers are competing for larger jobs they couldn’t otherwise win on capex terms alone.
For installers working the warehouse and industrial-unit end of the market, PPA-ready proposals are becoming table stakes rather than a nice-to-have. Sites like solarpanelsforwarehouses.co.uk and solarpanelsforindustrialunits.co.uk are seeing rising search volume specifically around “no upfront cost” and PPA-style phrasing — a signal that commercial energy buyers are actively searching for the funding mechanism, not just the technology.
Margin implications for installers — the part that actually affects your business
This is where PPAs get more complicated for installers than the marketing pitch suggests. Three things change compared with a straight capex install:
1. You’re usually paid as an EPC contractor, not as the asset owner. On a PPA-funded job you’re typically contracted by the investor to design, procure and install (an EPC — Engineering, Procurement, Construction — contract), then handed an O&M contract for the life of the asset. Your installation margin on a PPA-funded job is often tighter than a direct capex sale, because the investor is also pricing in their required return and the client’s below-market energy rate. You make it back — or should — on volume and on the long-tail O&M contract, which for a 15–25 year PPA term is genuinely valuable recurring revenue if you price it properly.
2. Payment terms are different. On a capex job you’re paid on completion (with stage payments along the way). On a PPA job, the investor is paying you, and investors move at investor speed — due diligence, legal review, funding drawdown schedules. Cashflow planning matters more; don’t quote PPA-funded jobs on the same payment assumptions as a direct client sale.
3. O&M becomes your long-term revenue, and you need to actually be good at it. A PPA investor cares about one thing above all else: generation performance over 20+ years, because that’s literally what they’re being paid for. If your O&M is patchy, underperformance eats directly into their return — and they will not send you the next job. This is a real opportunity for installers who take maintenance seriously rather than treating it as an afterthought; dedicated O&M specialists like solarmaintenancesolutions.com have built entire businesses around exactly this gap, and it’s a model worth studying if PPA-funded work is going to be a growing share of your pipeline.
There’s also a quieter margin effect worth flagging to clients: because the investor owns the asset, they — not the client — claim the Annual Investment Allowance and any capital allowances, and they receive the Smart Export Guarantee income from exported electricity (SEG rates vary by supplier, broadly in the 12–20p/kWh range at the top end in 2026, nowhere near a guaranteed flat national rate). None of that reaches the client under a PPA. It’s a fair trade for zero capex and zero risk, but it needs to be explained clearly — a prospect who assumes they’ll get SEG income on top of “free” solar will be disappointed, and that’s a conversation better had by you before the contract is signed than by the investor’s legal team afterwards.
Where PPAs make the most commercial sense right now
PPAs tend to work best for sites with high daytime electricity consumption relative to system size — warehouses running refrigeration or conveyor systems, factories running shift-pattern machinery, distribution centres, data halls, and larger office or retail portfolios where the finance team simply won’t approve capex for a non-core asset. Distribution and logistics operators in particular are a strong PPA fit because daytime load factors are high and multi-site portfolios give investors the scale they want for a single funding facility across several roofs.
Sites with low or seasonal daytime demand — a school open term-time only, for example — are generally weaker PPA candidates, because the investor’s return depends on the client actually consuming (or being paid a reasonable export rate for) most of what’s generated. That’s not a hard rule, but it’s the first filter worth applying before pitching a PPA structure over a lease or straight capex quote.
For UK installers, the practical takeaway is this: PPAs aren’t a threat to your installation business, they’re a route into deals that were never going to happen on capex terms. The businesses that will do well out of this shift are the ones who can talk fluently about all three funding routes, price EPC and O&M work properly rather than treating PPA jobs as capex jobs with a different paymaster, and build the long-term maintenance relationships that make investors want to fund their next site too. For a fuller picture of what commercial systems cost across different building types and how that maps onto financing decisions, thecostofsolar.co.uk’s commercial solar panel cost guide is a useful companion read alongside this one.