Funding your Commercial Solar installation: Capex vs. Power Purchase Agreements

When every pound is being watched and scrutinised, it’s easy to assume Solar is a luxury your budget cannot stretch to. But you don’t need a big upfront cheque to be able to deploy Solar. 

With a Power Purchase Agreement (PPA), you can move ahead with your new Solar installation with no upfront costs. It locks in a predictable price over the lifetime of your contract, and protects your organisation from grid price swings. 

How do Power Purchase Agreements (PPAs) work? 

• You pay £0 upfront – no capital expenditure is needed at all
• Our in-house team finances, designs and installs a new Solar system on your site
• We sell you the electricity it produces at a fixed rate, usually over a 10, 15, 20 or 25 year contract
• Throughout the term, we’ll be responsible for all maintenance, monitoring, and asset management. 

What are the benefits of PPAs? 

• No capex required: No upfront capital, no new debt, and often the PPA payments can be treated as operating expenses, preserving borrowing capacity for your core business investments
• Immediate cost savings: The PPA tariff is set below your current grid tariff and indexed against inflation, so you start saving money from day one and long-term price predictability
• Risk-free performance: You avoid technology risk, and we handle maintenance and monitoring. An ideal approach for businesses who don’t want the responsibility of Solar ownership
• Commercial simplicity: We pay for the installation from our own cash reserves. There are no complex multi-party arrangements, and you get a single, accountable partner and a seamless experience
• Operational expertise: Our experts handle development, construction, and long-term asset management. You just receive a regular bill for the Solar energy generated 

Financing your Solar installation with Capex vs. a PPA 

If a PPA isn’t right for your business, you could choose to directly fund the installation from your own cash. This is an ideal approach for cash-rich organisations with sustainability mandates, as it converts your capital into a 30+ year stream of cost savings. 

How does it compare to purchase the Solar installation directly, vs. funding it with a PPA? 

If capital is available and ROI requirements are met, direct investment can deliver strong value. If capital is tight or priorities lie elsewhere, a PPA allows you to reap the benefits of Solar with no hit to the balance sheet. These two approaches are not mutually exclusive either; some companies opt for a hybrid approach. They pay for part of the system themselves and use a PPA for the rest. 

Whichever option you choose, it’s clear that Commercial Solar is more accessible than ever – no matter your financial situation.