Are Solar Panels Better Funded via a PPA?

A Power Purchase Agreement (PPA) can be a strong funding option for commercial solar installations, but whether it’s “better” depends on your organisation’s goals, tax appetite and capital strategy.

Why PPAs are Often Considered Better for Commercial Solar:

PPAs are popular because they remove most or all up-front costs and shift financial/operational responsibility to the solar installer. Therefore:

1. No Up-Front Capital Required

Businesses avoid the large Capex of buying a system.This is especially attractive for organisations which prefer to conserve capital for core operations.

2. Immediate Savings on Electricity

The business buys power at a pre-agreed rate (usually lower than the utility rate), generating savings from day one.

3. No Performance or Maintenance Risk

The installer owns, operates, and maintains the system - if it underperforms, it’s their problem.

4. Long-Term Price Predictability

PPA rates usually increase at a predictable (and often small) escalation, protecting against rising utility prices.

When a PPA might not be better:

A PPA is not always the optimal funding route.

1. Companies with a Strong Tax Appetite

If your organisation can use Accelerated Capital Allowances, owning your solar installation may be the most tax efficient approach.

2. Contract Complexity

PPAs are long-term (often 15–25 years) and involve detailed legal, long term agreements.

3. Restrictions on Property and Building Use

If you expect to relocate, sell the property, or significantly renovate, a PPA’s long-term structure can limit flexibility.

To Sum-Up:

• If you want zero capital expenditure, minimal risk, and stable long-term power pricing an commercial solar installation via PPA is often the best option.

• If you can use tax incentives direct ownership may be better.