Funded solar or capital purchase: how to decide

Capital purchase

You buy and own the system. Every generated unit is yours, so you capture the full avoided import cost plus any export revenue, and the asset keeps producing long after payback. For qualifying UK businesses, capital allowances improve the post-tax position further.

In exchange you carry the capital outlay, the performance risk and the maintenance obligation, though the last of those is small and contractible.

Funded power purchase agreements

A funder installs and owns the system on your roof and sells you the generated electricity, usually at a rate below your import cost with a defined annual escalator. There is no capital outlay and performance risk sits with the funder.

The trade-off is that the funder takes the margin between the generation cost and the price you pay, for the full term. Terms typically run fifteen to twenty-five years, and roof access, assignment on sale of the building, and end-of-term options all need reading carefully.

The comparison that matters

Model both on the same consumption data, over the same period, in cash terms. Compare total electricity cost under each scenario rather than headline payback, because a PPA has no payback to quote and a capital scheme's payback ignores what happens in years eleven to twenty-five.

As a rule of thumb, capital purchase wins on lifetime value where funds are available and the building is held long term. A PPA wins where capital is genuinely constrained or better deployed in the core business.

Questions to ask before signing either

What happens if you sell the building? Who owns the export revenue? What are the performance guarantees and how are shortfalls compensated? Who is responsible if the roof needs work during the term? A good funder answers all four without hesitation.