PPA vs. Equipment Finance vs. Do Nothing: Which Solar Option Is Right for Your Business?
A question I hear a lot:
"Why would anyone do equipment finance when they could just do a PPA?"
It's a fair question. On the surface, PPAs seem like the obvious choice. You don't put up capital. You don't take on debt. You just sign a contract and the provider handles everything.
But here's the thing: PPAs aren't the only option.
And for a lot of businesses, they're not the best option.
Let me break down the three choices you actually have.
Option 1: Do Nothing
Let's start here because it's the most honest option. If you can't afford to buy solar outright, and you don't want to take on debt, and you don't want a 25-year commitment, then the answer is: do nothing.
Your solar stays on the shelf. Your electricity costs stay high. You don't get the benefits.
This is a valid choice. It's just not a good one.
Option 2: PPA (Power Purchase Agreement)
A PPA is essentially a 25-year electricity contract.
Here's how it works:
The PPA provider owns the solar panels. They install them on your roof. You pay them for the electricity they generate. You pay less per kWh than you'd pay the grid. Typically 15-20% cheaper.
After 25 years, the contract ends.
The provider removes the panels.
You're back where you started.
The advantages of a PPA:
- Zero upfront capital required
- Zero debt on your balance sheet
- The provider maintains the system
- The provider guarantees performance
- You get an immediate electricity discount
The real costs of a PPA:
- You're locked in for 25 years
- You never own the asset
- You can't get out early (or if you do, you pay a penalty)
- You don't capture tax benefits (the provider does)
- If your business changes, the PPA is a complication
- You're essentially buying your own power for 25 years at a fixed rate
That last point is worth thinking about. A PPA isn't free electricity. It's a 25-year power purchase contract at a fixed rate. You're locked into that rate for a quarter-century.
Here's something interesting about that 25-year commitment:
Solar PPAs were invented in 2006. That's 20 years ago. Think about that for a moment. In 2006, solar panel efficiency was around 12-14%. Today, it's 18-22%. That's a 40-50% improvement in technology in just two decades.
In 2006, solar companies like SunEdison and MMA Renewable Ventures were just starting out. Today, those companies have evolved. Some have merged. Some have gone out of business.
The solar industry has changed dramatically.
But if you signed a PPA in 2006, you'd still be locked in today. You'd be paying a 2006 rate for 2006 technology. And you'd have another 5 years left on your contract.
Now think about what happens in the next 5 years. Solar technology will improve again. Costs will drop again. New options will emerge. But you'll still be locked in.
That's the real problem with a 25-year commitment. You're betting that nothing will change for a quarter-century. And we know that's not how technology works.
When a PPA makes sense:
- You want zero capex and zero debt
- You're not planning to move or change your business significantly
- You want someone else to handle maintenance
- You value simplicity over ownership
- You're comfortable with a 25-year commitment to a fixed rate
When a PPA doesn't make sense:
- Your business is growing and you might relocate
- You want to own the asset
- You want to capture tax benefits
- You want to combine multiple technologies (solar + batteries + LED)
- You want flexibility to refinance or restructure later
- You want to benefit from technology improvements over time
Option 3: The Project Approval Model™ (Our Model)
This is where it gets interesting.
The Project Approval Model™ means you finance the solar over 5-7 years. You own the asset. You repay the loan. When the loan is paid off, you own the solar outright.
Here's how it works:
You get a quote from an installer. £200k for a solar array. You can't afford capex. So instead of a PPA, you finance it.
We structure the finance around the project's payback period. The solar saves you £4,000 a month in electricity costs. We structure the loan so your repayment is aligned with those savings.
You own the asset from day one.
You capture the capital allowances. You can combine it with other technologies (batteries, LED, heat pump) into one agreement.
After 5-7 years, the loan is paid off.
You own the solar outright. For the next 15-18 years, you get free electricity.
The advantages of equipment finance:
- You own the asset
- You capture tax benefits (capital allowances, business rates exemption)
- You build equity
- You can combine multiple technologies
- You can refinance or restructure if needed
- After 5-7 years, you get free electricity for the next 15-18 years
- You have flexibility if your business changes
- You can sell or leverage the asset
- You benefit from technology improvements (if you want to upgrade later)
The real costs of equipment finance:
- You take on debt (but it's structured around your savings)
- You're responsible for maintenance (but it's cheap and predictable)
- You need to qualify for the loan (but based on your creditworthiness, not the asset)
- You need to be comfortable with a 5-7 year commitment (not 25 years)
When equipment finance makes sense:
- You want to own the asset
- You want to capture tax benefits
- You want flexibility
- Your business might change (relocate, expand, sell)
- You want to combine multiple technologies
- You want to build equity
- You're comfortable with a 5-7 year commitment
When equipment finance doesn't make sense:
- You absolutely don't want any debt
- You want zero involvement (maintenance, management)
- You want the provider to handle everything
- You're not comfortable with a 5-7 year commitment
The Real Comparison
Here's where most people get confused.
They think it's PPA or nothing.
But there's a third option.
Let me show you some possible trade-offs:
| Factor | Do Nothing | PPA | Project Approval Model |
| Upfront capital | £0 | £0 | £0 (financed) |
| Commitment period | N/A | 25 years | 5-7 years |
| Ownership | N/A | Provider owns | You own |
| Tax benefits | N/A | Provider captures | You capture |
| Electricity cost | Grid rate (25p+/kWh) | PPA rate (15-20% discount) | Your savings (after loan paid) |
| Flexibility | N/A | Locked in | Flexible |
| Maintenance | N/A | Provider handles | Your responsibility (cheap) |
| Long-term value | N/A | Provider benefits | You benefit |
| If business changes | N/A | Complicated | Easy |
| After commitment ends | N/A | Panels removed | You own free electricity |
Now here's the thing to notice: PPAs aren't cheaper. They're just different.
Assume:
- system value = £200k
- avoided electricity = £48k/year
- loan repayment = £36k/year for 7 years
- residual maintenance/inverter costs ignored for simplicity
Years 1–7
Net annual benefit:
- £48k avoided electricity
- minus £36k finance
= £12k/year net benefit
Over 7 years:
= £84k benefit
Years 8–25
Now system owned outright.
Assume:
- £48k avoided electricity annually
- modest degradation ignored
18 years:
= £864k gross benefit
Add first 7 years:
= £948k gross avoided electricity
Then:
subtract:
- original £200k asset cost
- maintenance
- inverter replacement
- finance interest
Over 25 years, ownership models can produce substantially greater long-term economic value because the business retains the asset and benefits from decades of electricity generation after the finance term ends.
The numbers are different because you own the asset.
But here's another angle:
Solar panels today are built to last 30-40 years. Modern panels degrade at only 0.5-0.8% per year. After 25 years, they still produce 87-92% of their original output.
So when a PPA ends after 25 years, the panels are still working. They're still generating electricity. They're still valuable.
At the end of many PPAs, the provider may remove the equipment unless alternative arrangements are agreed.
With equipment finance, you own those panels.
They keep generating electricity for you for another 10-15 years.
That's real value.
The 25-Year Question
Here's what I think is the biggest misconception about PPAs: that 25 years is a reasonable commitment.
It's not. Not anymore.
When PPAs were invented in 2006, 25 years seemed like a reasonable timeframe. Solar technology was new. Nobody knew how long panels would last. The industry was uncertain.
But we know better now. Panels last 30-40 years. Technology improves every 5-10 years. The solar industry has matured. We have 20 years of real-world data.
A 25-year commitment in 2026 is different from a 25-year commitment in 2006. We have more certainty now. We know technology will improve. We know panels will last longer. We know the industry will evolve.
Locking yourself in for 25 years in 2026 is betting against progress. And that's a bad bet.
With equipment finance, you're locked in for 5-7 years. That's a reasonable timeframe. It aligns with the payback period. It gives you flexibility to adapt as technology improves.
What This Means For You
If you're considering solar, ask yourself these questions:
Do I want to own the asset?
If yes, equipment finance. If no, PPA.
Is my business stable or growing?
If growing or might relocate, equipment finance. If stable, either option works.
Do I want to capture tax benefits?
If yes, equipment finance. If no, PPA.
How long do I want to be committed?
If 5-7 years, equipment finance. If 25 years, PPA.
Do I want flexibility? If yes, equipment finance. If no, PPA.
Do I want to benefit from technology improvements? If yes, equipment finance. If no, PPA.
If most of your answers are "equipment finance," then that's probably your answer.
If most of your answers are "PPA," then that's probably your answer.
But don't assume PPA is the only option.
It's not.
And don't assume a 25-year commitment is reasonable.
It's not.
IN CLOSING
Are you considering solar right now?
If you're stuck between "PPA or nothing," there's a third option.
We finance commercial solar over 5-7 years so you own the asset, capture the tax benefits, and have flexibility. If you'd like to explore whether equipment finance makes sense for your business, get in touch.
We'll walk you through the trade-offs and help you decide what's right for you.
** Clearly, projects of this size are complex and every business has its own financial, operational, and technical considerations. The figures used here are deliberately simplified to illustrate general concepts, not to provide financial or tax advice.
Businesses should carry out their own due diligence, speak to qualified professionals, and weigh their options carefully before making any decision.