Four ways to fund office solar in 2026
For an office building considering solar PV, the funding decision usually matters more than the system specification. Get the funding wrong and a great system can sit on a poor commercial structure that delivers a fraction of its potential value to your business.
There are four routes, and each suits a different set of circumstances.
Cash purchase
The simplest structure. You buy the system outright, claim 100% Annual Investment Allowance in year one, and own the asset.
Best for: Owner-occupied offices, capex-comfortable balance sheets, organisations that want maximum long-term value.
Economics: Highest 25-year NPV. Highest IRR (typically 12-18% on UK office installations). Fastest simple payback (5-7 years). 100% AIA delivers an effective 25% cost reduction in year one for limited companies.
Watch outs: Ties up capex that could fund other strategic priorities. No off-balance-sheet treatment. If you sell the building before payback completes, system value is captured in sale price but at lower multiple than pure cash flow.
Asset finance
A 5-10 year secured loan against the system. Monthly payment is typically lower than the avoided electricity cost from day one — meaning the structure is cash-flow positive throughout the term.
Best for: Capex-constrained organisations with strong covenant, leased premises with 10+ year remaining term, organisations preferring not to depreciate capex.
Economics: Slightly lower NPV than cash (around 80-85%) due to finance interest. Cash-flow positive month one. Asset on balance sheet, depreciated over term. Owns asset at term end.
Watch outs: Interest costs reduce IRR. Some lenders require personal guarantees from directors on smaller SMEs. Early repayment penalties can be material.
Operating lease
Fixed monthly payment over 5-10 years. System reverts to lessor at term end (or you negotiate buy-out at residual value).
Best for: Organisations preferring off-balance-sheet treatment (IFRS 16 now puts most leases on balance sheet, but tax treatment can still favour leasing), shorter remaining lease terms, simpler accounting.
Economics: Lower NPV than cash or asset finance. Predictable cost. No residual asset value (or pay residual to keep).
Watch outs: No long-term ownership. Less attractive on 25-year horizon than ownership routes.
Power Purchase Agreement (PPA)
A third party — usually an independent power producer or solar developer — installs the system at their cost, owns and operates it, and sells you the electricity at a discounted per-kWh rate over a 15-25 year term.
Best for: Zero capex appetite, multi-let landlords looking for tenant cost-recovery without service-charge complexity, organisations wanting performance risk transferred to a specialist operator.
Economics: Lowest NPV (the PPA provider takes a return). Zero capex. Cash-flow positive day one. PPA tariff typically 30-50% below grid retail at start of contract, with annual escalation (RPI or fixed %) over term.
Watch outs: Long-term commitment. PPA provider has roof rights for full term — restricts other uses. Exit costs at break clauses can be material. Lender / buyer due diligence at building sale.
The decision framework
| Question | If yes → | If no → |
|---|---|---|
| Do you have £200k+ of available capex? | Cash | Skip to next |
| Do you want to own the system? | Cash or Asset finance | PPA |
| Is your lease >10 years remaining? | Cash / Asset finance | PPA or short Operating lease |
| Do you need cash-flow positive from month 1? | Asset finance / PPA | Cash |
| Is your balance sheet sensitive? | PPA | Any route |
| Do you want maximum 25-year value? | Cash | Asset finance |
Worked example
A 320 kWp installation on a multi-let London office. Total project cost: £288,000.
Cash route: Year 1: -£288k capex + £72k AIA tax saving = -£216k net. Years 2-25: £96k/year savings. Simple payback 4.5 years. 25-year cumulative cash benefit: £2.16m (undiscounted). IRR: 15.8%.
Asset finance (7-year term at 7.5% APR): Year 1: -£0 capex, monthly payment £4,470 = £53.6k/year. Savings £96k/year. Net cash flow positive £42.4k/year for 7 years, then £96k/year for 18 years. 25-year cumulative cash benefit: £2.0m. Effective IRR: 13.2%.
PPA (20-year term, 12p/kWh starting tariff vs 28p/kWh grid): Year 1: -£0 capex, savings = (28p - 12p) × 250,000 kWh self-consumed = £40k/year, plus £15k SEG revenue retained. 25-year cumulative: £1.4m. No exit value. IRR: not applicable (no capex).
Net call: Cash purchase delivers £760k more 25-year value than PPA but ties up £288k for 4.5 years. Asset finance delivers £600k more than PPA with no capex commitment. PPA delivers the lowest absolute return but is the only zero-capex, zero-balance-sheet route.
How we structure decisions
For every office solar proposal we deliver, we model all four funding routes side by side with full 25-year cash-flow projections. The customer picks on the basis of their specific cash position, lease length, balance sheet, and strategic priorities — not on the basis of which structure pays us the highest commission (we charge the same fee on any structure).
Request a free feasibility study with side-by-side funding modelling.