Solar PPA vs asset finance vs cash — what works best for office buildings

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.