What is a Solar PPA and is it right for your office building?

What a Solar PPA actually is

A Solar PPA (Power Purchase Agreement) is a contract under which a third-party developer installs solar PV at your office building at their cost, owns and operates the system, and sells you the electricity it generates at a discounted per-kWh rate over a long-term (typically 15-25 year) contract.

The customer commits to buying electricity from the system at the contractual rate. The PPA provider takes the system performance risk and operational responsibility. The customer typically pays nothing upfront (zero capex) and is cash-flow positive from month one.

In essence, a PPA converts solar from a capex investment into an opex line item.

How the numbers work

A typical UK office solar PPA in 2026:

PPA tariff: 10-13p/kWh for self-consumed electricity (versus 28-32p/kWh grid retail)
Tariff escalation: Either fixed (3% annual) or RPI-linked
Contract length: 15-25 years (occasionally up to 30)
Performance risk: PPA provider bears underperformance vs PVSyst model
Maintenance: Fully included by PPA provider
Roof rights: PPA provider has exclusive PV roof use for contract term
Exit: Buy-out at present value of remaining contract payments, or transfer with building sale

For a 400 kWp office system generating 368,000 kWh/year at 78% self-consumption (287,000 kWh self-used), the customer typically saves £45-60k/year on grid electricity costs while paying £29-37k/year to the PPA provider — net positive £18-25k/year from day one with zero capex outlay.

When PPAs win

Three situations where PPAs clearly outperform cash purchase, asset finance, or operating lease:

1. Capex-constrained organisations. Where the customer cannot or will not commit £200k+ of capex, PPA enables solar deployment that would otherwise not happen.

2. Multi-let landlords. Where the building has multiple tenants with varied lease terms and complex service-charge structures, PPA simplifies cost-recovery — the PPA provider sells electricity directly to tenants under sleeve PPA arrangements.

3. Off-balance-sheet preference. Under IFRS 16, most leases now go on balance sheet, but PPAs structured as electricity supply contracts can remain off-balance-sheet. For some businesses (particularly those with restrictive borrowing covenants), this matters.

When PPAs lose

Three situations where alternative funding routes outperform PPA:

1. Long-tenure owner-occupiers with capex available. Cash purchase delivers 25-year NPV roughly 2× the PPA equivalent because the customer captures full electricity savings rather than splitting with the PPA provider.

2. Strong covenant SMEs with asset finance access. Asset finance at 6-8% APR over 7 years typically delivers higher 25-year NPV than PPA because the customer owns the asset after the financing term.

3. Short remaining lease tenants. Sub-7 year lease tenants generally cannot make PPA work — the long-term commitment doesn’t fit the short-term occupancy.

The exit problem

The single biggest PPA risk is exit. Three scenarios:

Building sale. PPA must transfer to the new owner or be bought out by the seller. Buy-out typically requires paying the PV provider the present value of remaining PPA payments — often £80-£200k on a system in year 5 of a 20-year PPA. This can affect building sale price.

Tenant move-out. Tenants on sleeve PPA arrangements need novation provisions allowing PPA transfer to the next tenant. If the building stands vacant, the landlord typically becomes the PPA counterparty by default.

PPA provider failure. PPA providers occasionally go out of business. The PV asset typically continues operating (the customer keeps buying electricity at PPA rates from whoever acquires the asset), but service quality may decline.

We model exit scenarios specifically in PPA proposals — including the present-value buy-out calculation at multiple year-of-exit assumptions.

What we do

We work with the major UK commercial solar PPA providers (Aggreko, Atrato Onsite, Custom Power, Hive Energy, Lightsource bp) and can structure PPA proposals across all of them.

For every PPA proposal, we model:

25-year cash flow under PPA vs cash purchase, asset finance, and operating lease
Exit scenarios at years 3, 5, 7, 10, 15
Tenant cost-recovery implications (for multi-let buildings)
Sleeve PPA vs landlord PPA legal structures

The PPA route wins on net call for roughly 30% of office solar customers we model. The rest are better served by cash, asset finance, or operating lease structures — and we recommend accordingly rather than push the PPA option where it doesn’t fit.

Request a feasibility study with PPA and alternative funding modelling.