UK PPA guide — May 2026

Solar Power Purchase Agreements — zero-capex commercial solar in 2026.

A PPA is the most-used commercial solar funding mechanism in the UK by capacity. Third-party investor pays for and owns the PV; you buy the electricity at a fixed pence/kWh, typically 6-9p/kWh below grid prices. Zero capex, immediate cash savings. Now that direct grants like IETF and PSDS have closed to new applications, PPAs are even more central to the 2026 commercial solar funding stack.

How a UK commercial solar PPA actually works

The mechanic is simple but the contract is meaty. A typical structure:

The PPA funder (a specialist solar investor) agrees to fund the entire commercial solar project — design, install, DNO connection, commissioning. Typical projects 250kWp – 5MWp.
The funder takes a long-term roof or land lease from you (the site host) — typically 25 years at nominal rent (£1/year is common).
You sign a Power Purchase Agreement to buy the electricity the system generates at a fixed pence/kWh — typically 5.4-7.5p/kWh for projects 250kWp+. The rate may include an escalator (CPI/RPI/fixed).
The funder owns and maintains the asset for the term. You buy power as it's generated, on-site, behind your meter.
At the end of the term (or via earlier buyout), the asset typically transfers to you for £1 (or there's a short extension period).

The three negotiation points that matter most

1. Headline tariff

Year-1 pence/kWh you pay for the solar electricity. UK 2026 typical: 5.4-6.4p/kWh for investment-grade tenants on large projects, 6.0-7.5p/kWh for mid-sized projects. Compare against your current grid electricity rate (22-32p/kWh) — the saving is the main commercial benefit. Tariff economics vary 0.5-1.0p/kWh between PPA funders, so competitive tendering pays.

2. Tariff escalator

Annual rate increase. Three common structures:

RPI — the worst for you. RPI averaged ~3.8% over recent years.
CPI — better. CPI averages 1.5–2.5% in normal periods.
Fixed percentage — typically 2-3%. Predictable.

Over 25 years, the cumulative cost differential between RPI and CPI escalation is 18-22% on total off-take — material. Always negotiate to CPI or fixed-percentage caps.

3. Buyout schedule

Most PPAs allow you to buy the asset out from year 7 or year 10. Buyout values are typically 75-85% of fair market value at the buyout date, declining over time. If you might sell the building or significantly reorganise the site within the PPA term, the buyout schedule needs to be acceptable. Negotiate caps on the buyout multiple.

On-site vs sleeved off-site PPAs

Two structurally different products:

On-site PPA

Solar generated on your roof / land, connected behind your meter. Power flows directly to your loads with no grid charges in the path. Tariff economics: 5.4-7.5p/kWh. The dominant commercial PPA structure.

Sleeved off-site PPA

Solar generated at a remote ground-mount solar farm, contractually allocated to your supply via your electricity supplier. Power flows over the public network with normal grid charges. Tariff economics: 10-13p/kWh — weaker than on-site because no avoided distribution and transmission charges. Used for: listed Class A central offices, heritage buildings without on-site PV potential, multi-site groups consolidating renewable supply across an estate.

Which sites suit a PPA

The structural fit characteristics:

15+ year horizon at the site (most PPAs are 15-25 year terms)
Site demand of 100,000 kWh+ annually (smaller sites struggle on transaction costs)
Stable tenant covenant — funder needs assurance of the off-take counterparty
Roof or ground available for an unobstructed PV array (>250kWp typical for on-site)
Capex constraints or capital allocation preferences favouring opex over capex

Sites that don't suit PPAs:

Short-lease tenants without landlord engagement (PPAs need the building owner)
Sites with capacity to fund capex and capture 25-year savings outright (better long-term IRR)
Sites with significant operational uncertainty or planned divestment within 7-10 years

What we do for PPA clients

Three-stage scoping. (1) Pre-qualification: site demand, roof condition, lease tenure, covenant strength. We confirm whether a PPA is the right fit before any funder contact. (2) Funder shortlist: 2-4 PPA funders solicited based on project size and sector. We negotiate heads of terms covering tariff, escalator, buyout. (3) Documentation review: legal review of the PPA, roof lease, off-take agreement and ancillary documents. Closing typically 8-14 weeks from kickoff. The free funding review includes PPA shortlisting if appropriate for your site.

PPA FAQs

What is a solar Power Purchase Agreement?

A PPA is a long-term contract (typically 15-25 years) between a third-party investor (the funder) and a site host (your business). The funder pays for and owns the solar PV asset; you sign an off-take agreement to buy the electricity it generates at a fixed pence/kWh, typically 6-9p/kWh below grid prices. Zero capex from your business — the investor recovers their capital through the off-take payments over the term.

What are typical UK commercial solar PPA tariffs in 2026?

For investment-grade tenants on 1MW+ projects with 25-year terms, headline tariffs are 5.4–6.4p/kWh. For mid-sized projects (250–500kWp) with 20-year terms, 6.0–7.5p/kWh is typical. Smaller projects under 250kWp struggle on transaction cost — fewer funders compete, so tariffs rise to 7.5–10p/kWh. Compare against UK grid electricity rates of 22-32p/kWh in 2026 — the saving is substantial.

How does a PPA compare to buying solar outright?

PPA: zero capex, fixed pence/kWh for 15-25 years, no maintenance burden, but you don't own the asset and there's a tariff escalator (typically CPI 1.5-3%/year). Outright purchase: capex required (£540-£1,100 per kWp), Full Expensing recovers ~25% via tax, you own the asset and capture 100% of cost savings, but you bear maintenance and performance risk. For sites with capex constraints or 15+ year horizon and limited engineering capacity, PPAs win. For sites with capital and engineering capacity, ownership wins on long-term IRR.

What's the catch with a solar PPA?

Three things to watch. (1) The tariff escalator — most PPAs include 1.5-3% annual escalation, often linked to RPI or CPI. Over 25 years that compounds. (2) Exit terms — selling the building or vacating the site mid-PPA usually triggers a buyout. Make sure the buyout schedule is in your favour from year 7 onward. (3) IFRS 16 treatment for listed companies — some PPAs are now brought back on balance sheet as right-of-use assets. Take audit advice before signing.

What is a sleeved off-site PPA?

A structure where the solar generation happens at a remote site (typically a UK ground-mount solar farm) and is contractually "sleeved" through your electricity supplier into your supply. You pay the supplier for the sleeved volume at a contracted pence/kWh (typically 10-13p/kWh — higher than on-site PPAs because there are no avoided distribution and transmission charges). Used by listed Class A office buildings, heritage sites, and sites without on-site PV potential to claim renewable supply for ESG/BREEAM purposes.

Can a PPA be combined with grants?

Yes. The PPA funder can take a grant on your behalf and pass through a lower headline tariff. Common on Local Growth Fund projects where the host wants zero capex but wants the grant value reflected in the PPA rate. With IETF and PSDS now closed, this stacking opportunity is more limited — most 2026 PPAs run pure-private without grants.

Who are the major UK commercial solar PPA funders?

Atrato, NextEnergy Capital, Octopus Energy Generation, Foresight Group, Greencoat Capital UK, Bluefield Solar, JLL Ardent. Sub-segment specialists: Earthworm (rural and farm), Aurora Energy Research (energy specifics), and various corporate-led funds. Tariff economics vary 0.5-1.0p/kWh between funders — competitive tendering pays.

Free funding review

See which grants your business qualifies for — free 20-minute funding review.

Tell us your sector, roof size and energy spend. We come back within one working day with a shortlist of grants and the realistic capex you can expect to recover.

Start Funding Review Call 020 4525 6101

No obligation. We don't charge for grant scoping.