UK solar leasing — May 2026

Commercial solar leasing UK — PPAs, operating leases, asset finance compared.

Three commercial solar leasing structures in the UK in 2026. Each suits different business circumstances. The right answer depends on capex constraints, accounting treatment, building tenure and how Full Expensing fits.

The three UK solar leasing structures

1. Power Purchase Agreement (PPA)

Third-party funder pays for and owns the solar asset. You sign a long-term contract (typically 15-25 years) to buy the electricity at a fixed pence/kWh, typically 6-9p below grid prices. Zero capex from your business. The funder claims Full Expensing on the asset and recovers capital through the off-take payments. Dominant in UK commercial solar above 250kWp. Full PPA guide.

2. Operating lease

Third party owns the asset; you make fixed monthly payments to use it. Typically 5-15 year terms. Less common in UK commercial solar than PPAs but used in some retail/SME contexts where simpler accounting is preferred. Under IFRS 16, operating leases now appear on balance sheet as right-of-use assets.

3. Asset finance / hire purchase

You make fixed monthly payments over 5-7 years and own the asset at the end. Effectively a loan secured against the solar asset. You can claim Full Expensing because you own the asset (or have a strong claim to ownership). Common in UK commercial solar 50-250kWp range where the project is too small for a PPA but capex is unwelcome.

Which leasing structure suits which business

Use a PPA when

15+ year horizon at the site
Site demand 100,000+ kWh/year
Stable tenant covenant (PPA funder needs assurance)
Roof or ground available for unobstructed PV array (>250kWp typical)
Capex constraints or capital allocation preferences favouring opex over capex

Use asset finance when

Project size 50-250kWp (PPA transaction costs disproportionate)
You want to own the asset and claim Full Expensing yourself
5-7 year horizon is acceptable
You\'re comfortable with on-balance-sheet treatment

Use cash + Full Expensing when

You can fund capex from reserves
You want to maximise long-term IRR (best post-25-year economics)
You have engineering capacity to manage the asset

Worked example — same project, three structures

A 500kWp commercial solar project at £350,000 turnkey, against grid imports at 22.3p/kWh:

Cash + Full Expensing

Capex: £350,000
Full Expensing tax saving: £87,500 (25%)
0% VAT applied
Net cost: £262,500
Annual savings: £85,000
Payback: 3.1 years
25-year cumulative savings: £2.6m

PPA (5.9p/kWh tariff, 25-year term, CPI escalator)

Capex: £0
Year 1 PPA payments: £36,000 (against grid imports of £85,000)
Year 1 savings: £49,000
25-year cumulative net savings: £1.6m (after CPI-escalated PPA payments)
Asset transfers to operator at £1 at end of term

Asset finance (7-year hire purchase, 6% effective)

Capex: £0 upfront; £4,750/month for 84 months = £399,000 total
Full Expensing tax saving: £87,500 (over the asset life, claimed as you own the asset)
Effective net cost: £311,500
Annual savings (year 1): £85,000 — exceeds annual finance cost (£57,000)
Net cash flow positive from year 1
25-year cumulative savings (post-finance term): £2.0m

Selling solar back to the grid — separate from leasing

Whichever leasing structure you choose, the solar generation that exceeds your self-consumption gets sold back to the grid via the Smart Export Guarantee. Under PPA, the SEG revenue accrues to the funder (not you). Under operating lease and asset finance, SEG revenue is yours. The right SEG tariff is a separate decision — see SEG tariff comparison.

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Solar leasing FAQs

Can UK businesses lease solar panels?

Yes, three structures are commonly used. (1) Power Purchase Agreement — third-party investor owns the asset, you buy the electricity at a fixed pence/kWh. Zero capex, 15-25 year terms. (2) Operating lease — third party owns the asset, you make fixed monthly payments to use it. 5-15 year terms typically. (3) Asset finance / hire purchase — you make fixed monthly payments and own the asset at the end. 5-7 year terms typically. Each suits different business circumstances.

What's the difference between leasing solar and a PPA?

A PPA is technically a leasing structure where you pay for the electricity (kWh consumed) rather than the asset itself. Operating leases pay for the asset (fixed monthly), regardless of generation. Asset finance pays for the asset (fixed monthly) and you own it at the end. PPAs are dominant in UK commercial solar above 250kWp because of the regulatory and tax structuring; asset finance is more common at smaller scales.

Can I lease solar without changing accounting treatment?

Depends on the structure and your accounting standard. Under IFRS 16, most operating leases now appear on balance sheet as right-of-use assets — including some PPAs that contain a leased asset. Asset finance is unambiguously on balance sheet. PPAs that explicitly purchase electricity (not capacity) and give the funder operational control of the asset usually keep off balance sheet. Listed companies must take audit advice before signing any leasing structure.

How much does it cost to lease commercial solar in 2026?

For PPAs on UK commercial solar 250kWp+: tariff economics 5.4-7.5p/kWh — typically 6-9p below grid prices. For operating leases: typically £8-£15/kWh of installed capacity per month, with the lease covering 5-15 years. For asset finance / hire purchase: typically 5-7 year terms with fixed monthly payments at 4-7% effective interest.

Can a leased solar system claim Full Expensing?

No — Full Expensing requires you to own the asset. Under PPA or operating lease, the funder owns the asset and claims Full Expensing on its own corporation tax return. Under asset finance / hire purchase, you typically own the asset (or have a strong claim to ownership) and can claim Full Expensing. The choice between leasing structures should account for the value of who claims Full Expensing.

Selling a building with leased solar panels — what happens?

Depends on the leasing structure. Under a PPA with a long-term roof lease, the new building owner typically inherits the roof lease and PPA off-take obligation — this can constrain the sale or affect the price. Under asset finance with you as owner, you can sell the building with the solar asset transferring to the buyer (capital allowances transfer too). Always check the early termination / buyout terms before signing any lease. Most PPAs include buyout schedules from year 7 or 10.