Compare commercial solar funding options: buy vs lease vs PPA
What’s the best way to fund your solar project? Here’s the full comparison to help you decide.
One of the most important yet under-estimated and often misunderstood parts of a commercial solar project is how it’s funded.
There are three main routes:
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Buy (with your own capital)
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Lease (via asset finance or hire purchase)
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Power purchase agreement (PPA)
Each one comes with unique pros, cons, risks, and benefits.
In this guide, we’ll compare all three side by side to help you answer the question of what the best way is to fund renewable energy for your business without compromising cash flow or long-term return.
Along the way, we’ll also address key questions like:
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Buying solar panels vs PPA: which is better?
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Should I lease solar panels or go with hire purchase?
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What’s the difference between solar PPA vs buy or asset lease?
We’ve written this guide to help you make the right decision with clarity and confidence.
Quick comparison table: buy vs lease vs PPA
Feature | Buy (Capex) | Lease/ hire purchase | PPA |
|---|---|---|---|
Upfront cost | 100% capital investment | £0 for lease agreements or the cost of the VAT for hire purchase agreements | £0 |
Ownership | You own from day one | Own at end (HP) / Optional (Lease) | Third party owns |
Balance sheet impact | On balance sheet | HP: on balance sheet. Lease: off (in many cases) | Usually off balance sheet |
VAT treatment | Pay upfront | HP: upfront. Lease: monthly | No VAT on your side |
Cash flow | Negative at start, positive later | Cash positive or neutral | Cash positive from day one |
Energy savings | 100% of generated energy | 100% after finance term concludes | You buy generated energy at discounted rate |
Best for | Businesses with Capex and long-term horizon | Businesses with cash flow sensitivity but want ownership | Businesses with no Capex and low risk appetite |
Option 1: buying solar panels (Capex)
Option 2: leasing solar panels or hire purchase (asset finance)
This structure allows you to pay over time either through hire purchase, where you’ll own the asset at the end, or asset lease, where ownership is optional.
Pros:
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No (or low) upfront costs
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Access to energy savings from day one
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Flexible VAT and accounting treatment
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Works for many SME or mid-market businesses
Cons:
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Finance costs reduce net ROI vs upfront purchase
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You may not own the asset (in lease scenarios)
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Requires finance approval
Option 3: power purchase agreement (PPA)
Under a PPA, a funder installs and owns the system. You simply buy the electricity it generates at a lower rate than your current supplier with no Capex or lease involved.
Pros:
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Zero upfront cost
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Discounted energy vs grid prices
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Maintenance included
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No VAT impact
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Off-balance sheet (subject to accounting method)
Cons:
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You don’t own the system
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Savings are smaller than ownership models
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Long-term agreement (usually 15–25 years)
Which funding route is right for you?
Ask yourself:
1. Do we have capex to deploy?
If yes, consider outright purchase
2. Do we want long-term ownership but preserve cash now?
If yes, consider hire purchase
3. Do we want off-balance-sheet financing with low risk?
If yes, consider lease or PPA
4. Is cash flow our #1 priority?
If yes, consider PPA
5. Do we want maximum long-term savings?
If yes, Any of the funding options could be relevant here. Ask us to model potential outcomes for you
Many clients come to us unsure. Our job is to show which route delivers the best ROI, funding fit, and commercial logic for your site and objectives.
We’re not installers or finance brokers. We’re commercial project advisors and our role is to help you:
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Select the right funding structure
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Maximise long-term savings
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Protect cash flow
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Make a business case your CFO will approve
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Get the project done without the usual roadblocks
Our methodology (The Optify Edge) has helped clients unlock 25–30% more savings than unoptimised routes without spending a penny upfront.
