For businesses looking to reduce energy costs and become more sustainable, installing solar panels can be an attractive long-term investment. But there is an important decision to make before moving forward: should you buy a solar PV system outright, or could a Commercial Solar Power Purchase Agreement (PPA) be a better option?
While purchasing a solar system gives your business ownership of the equipment, a Solar PPA can allow you to benefit from solar-generated electricity without the significant upfront investment of purchasing and installing the system yourself.
For many businesses, this can make a PPA a particularly attractive way to start using renewable energy while keeping capital available for other areas of the business.
What Is a Commercial Solar PPA?
A Commercial Solar PPA is a long-term agreement between a business and a solar provider.
Under a PPA, the solar provider typically arranges the installation and ongoing maintenance of the solar PV system. Your business then purchases the electricity generated by the solar panels at an agreed rate.
This means your business can benefit from solar power without necessarily having to purchase the solar installation outright.
Instead of making a large capital investment in solar equipment, you can potentially use your available funds for other business priorities while paying for the electricity your solar system generates.
What Does Buying Solar Panels Outright Involve?
When a business purchases a solar PV system, it generally pays for the equipment and installation itself.
The business then owns the system and is responsible for the associated costs of maintaining it throughout its operational life.
There can be significant long-term benefits to owning a solar system, particularly for businesses that have the capital available and want to make a substantial upfront investment in renewable energy.
However, the initial cost can be a major consideration.
Commercial solar installations can involve costs for:
- Solar panels
- Inverters
- Mounting systems
- Electrical equipment
- Installation
- Structural assessments
- Ongoing maintenance
- Repairs and replacement equipment
For some businesses, committing a significant amount of capital to a solar installation may not be the preferred approach.
Solar PPA vs Buying Solar: What’s the Difference?
The biggest difference is how the solar system is financed and paid for.
With an outright purchase, your business pays for the solar system and owns the equipment.
With a PPA, the solar provider arranges the investment in the system, while your business purchases the electricity generated by the panels.
This can make a PPA an appealing option for businesses that want the benefits of solar without taking on the full upfront cost.
| Commercial Solar PPA | Buying Solar Outright | |
|---|---|---|
| Upfront investment | Potentially little or no upfront capital investment | Significant upfront investment |
| Solar system ownership | Typically remains with the provider during the agreement | Business owns the system |
| Maintenance | Typically managed by the provider | Business is responsible |
| Electricity | Purchased under the PPA agreement | Generated electricity is owned by the business |
| Capital requirements | Lower initial capital requirement | Higher initial capital requirement |
| Contract | Long-term agreement | No PPA contract required |
| Long-term ownership | Depends on the agreement | Business owns the system |
Specific terms vary between providers and individual projects. For Sunpower Services specific information, find out more here.
Why Could a Solar PPA Be More Attractive for Your Business?
1. No Large Upfront Solar Investment
One of the biggest advantages of a PPA is that your business may not need to fund the full cost of installing a commercial solar system.
Instead of putting a large amount of capital into solar equipment, a PPA can allow you to access solar-generated electricity while preserving your cash for other areas of the business.
For companies looking to invest in growth, equipment, staff or other operational priorities, this can be a significant advantage.
2. Start Benefiting From Solar Without Owning the System
A common misconception is that a business needs to purchase solar panels to benefit from solar energy.
A PPA provides another route.
The solar provider can arrange the installation of the system, while your business uses the electricity generated on site.
This allows your business to move towards renewable energy without taking on the same level of capital expenditure associated with buying the system outright.
3. Reduce Your Reliance on Grid Electricity
Solar panels generate electricity on your premises, allowing your business to use renewable electricity directly where it is produced.
For businesses with substantial daytime electricity consumption, this can provide an opportunity to reduce reliance on electricity purchased from the grid.
The amount of electricity generated will depend on factors such as the size and orientation of the solar installation, local conditions and your property’s suitability.
4. Potentially Improve Energy Cost Predictability
Energy prices can be difficult for businesses to predict.
A Solar PPA can provide an agreed price for the electricity generated by the solar system, helping businesses gain greater visibility over the cost of their solar-generated electricity.
The precise pricing structure will depend on the terms of the individual PPA.
5. Maintenance Can Be Taken Care Of
With an outright solar purchase, responsibility for maintaining the system ultimately sits with the business.
With a PPA, the solar provider will typically remain responsible for maintaining the solar installation throughout the agreement.
This can remove some of the practical responsibilities associated with owning a commercial solar system.
6. Support Your Sustainability Strategy
Businesses are under increasing pressure to demonstrate progress towards reducing their environmental impact.
A Solar PPA can help businesses generate renewable electricity on site and reduce their reliance on grid electricity.
For companies with sustainability targets, environmental commitments or supply-chain requirements, this can form an important part of a wider carbon reduction strategy.
Is Buying Solar Ever Better Than a PPA?
Yes.
Buying a solar system outright can make sense for businesses that have the capital available and want to own the installation themselves.
Once the initial investment has been made, the business owns the system and can benefit from the electricity it generates.
However, the key question is whether your business wants to invest capital in owning solar equipment, or whether it would prefer to access solar power without making the same upfront investment.
For many businesses, particularly those that want to preserve capital, a PPA can be an attractive alternative.
Why a PPA Could Make Sense for Your Business
A Commercial Solar PPA can be particularly appealing if your business:
- Wants to move towards renewable energy
- Has a large commercial or industrial roof
- Uses significant amounts of electricity during the day
- Wants to avoid a substantial upfront investment in solar
- Wants to preserve capital for other business priorities
- Would prefer the solar provider to manage the system
- Wants greater visibility over the cost of solar-generated electricity
- Has long-term plans for its current premises
Rather than asking your business to make a significant upfront investment, a PPA can provide a way to start benefiting from solar-generated electricity while spreading the arrangement over a longer contract period.
How Long Does a Commercial Solar PPA Last?
Solar PPAs are generally long-term agreements.
At SunPower Services, a minimum contract period of 10 years is required, with longer agreements potentially allowing for a lower electricity price.
The exact terms will depend on the individual project and the suitability of the property.
Because a PPA is a long-term commitment, it is important to understand the agreement fully before proceeding.
Is Your Business Suitable for a Solar PPA?
Before a Solar PPA can be considered, your property needs to meet certain suitability requirements.
Generally, we look for:
- A solid roof construction, such as profile metal cladding
- More than 20 years of remaining roof life
- A roof broadly facing south, with south-east to south-west generally acceptable
- No or minimal roof protrusions, such as chimneys, flues or ducts
- No or minimal shading from trees or surrounding buildings
- A property located in England or Wales
- A property that is not a listed building
- A property that is not in a conservation area
- A business that has control over the ability to install solar panels on the roof
- A suitable existing electricity supply, ideally a minimum of 100 amps, three-phase
- No existing solar panels connected to the same electricity supply
- Suitable internal wall space for wall-mounted inverters
- Ideally, no roof lights, or roof lights covering no more than approximately 20% of the roof area
Meeting these requirements does not guarantee that a site will be suitable. A full assessment is required before a project can proceed.
Commercial Solar PPA: A Smarter Way to Access Solar?
There is no single solution that is right for every business.
However, if your priority is to benefit from renewable electricity without committing significant capital to purchasing a solar system, a Commercial Solar PPA could be a particularly attractive option.
You can potentially make use of your existing roof space, generate renewable electricity on site, reduce reliance on grid electricity and support your sustainability objectives, without taking on the full upfront cost of purchasing the solar installation.
For businesses looking for a practical route to commercial solar, a PPA is certainly worth considering.
Find Out If Your Business Could Be Suitable
Think your business could be suitable for a Solar PPA?
Contact Sunpower Services to discuss your property and energy requirements.
Alternatively:
Email: mail@sunpowerservices.co.uk
Call: 01634 295354
Our team can assess your requirements and determine whether your property could be suitable for a Commercial Solar PPA.