What is a solar Power Purchase Agreement?
A Power Purchase Agreement, or PPA, is how a business gets solar on its roof without paying for the system. Someone else funds and owns it. You buy the power it produces, at an agreed rate, for an agreed period.
How it actually works
An energy investor pays for the system, has it installed on your roof and retains ownership of it. You do not buy the equipment and you do not take on a loan. What you sign is an agreement to buy the electricity that system generates, at a rate set out in the contract, for the length of the term.
Because that rate is typically below what your supplier charges, the arrangement reduces your bill from the point the system switches on. You continue buying the rest of your electricity from the grid exactly as you do now. Solar sits alongside your existing supply rather than replacing it.
The investor makes their return over the long term by selling you that power. That is the answer to the reasonable question of where the catch is. There is a commercial motive on the other side of the table, and it is a straightforward one.
Terms, and what to check
UK solar PPAs commonly run somewhere between 10 and 25 years. Two things in any agreement deserve close reading before you sign, and we would tell you the same thing whether or not we were involved:
- The length of the term, and what your options are if the site changes hands or your occupation of it ends.
- How the price changes over time. Most agreements include an annual adjustment, and the basis for it matters over a period this long.
These are contract specifics rather than generalities, so the honest answer is that they are established on a call with the funder against your actual site, not read off a website.
PPA compared with buying outright
Buying the system outright means capital up front and a payback period, after which the electricity is effectively free for the remaining life of the equipment. It produces a better lifetime return for a business that has the capital available and wants to deploy it this way.
A PPA produces no capital requirement and an immediate reduction in unit cost, at the expense of that longer-term upside during the term. Neither is universally right. Which one suits depends on whether the capital exists, what else it could be doing, and how long you expect to occupy the building.
Where a site is too small for a funded agreement to be viable, buying outright often still stacks up. That is worth knowing rather than treating a declined PPA as the end of the conversation.
What happens at the end
At the end of the agreement, rights and title to the system pass to you. You own it outright, and the electricity it carries on generating from that point costs you nothing. Commercial panels typically continue producing well beyond the length of a PPA term, at gradually reducing output.
Maintenance and monitoring
Under a funded agreement, maintaining, monitoring and insuring the system sits with its owner rather than with you. That includes cleaning and repair. It is one of the practical differences from ownership that tends to get overlooked in a straight cost comparison.
Who a solar PPA suits
Funded agreements work best for established businesses occupying a building with substantial roof area and meaningful daytime electricity use. In practice that means warehousing and distribution, manufacturing and industrial sites, schools and academies, care homes, hotels, retail estates and commercial landlords. The common thread is not the sector but the shape of the building and the load underneath it.
There is a practical minimum system size below which a funded agreement stops working for the investor, which is why smaller sites are sometimes better served by purchasing outright. We would tell you which category you fall into before anything else happens.
Where Hawthorne fits
We are an introducer. We assess your site, model what is achievable and handle the commercial side, then introduce you to an accredited funding and installation partner who designs, installs and maintains the system. There is no cost to you for our involvement, at any stage.
Related reading
- Solar PPA vs buying outright, compared
- PPA terms: length, price escalation and exit
- What does a solar PPA cost?
- Solar for warehouses and distribution centres
- Solar for manufacturing businesses
- Solar for schools and academies
- Solar for care homes
- Common questions about fully funded commercial solar
The first step
A free desktop assessment. We use your site address and a recent electricity bill to model what your roof could produce and what it could be worth. No site visit, no cost, no obligation.
Common questions
Is a PPA a loan?
No. There is no borrowing and no repayment schedule. You are buying electricity at an agreed rate, not paying off the cost of equipment. The system belongs to the investor until title passes to you at the end of the term.
What if we sell the building or move out?
Agreements deal with this, usually by the arrangement transferring with the site to the new occupier or owner. The specifics vary by contract, which is exactly why the term and exit provisions are worth reading closely before signing.
Does the rate we pay stay the same for 20 years?
Most agreements include an annual adjustment rather than a flat rate for the whole term. The funding partner publishes an RPI-linked increase as its standard. Confirm the basis and any cap in the agreement you are offered.
Is our site too small for a PPA?
Possibly, and it costs nothing to find out. There is a practical minimum below which funded agreements stop being viable for the investor. Where that is the case, purchase often still works, and we would tell you so.