The question comes up in every serious solar conversation: is it better to fund the system ourselves or use a Power Purchase Agreement? It is the right question to ask, and the answer is not the same for every business.
The difference is in what each one costs your business, who carries the risk, and how long it takes to see a return.
The fundamental difference
When a business buys a solar system outright, it acquires a capital asset. The upfront cost sits on the balance sheet, the system is owned by the business, and all future performance risk – degradation, equipment failure, maintenance – sits there too. The long-term financial risk and return belongs entirely to the business.
When a business takes a PPA, it buys a service. UrbanVolt funds, installs, owns, and maintains the system. The business pays a fixed tariff for the electricity the system generates – 30 to 40% below the grid rate – from day one. There is no asset on the balance sheet and no performance risk to carry. The first cost your business sees is the first electricity bill.
The financial comparison
A business typically makes decisions on the economics of ownership versus a service contract. But the comparison is rarely that straightforward in practice, for three reasons.
Firstly, the upfront cost. A commercial rooftop system is a significant investment that has an opportunity cost – it is not available for other uses, and it needs to earn a return that justifies the investment relative to alternatives. For many businesses, that capital is better deployed elsewhere.
Second, the payback period. A solar system purchased outright typically has a payback that depends on the grid tariff, self-consumption rate, and system performance. During those years, the business is carrying the full maintenance and performance risk. If the system underperforms or requires significant repairs, payback extends.
Third, the accounting treatment. A purchased system is a capital asset. It sits on the balance sheet, is subject to depreciation, and affects capital ratios. A PPA is an operating expense – it sits on the P&L and has no balance sheet impact. For businesses with balance sheet constraints or a preference for keeping capital ratios clean, this is important.
When a PPA makes sense
A PPA makes the strongest commercial case when:
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- Capital is better deployed in the core business, or is simply not available for energy infrastructure
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- The finance team needs an operating expense rather than a capital line
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- The business is on a lease, making long-term capital investment in a building it does not own commercially difficult to justify
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- The business wants the financial benefit of solar without carrying maintenance and performance risk for 25 years
For most commercial businesses, particularly those with capital deployed in growth, a PPA is the more practical route. It delivers immediate, guaranteed savings with no downside risk and no management overhead.
The question worth asking
The difference is what goes on the balance sheet and who carries the risk for the next 25 years. Capital committed to a solar asset is capital that cannot be deployed elsewhere. Maintenance costs, equipment failures, and performance shortfalls over 25 years are unpredictable in a way that a fixed PPA tariff is not.
The CAPEX vs PPA debate tends to frame solar as an either/or decision. In practice, the more relevant question is not “which is better?” but “where do I want to deploy capital?”
About UrbanVolt
Founded in 2015, with the idea of making sustainability simple, UrbanVolt has become Ireland’s leading Solar as a Service provider and is now expanding rapidly across the UK. Backed by a team with decades of UK renewable energy experience, we help businesses cut carbon and reduce energy costs without the need for upfront investment.
Take a look at our guides, or contact us to start your journey to energy independence.