Solar finance that pays for itself from year one

What are the three solar finance options for UK businesses?

UK businesses can fund a commercial solar installation in three ways: a power purchase agreement (PPA), a hire purchase agreement, or direct capital expenditure (capex). Each route changes who owns the system, when savings start, and what the long-term return looks like. The right choice depends on your cashflow position, your tax treatment, and how quickly you want to own the asset.

How does a solar PPA work?

A solar PPA lets you install commercial solar with no upfront cost. An investor funds, owns and maintains the system for the term of the agreement (typically around 25 years), and you buy the electricity it generates at a fixed rate that is lower than your grid tariff. At the end of the agreement you can extend, buy the system at its residual value, or have it removed.

This route is often well suited to organizations prioritizing cashflow, price certainty, and sustainability outcomes with minimal operational responsibility.

Spirit Energy installed a 217.35 kWp PPA-funded array at Old Thorns Hotel and Golf Club in Hampshire, generating 208,419 kWh a year for the venue at below-grid electricity rates from day one. For the full breakdown, including a worked example, see our solar PPA page.

How does hire purchase work for solar finance?

Hire purchase spreads the cost of a solar installation over a fixed term, typically five to seven years. A green finance provider funds the installation, you make monthly repayments, and ownership transfers to you after the final payment. Because the system generates from day one, monthly savings often exceed monthly repayments, which is what makes the project cashflow positive across the finance term.

This option suits organizations that want full ownership and long-term savings but prefer to spread the capital cost. 

The 377.97 kWp install at Wolverton Swimming and Fitness Centre in Buckinghamshire is forecast to save £63,215 in its first year, with a 36% IRR and a four year payback. For the worked hire purchase example, see our solar hire purchase agreements page.

How does capex finance work for solar?

With direct capex, you fund the system from cash reserves or a standard business loan. You own the asset from day one and capture every penny of the savings. Capex is typically the most cost-effective route over the system's lifetime and is eligible for capital allowances and tax reliefs.

This option is the most cost-effective route over the system lifetime and suits businesses that have the ability to fund the system upfront.

Recent capex installations include 132.86 kWp at St Luke's Care Home in Berkshire (forecast £21,805 year one saving, 6 year payback, 20% IRR) and 368.55 kWp at Cobham Service Station in Surrey (~£77,000 year one saving, projected £1.9 million in cumulative savings over 25 years). See our capex solar financing page for the full breakdown including IRR, NPV and tax treatment.

What returns can UK businesses expect from solar finance?

Returns depend on your roof, your daytime consumption, and the finance route you choose. The figures below come from real Spirit Energy installations completed across southern England.

Solar typically offsets 30% to 50% of a commercial site's daytime consumption. Sites with continuous high daytime load (hotels, service stations, care homes) often achieve self-consumption above 90%, which is the lever that pushes payback periods down and IRR up.

Can solar finance be cashflow positive from year one?

Yes. With a PPA, you save on day one because the contracted electricity rate is lower than your grid tariff. With hire purchase structured correctly, the monthly electricity savings are typically higher than the monthly repayment, making the project cashflow positive across the finance term. UK business electricity sits 118% above the European median, and industrial electricity prices rose 113% in real terms between 2019 and 2024, which is why the gap between savings and finance cost continues to widen.

What about solar finance for leased premises?

If you lease your premises, solar is still possible. A PPA can be structured so that the investor funds, owns and maintains the system, the landlord grants permission for the roof, and you (the tenant) buy the electricity at a reduced rate. PPA agreements are designed to be assignable, so they transfer to a new tenant or owner if the building changes hands.

What tax reliefs apply to commercial solar finance?

UK businesses installing commercial solar pay the standard 20% VAT rate, which is recoverable as input tax for VAT-registered businesses. 

The substantial commercial tax benefit sits in capital allowances. A capex solar installation qualifies as plant and machinery and is eligible for the Annual Investment Allowance (AIA), giving 100% first-year relief on up to £1 million of qualifying spend per year. Where AIA is unavailable or already used, solar PV is treated as an "integral feature" and qualifies for the 50% first-year allowance, with the remaining balance written down at 6% per year via Writing Down Allowances.

These reliefs apply to capex-funded systems where the business owns the asset. PPA and hire purchase arrangements have different tax treatments, which we work through with your accountant at quote stage.

Why use Spirit Energy for commercial solar finance?

Spirit Energy has been installing solar in the UK since 2010, with over 6,000 systems delivered. Our in-house design and high quality installation teams handle every project from survey to commissioning, and our finance partners are sourced specifically for the energy efficiency sector. Recent commercial clients include Extra MSA Group (Cobham Service Station), Old Thorns Hotel and Golf Club, and B&M Care Homes. We hold MCS certification, Which? Trusted Trader status, and the HCS Safety Award.

Solar finance FAQs

Is solar finance the same as a solar loan?

A solar loan is one specific way to fund a solar installation: a third-party lender advances the capital and you repay it on agreed terms. Hire purchase is a related instrument with ownership transferring at the end of the term. PPA and capex are not loans: a PPA is an electricity supply agreement, and capex is funding from your own cash or general business credit.

Is solar finance available for homeowners?

Spirit Energy's structured finance routes (PPA, hire purchase, capex) are designed for commercial clients. Residential customers typically fund installations from savings or via a standard solar loan from a third-party lender. Spirit Energy does not offer any financing options for residential customers.

How long does a solar finance application take?

A finance decision is typically returned within five to ten working days once the system design and quote are finalised. Installation usually follows soon after sign-off, depending on scaffolding and material lead times.

Can I pay off a hire purchase agreement early?

Most hire purchase agreements allow early settlement, with terms set out in the original agreement. We share the full terms before you sign so you can see what early settlement looks like in pounds and pence.

Does the finance provider take a charge over my building?

No. The finance is secured against the solar asset, not your premises. With a PPA, the investor owns the asset; with hire purchase, the lender retains a charge over the equipment until the final payment transfers ownership to you.

What happens at the end of a PPA?

You typically have three options at the end of a PPA: extend the agreement at a renegotiated rate, buy the system outright at its residual value, or have the system removed at no cost to you.