The four routes summarised
Capex: customer owns the asset, pays full price upfront, captures all savings. PPA: third-party owns asset, customer pays per-kWh for solar generation only (no capex). Lease: customer pays monthly for use of the asset, may have ownership option at end. Asset finance: customer borrows to buy, repays loan from savings — customer owns the asset.
Capex — when it's the right answer
Best when: (1) You have cash and want maximum ROI. (2) You're a UK corporation tax payer (Annual Investment Allowance (AIA) makes capex 25% cheaper). (3) You want all the savings and energy independence narrative. (4) You're prepared to manage O&M. Capex typically delivers 18–25% IRR over 25 years for a well-sized commercial install.
PPA — the zero-capex route
Solar PPA in 2026: customer pays a fixed rate per kWh of solar generated (typically 8–14p/kWh, indexed to CPI). PPA developer takes on capex, install, maintenance, replacement. Customer benefit: no upfront cost, instant bill reduction (PPA rate is below grid import). PPA pain points: (a) lock-in 20–25 years. (b) Lose the capital allowances — the PPA provider owns the asset and claims them. (c) Building sale complicates handover.
Lease — the middle ground
Operating lease: monthly payment, lease term 5–10 years, ownership transfers at end (or option to buy at residual). Capital lease: similar but accounting treats as on-balance-sheet. For most SMEs, asset finance (below) is cleaner. Lease pricing has tightened in 2026 with rate cuts.
Asset finance — most popular for SMEs
5–7 year asset finance: 6–9% APR typical in May 2026. Monthly payment under the energy bill saving from day 1 on most installs. Customer owns the asset from day 1 (so the Annual Investment Allowance can usually be claimed — check the finance terms with your accountant). At end of term, asset is paid off but continues generating for another 15–20 years.
Tax treatment — the gap that matters
Capex + Annual Investment Allowance: up to 25% Year 1 corporation tax relief on net capex. PPA: customer treats payments as opex — fully deductible but no asset on balance sheet. Lease: depends on lease type (operating vs finance). Asset finance: customer claims Annual Investment Allowance (AIA) on the asset value, treats interest payments as deductible opex.
ESG reporting differences
Capex: customer reports generation in their scope-2 reporting (the gold standard for ESG metrics). PPA: customer reports REGO-backed renewable consumption (still counts but is one step removed). Lease/finance: customer owns asset = same scope-2 benefit as capex. For Care Quality Commission, B-Corp, SBTi: capex or asset finance is preferred.
Exit and building sale
Capex: solar sells with the building — usually small uplift in EPC and saleability. PPA: PPA developer must consent to transfer to new owner, can demand novation fees. Lease/finance: customer can usually pay out at any time (subject to early settlement fees).
Worked decision tree
Asking 3 questions: (1) Do you have cash for capex without straining working capital? If yes → Capex. (2) If no, can you secure asset finance under 9% APR? If yes → Asset finance + AIA. (3) If neither → PPA, but negotiate hard on per-kWh rate and contract length.
