PPA vs asset finance vs buying solar outright: which is right for a manufacturer?

For most manufacturers the question is not whether solar pays, it is how to pay for it. The array is a six or seven-figure capital item competing with your production line, so the funding route matters as much as the engineering. There are three routes, and we model all three against your current grid tariff so the board compares like for like rather than being sold one.

Buying outright

Buying the system outright gives you the best total return over its life, because you keep every pound of saving and you own an asset that still has value at year 15 and beyond. The tax treatment helps: solar PV is special-rate plant and machinery, so it does not qualify for full expensing or the 40 percent first-year allowance, but the Annual Investment Allowance covers 100 percent of the first £1m of qualifying spend in year one, worth up to roughly 25 percent effective relief for a corporation-tax-paying company.

The catch is obvious — you need the capital, and that capital cannot then go into a new line or a machine. For a cash-rich manufacturer with no better internal use for the money, outright purchase is usually the highest-return option. For everyone else, the next two routes exist precisely so the roof does not compete with production.

Asset finance or a lease

Asset finance keeps the system on your balance sheet and in your ownership, but spreads the cost over 7 to 15 years. Because a well-sized manufacturing array typically saves more each year than the finance costs, the arrangement is usually EBITDA-positive from year one — the energy saving more than covers the repayment. You keep the Annual Investment Allowance benefit, you own the asset outright at the end of the term, and you have not touched your capital budget. For most manufacturers this is the pragmatic middle route, and it is the one a large share of our clients choose.

A power purchase agreement (PPA)

Under a PPA, a third party funds, owns and maintains the array on your roof, and you simply buy the electricity it produces at a rate below your grid tariff. There is zero capital outlay, the asset sits off your balance sheet, and you see a saving from day one. The trade-off is ownership: you do not own the system, you do not get the Annual Investment Allowance, and the third party keeps the residual value. A PPA suits a manufacturer that wants the carbon and cost benefit without any capital or balance-sheet impact, or one whose covenant supports a long-term offtake agreement.

Comparing the three

	Outright	Asset finance	PPA
Upfront capital	Full	Deposit only	None
You own the asset	Yes	Yes (after term)	No
Annual Investment Allowance	Yes	Yes	No
EBITDA-positive year one	Sometimes	Usually	Usually
Best lifetime return	Yes	Middle	Lowest

The right answer depends on your tax position, your cost of capital and how hard your capital budget is working elsewhere. That is why we build a full discounted-cash-flow model for each route from your own half-hourly meter data, and hand it over so your finance team can test it. See the cost guide for worked figures and the grants and funding page for the allowances, or request a free feasibility study and we will model all three for your site.