How can businesses finance commercial solar panels?

There are two traditional funding routes available to pay for a commercial solar panel installation for your business. These are self-funding or a power purchase agreement. These options are explained in more detail below.

Self-fund (CapEx)

Under this model, the business uses its own capital expenditure budget to pay for the solar panel installation. They will own the solar panels from day one and be required to operate and maintain the solar panels.

Pros		Cons
	Full ownership of the system		High upfront capital cost
	Maximum long-term financial return		Opportunity cost of capital
	All energy savings and export income go directly to you		Cash used for solar can’t be used elsewhere
	Protection against energy price volatility		Exposure to performance risk
	You can leverage the asset against traditional finance		Increased payback time due to interest
	Lower lifetime cost vs PPA		You are responsible for maintenance, monitoring, inverter replacement, and insurance

When self-funding usually makes sense

• You have strong cash reserves

• You want maximum ROI

• You are happy with ongoing maintenance obligations

Power Purchase Agreement (PPA)

Under this model, a third-party investor funds, owns, installs and maintains the solar installation on the businesses roof or land. Power generated from the solar panels is sold to the business for a pre-agreed rate and timeframe. Typically terms of 15-25 years, enabling savings vs grid electricity rate of up to 60%.

Pros		Cons
	The PPA provider funds, installs, and owns the system meaning zero upfront capital cost		No ownership
	Immediate energy cost savings		Lower total lifetime savings
	Predictable energy pricing		Long contract terms
	Fixed or indexed pricing helps budget certainty		PPAs can reduce flexibility if your site or energy needs change
	No maintenance or performance risk		Less control over the system
	Treated as an operating expense rather than a capital asset, therefore not on balance sheet		PPAs involve detailed legal and commercial agreements

When a PPA usually makes sense

• You want no upfront spend

• Cash is better used for core business growth

• You value certainty and low risk

Summary:

• Self-fund – higher risk with ongoing maintenance obligations but higher lifetime savings

• PPA – lower risk with no ongoing maintenance obligations but lower lifetime savings

If you would like Eden to help with deciding which option best suits your business, please get in contact.