Rooftop and on-site solar have become mainstream for commercial and industrial customers, but the choice of financing model still shapes project risk, balance sheet impact and long-term energy costs. This report compares power-purchase agreements (PPAs), operating leases and direct purchase for businesses evaluating solar in 2026.
At Energy Solutions, we view solar financing choices as a governance question before they are a tariff question. Power-purchase agreements (PPAs), solar leases and direct purchase all deliver electrons, but they allocate performance, counterparty and residual value risk in very different ways.
For commercial and industrial customers, rooftop and on-site solar are no longer experimental. In many markets, they are a routine part of energy and decarbonisation planning. The question has shifted from "Should we do solar?" to "How should we hold the asset, and with whom do we share risk?" Financing structure determines who owns the system, how cash flows are scheduled, and how much flexibility the business retains if it relocates, sells the site or changes its load.
A superficially cheaper tariff can hide constraints: for instance, tight change-of-control clauses or limited options to expand capacity. Likewise, an apparently expensive direct purchase can be attractive for companies with low capital costs and strong in-house engineering. Understanding the trade-offs is a prerequisite to any robust request for proposals (RFP) for solar providers.
Under a typical behind-the-meter PPA, a third-party investor develops, owns and operates the solar system on the customer's site, selling electricity at an agreed tariff for a fixed term. The host pays for delivered kWh rather than the asset itself. PPAs are attractive where the host wishes to preserve capital, values price visibility and is comfortable with a long-term offtake commitment.
Key design variables include contract length, tariff indexation, treatment of excess generation and options at term (buyout, renewal, removal). Credit quality of the offtaker is central: weaker credits may face higher tariffs or require credit enhancement. Regulatory context also matters; in some jurisdictions, third-party ownership is constrained by licensing or grid code requirements, affecting which PPA structures are viable.
In a solar lease, the customer typically pays a fixed periodic fee for the use of the system rather than for each kWh. This can simplify billing and decouple payments from short-term variations in solar output, but it also shifts some performance risk back onto the host. Depending on local law and contract design, the host may bear more of the responsibility for operations and maintenance than under a fully managed PPA.
Modern accounting standards increasingly bring leases onto the balance sheet, especially for longer terms, which limits their ability to keep obligations "off credit". Leases may still appeal where electricity tariff structures are complex or where companies prefer fixed monthly charges over volumetric payments, but the distinction versus financed ownership is narrower than it once was.
Direct purchase—funding the system on the corporate balance sheet or via dedicated project finance—offers the clearest line of sight on economics. The business captures the full benefit of avoided grid purchases, any available incentives and residual asset value. It also assumes responsibility for design, performance and long-term asset management.
For investment-grade corporates with low borrowing costs and stable load, direct ownership can generate strong risk-adjusted returns, especially when combined with broader site upgrades. However, it competes for capital with core business investments and may not be prioritised if internal hurdle rates are high or if there is limited in-house capability to manage distributed energy assets.
PPAs, leases and direct purchase differ most visibly in how they allocate construction, performance, regulatory and counterparty risk. In PPAs, the investor typically bears construction and performance risk, while the host takes volumetric and credit risk. In leases, performance risk is more mixed; in direct purchase, most risks sit with the owner, although they can be mitigated via EPC contracts and warranties.
For boards and finance teams, the key is to map risks against their appetite and capabilities. A company comfortable managing long-term industrial assets may find ownership acceptable, while a service business with limited engineering depth may prefer a PPA even if the nominal price per kWh is higher.
| Risk Category | PPA | Lease | Direct Purchase |
|---|---|---|---|
| Construction & commissioning | Primarily investor/EPC | Shared between lessor and host | Host, mitigated via EPC contracts |
| Performance & availability | Investor, under availability guarantees | Mixed; depends on lease type | Host, supported by warranties and O&M contracts |
| Tariff / revenue risk | Host (volumetric payments vs. avoided cost) | Host (fixed fee vs. savings) | Host (full exposure, full upside) |
| Regulatory & change-in-law | Often shared via pass-through clauses | Shared, but with simpler mechanisms | Host, with some sharing via supplier contracts |
Relative share of overall project risk broadly retained by the host customer under each model (illustrative scores).
Source: Energy Solutions synthesis of corporate solar transactions; values are indicative only.
Accounting rules—and how they are applied in practice—can materially change the appeal of each model. Depending on jurisdiction and contract details, PPAs may be treated as executory service contracts, leases or a mix of both. Leases are increasingly scrutinised under on-balance-sheet standards, while direct purchase creates a depreciable asset with associated tax benefits.
Tax incentives such as investment tax credits, accelerated depreciation or bonus schemes often flow first to the asset owner. Under PPAs and leases, part of this value is passed through in pricing; under ownership, the corporate captures it directly but must have sufficient tax appetite. Early engagement with auditors and tax advisers is essential to avoid surprises after contracts are signed.
| Dimension | PPA | Lease | Direct Purchase |
|---|---|---|---|
| Typical balance sheet impact | Service contract or hybrid; may be off-balance sheet depending on rules. | Often on-balance sheet under modern standards. | Asset and debt (if financed) on-balance sheet. |
| Tax credits / incentives | Captured by investor, partially passed through in tariff. | Typically investor/lessor, with some pass-through. | Captured directly by corporate owner, subject to tax appetite. |
| Depreciation | On investor's books. | On lessor's books (for most structures). | On host's books; can be aligned with broader asset strategy. |
| P&L profile | Opex-like energy expense. | Lease expense, typically split into interest and amortisation. | Depreciation plus financing costs, offset by reduced energy spend. |
Qualitative comparison of how much on-balance-sheet obligation each model typically creates for the host.
Source: Energy Solutions interpretation of common accounting treatments; not a substitute for professional advice.
Regardless of model, certain clauses deserve particular attention: tariff escalation formulas, change-in-law provisions, metering and verification, site access, insurance, and events of default. In PPAs, termination rights and compensation mechanisms in the event of building sale or major load change are especially important. In leases and ownership structures, warranties and performance guarantees sit closer to traditional equipment procurement.
For multi-site portfolios, standardising key terms can simplify management and benchmarking, but local grid rules and landlord–tenant relationships may necessitate variation. Many corporates therefore adopt a template with clearly defined negotiable and non-negotiable elements.
Different models tend to cluster in different segments. Capital-constrained but creditworthy tenants often favour PPAs if landlords permit them, while asset owners with long investment horizons—such as logistics or data centre operators—may lean towards ownership. Public-sector entities may face additional constraints that steer them towards specific models governed by procurement rules.
Rather than assuming one "best" model, portfolio managers increasingly adopt a toolbox approach, matching PPAs, leases or ownership to each site's load profile, lease tenure, grid tariff and strategic importance. The internal governance process—who approves what, and on which criteria—then becomes as important as the external contract structure.
For groups with dozens or hundreds of locations, financing decisions are best made at portfolio level rather than site by site. A clear framework can define when to prioritise PPAs (for example, smaller sites with stable tenants), when to reserve capital for flagship owned projects, and when solar is best integrated into wider refurbishments or electrification programmes.
Such a roadmap also clarifies data needs: interval consumption data, roof condition, connection capacity and local regulatory constraints. Without this information, suppliers may price in uncertainty, eroding the value of any particular financing option. With it, corporates are better positioned to run competitive tenders and compare offers on a like-for-like basis.
| Site Type | Example | Often Favoured Model |
|---|---|---|
| Flagship owned sites | Headquarters, major logistics hubs | Direct purchase or long-term PPA with buyout option. |
| Smaller leased locations | Retail outlets, regional offices | Shorter-term PPAs or leases aligned with tenancy. |
| Highly uncertain load sites | Sites subject to closure or consolidation | Deferred investment, or flexible PPAs with clear termination mechanisms. |
Stylised share of portfolio solar capacity held under PPAs, leases and direct ownership as a programme matures.
Source: Energy Solutions scenario for an illustrative multi-site corporate; values are indicative, not a forecast.
The questions below summarise issues that typically arise in board and investment committee discussions about corporate solar PPAs, leases and ownership. They focus on clarifying trade-offs rather than recommending a single model.
Not necessarily. PPAs bundle financing, development and operations into a single tariff, which can be attractive for capital-constrained customers. However, corporates with strong balance sheets and low borrowing costs may achieve lower lifetime energy costs through ownership, provided they are comfortable managing the asset.
Under modern accounting standards, many long-term leases are recognised on the balance sheet. The detailed treatment depends on jurisdiction and contract terms, so finance teams should confirm how a proposed lease will be classified before assuming it is "off balance sheet".
Most PPAs anticipate change of control events, but the specifics vary. Typical options include transferring the PPA to a new owner, buying out the system, or terminating with a pre-agreed compensation formula. These mechanisms should be reviewed early to avoid constraining future real-estate strategy.
Yes. Many corporates combine owned systems at key sites with PPAs or leases elsewhere. The challenge is to maintain consistent governance and risk criteria so that decisions remain comparable across regions and business units.
Timelines depend more on site readiness and internal approvals than on the financing label. That said, well-structured PPAs with experienced counterparties can move quickly once a template is in place, while first-of-a-kind ownership structures in an organisation may take longer to clear investment committees.
Comparisons should account for all-in avoided costs, including energy, demand charges where relevant, and any incentives tied to self-generation. It is also important to compare against a realistic forward view of grid tariffs rather than today's prices alone.
Successful programmes typically involve finance, sustainability, operations, legal and real-estate teams from an early stage. Clear ownership of the decision framework reduces the risk of late challenges or misaligned expectations once offers are on the table.