For warehouse operators considering solar PV at scale, the choice between in-house ownership (capital purchase or asset finance) vs PPA (third-party owned, you offtake the kWh) is the single most important commercial decision. This comparison runs the 25-year head-to-head: cumulative cash flows, IRR, residual value, balance sheet impact.
25-year cumulative cash flow
In-house owned (1 MW Daventry DC, capital purchase): year-1 cost £750k, year-1 tax shield £225k, year-1 cash benefit £182k. Years 2-25 cash benefit averages £200k/yr (rising 4-6%/yr with grid retail). 25-year cumulative net cash: ~£4.6m. PPA (same 1 MW at PPA tariff 12p/kWh year 1, CPI-capped escalation): year-1 cash benefit £73k. Years 2-25 cash benefit averages £130k/yr (gap to grid widening over time). 25-year cumulative net cash: ~£3.2m. In-house owned delivers 40% higher 25-year economic outcome IF you can absorb tax shield.
Residual asset value
In-house owned: at year 25, the system has typically 5-10% panel degradation but remains fully operational. Residual asset value 30-40% of original capex (£250-350k for £750k install) in industry secondary market. Some owners extend the system to year 30-35 before decommissioning. PPA: at year 25, PPA contract ends. Standard end-of-PPA options: extend at prevailing market, transfer ownership at agreed value (typically £0 or nominal), PPA provider removes system. Residual value typically accrues to PPA provider, not customer.
Balance sheet treatment
In-house owned: asset capitalised on balance sheet, depreciates over 25 years. AIA delivers immediate £225k tax shield + £75k FYA on capex above £1m. Higher debt-to-equity ratio if asset financed. PPA: under IFRS 16, PPAs typically not on balance sheet (they're service contracts, not lease finance). Off-balance-sheet preference often drives PPA choice for listed companies.
Customer audit benefit
Both routes deliver equivalent customer audit benefit — the carbon abatement accrues to the offtaker (you). PPA provider doesn't claim the carbon. Verified on-site renewable status applies to either route. We provide identical audit pack for both.
Common questions about owned vs ppa
Why does owned beat PPA economically?
You absorb the tax shield (AIA + FYA) and retain residual asset value at year 25 (30-40% of capex). PPA provider takes both. Combined, owned typically delivers 30-40% higher 25-year economic outcome — IF you can absorb the year-1 capex and tax shield.
When does PPA win?
When you can't own. Loss-making or AIA-constrained entities, lease term under 7 years, off-balance-sheet preference, multi-customer landlord requirement. PPA shifts lease risk to third party — valuable when lease event risk is real.
Can we switch from PPA to owned mid-contract?
Sometimes — at PPA buyout milestones (typically year 5 or year 10). Buyout price is contractual and reflects PPA provider's remaining asset value. Often economic if grid retail has risen faster than expected, making the PPA tariff differential narrower than at signing.