PPA for Farms: Agricultural Solar Power Purchase Agreements

Solar PPA for farms explained

A Power Purchase Agreement (PPA) is a long-term contract where an investor or developer installs a solar system on your farm at no cost to you, and in return sells you the electricity it generates at a fixed, discounted unit rate. You pay for what you use; they own the asset. A farm solar PPA is the main route to zero-capex solar for an agricultural business that does not want to (or cannot) fund the system itself.

How it works

1. 1. Roof or land lease. You grant a 15–25 year licence for the investor to install panels on a specified roof or field. No mortgage charge in most modern PPAs.
2. 2. Investor pays for everything. Panels, inverters, structural reinforcement, grid connection, planning, ongoing maintenance — all funded by the PPA provider.
3. 3. You pay a unit rate per kWh consumed. Typically 10–16p/kWh vs grid retail of 25–32p/kWh. Locked in for the contract term with limited inflation linkage.
4. 4. Exported electricity sold separately. Excess generation is sold by the investor under Smart Export Guarantee or a wholesale PPA. You don't profit from export, but you don't have to manage it either.
5. 5. Buyout or transfer at term end. Most PPAs include a buyout option at year 7–10 (depreciated asset value) and an option to take free ownership at term end.

When a PPA is the right call

• ✓ You have no capital to invest in solar but want immediate energy savings
• ✓ You're a tenant farmer (with landlord consent — most modern FBT terms permit this)
• ✓ You're preserving borrowing capacity for stock, land or new buildings
• ✓ You want a hassle-free arrangement — investor handles maintenance, monitoring and warranty admin
• ✓ Your system is large (200kW+) and ground-mount, so PPA economics work for the investor

When a PPA is the wrong call

• ✗ You have capital and want maximum lifetime return — outright purchase beats PPA on total economics every time
• ✗ You're profitable and could fully use 100% AIA to write down the system in year one
• ✗ Your system is small (sub-50kW) — investors rarely PPA below 100kW on agricultural roofs
• ✗ You're considering selling or restructuring the farm within 5–10 years — PPA terms can complicate due diligence

PPA vs buying outright vs lease finance — the three routes compared

A PPA is one of three ways to put solar on a farm. The right choice depends on whether you have capital, taxable profit, and the appetite to own the asset. This is the decision every farm makes — here is the side-by-side:

If you can fund the project, outright purchase wins on total economics — see the agricultural solar panel cost guide and finance options. A PPA wins when you have no capital and the system is large. Decision unclear? We model all three side-by-side in your free feasibility.

Farm solar PPA worked example — a 200kW dairy

The clearest way to see PPA economics is a worked example. Take a 200kW system on a dairy farm under a typical 2026 PPA:

• The 200kW array generates roughly 190,000 kWh per year in a UK setting (~950 kWh/kWp).
• A dairy's 24/7 load (milking, cooling, ventilation) means about 80% is self-consumed — roughly 152,000 kWh used on-farm.
• You buy that power from the investor at a PPA rate of 12p/kWh instead of 28p/kWh grid retail — a 16p/kWh saving.
• That is approximately £24,000 saved in year one (152,000 kWh × 16p), with zero capital outlay and no maintenance liability.

For comparison, buying the same 200kW system outright would cost roughly £120,000–£180,000 gross (£600–£900/kWp), fall to a far lower net figure after FETF and 100% Annual Investment Allowance, and pay back in 2–4 years — after which all the savings are yours for the system's remaining ~20-year life. The PPA gives you the £24k/year saving with no outlay; the purchase gives you a bigger lifetime return if you have the capital.

Typical PPA terms in 2026

PPA lease structure — what you're actually signing

A standard UK agricultural PPA involves three concurrent legal documents:

1. 1. Roof or land licence — gives the investor exclusive rights to install, operate and maintain the array on the specified roofs or land plot for the contract term. Annual licence fee paid to landowner (typically £500–£1,500 per acre for ground-mount; nominal for rooftop). Restrictive covenants for the duration — you can't sell/let the building/land without investor consent.
2. 2. Power Purchase Agreement — the unit-price contract. You agree to buy the electricity generated at the agreed p/kWh rate, with annual RPI indexation (capped at 3–4%). You commit to maintaining a minimum supply baseline (typically 80% of historical consumption). Force majeure and termination clauses spelled out.
3. 3. Operations and Maintenance Agreement — confirms the investor's obligation to maintain the array to manufacturer specification, including cleaning, inverter replacement at year 12-15, and end-of-term decommissioning. Performance guarantees typically 95%+ of P50 projected yield.

How tenant farmers approach a PPA

Roughly 30% of UK farms are tenanted; tenant farmers face a specific PPA challenge — they don't own the roof or land, so they can't legally grant a licence to an investor. The solution is the tripartite PPA:

• Landlord grants the roof/land licence to the investor and receives an annual rental income. Most modern FBTs since 2018 explicitly permit this with written consent.
• Investor finances, installs, and maintains the system as before.
• Tenant farmer buys the electricity from the investor at the discounted unit rate — getting the operational benefit without holding the asset rights.

The economics work because the landlord receives rental income they wouldn't otherwise; the tenant receives discounted electricity they wouldn't otherwise; the investor gets the asset and capital appreciation. Tripartite PPAs are now common across tenanted estates precisely because every party gains — the landlord earns rent, the tenant gets cheaper power, and the investor owns the asset.

PPA risk allocation — read the small print

• Performance risk — typically investor's. Most PPAs include 95% P50 performance guarantee. If the system underperforms, the investor compensates you for the shortfall.
• Force majeure — typically investor's (extreme weather damage covered by their insurance).
• Tariff escalation risk — typically tenant's. RPI-linked unit prices can outpace grid retail in deflationary periods.
• Consumption baseline risk — tenant's. If you go below the agreed minimum, take-or-pay clauses can apply.
• Asset transfer at term end — typically free transfer to landowner, but some PPAs include buyout-at-fair-value or removal options. Read these carefully.

Two kinds of farm PPA — don't confuse them

The phrase "farm solar PPA" covers two very different arrangements. Be clear which one you mean before you talk to anyone:

1. 1. On-site supply PPA (the farm is the electricity user). Panels go on your roof or yard, an investor owns them, and you buy the power they generate at a discounted unit rate to cut your bills. This is the core of everything on this page — it's about saving on consumption.
2. 2. Land-lease / export PPA (you rent out a field). Here you lease land to a developer for a ground-mount solar farm and earn rent — typically around £850–£1,200 per acre per year, RPI-linked over a 30–40 year lease — or sell exported power. You are not the electricity user; you are the landlord. See our 1-acre solar farm guide and solar farm profit & income per acre for the full land-lease and per-acre income figures.

If your goal is cheaper electricity for the farm, you want route 1. If your goal is income from spare land, you want route 2.

PPA vs the grant route

A common question is whether you can take a capital grant and a PPA at the same time. Generally you cannot on the same equipment: a PPA means the investor owns and pays for the kit, while a capital grant funds your own purchase. If you qualify for FETF and can fund the residual, buying with the grant plus 100% Annual Investment Allowance usually beats a PPA on lifetime return. If you can't fund the project, a PPA is the zero-capital alternative. Either way, we model both in your feasibility so the choice is evidenced, not assumed.