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.
How it works
- 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. Investor pays for everything. Panels, inverters, structural reinforcement, grid connection, planning, ongoing maintenance — all funded by the PPA provider.
- 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. 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. 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
Typical PPA terms in 2026
| Parameter | Typical range |
|---|---|
| Term | 15 to 25 years |
| Unit price (Year 1) | 10–16p/kWh |
| Annual escalator | RPI-linked, capped at 3–4% |
| Buyout window | Year 7+ (option) |
| End-of-term ownership | Free transfer to landowner (typical) |
| Minimum project size | 100kW (commercial-scale) |
PPA lease structure — what you're actually signing
A standard UK agricultural PPA involves three concurrent legal documents:
- 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. 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. 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. We have brokered this structure on dozens of estates including Crown Estate and Church Commissioners portfolios.
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.