With average 4 kWp solar installations now costing between £6,000 and £9,000 fully installed in the UK, the upfront outlay puts some households off. Lease agreements and power purchase agreements (PPAs) have grown in availability since 2024, offering routes to solar with no upfront cost. But the trade-offs are significant.
Option 1: Outright Purchase
Buying a solar system through savings or a personal loan is the most straightforward route. You own the equipment, you register for the Smart Export Guarantee in your own name, and all financial benefits flow directly to you.
Financial profile (4 kWp system, Midlands)
- Upfront cost: £7,500 (including installation, 0% VAT)
- Annual savings on bills (self-consumed energy at 27p/kWh): ~£650
- Annual SEG income (at 6p/kWh fixed): ~£120
- Total annual benefit: ~£770
- Simple payback: approximately 9.7 years
- 25-year net gain: approximately £11,750 (before inflation)
For homeowners planning to stay long-term, outright purchase consistently delivers the best financial outcome. Loan financing at 6–8% APR extends the payback to 12–14 years but still produces a positive return over 25 years.
→ Before you read on — see what payback looks like for your roof in under a minute.
Option 2: Solar Lease
Under a lease, a company installs panels on your roof and charges you a fixed monthly fee (typically £30–£60/month for a 4 kWp system). You use the electricity generated for free or at a reduced rate, and the company takes the SEG income.
Key considerations
- No upfront cost
- The SEG tariff goes to the panel owner, not you
- Lease agreements typically run 20–25 years
- Selling your home requires either buying out the lease or transferring it to the buyer — this can complicate and slow property sales
- Equipment ownership never transfers unless you buy out the lease
- Lease agreements may inflate annually by RPI
Option 3: Power Purchase Agreement (PPA)
A PPA is similar to a lease but structured around the electricity rather than the equipment. A third-party provider installs panels at no upfront cost; you agree to buy all electricity generated at a fixed rate (typically 10–18p/kWh in 2026) for a contract term of 15–25 years.
This is less common for UK residential properties than in the US market, but providers including Solarplicity successors and newer entrants have expanded offerings since 2024.
Key considerations
- Electricity price is locked below current retail rates but above SEG export rates
- Grid import is still needed when solar output is insufficient
- No SEG entitlement (the provider owns the system)
- Similar property sale complications as a lease
- Beneficial if retail prices rise sharply; less so if prices fall
Side-by-Side Comparison
| Factor | Buy (Outright) | Lease | PPA |
|---|---|---|---|
| Upfront cost | £6,000–£9,000 | £0 | £0 |
| SEG income | Yes (yours) | No (provider's) | No (provider's) |
| Equipment ownership | You | Provider | Provider |
| 25-year net gain | Best | Moderate | Low-moderate |
| Property sale impact | None | Complicates | Complicates |
| Flexibility | High | Low | Low |
| Best for | Long-term owners with capital | Those who cannot finance | Rarely the best UK option |
The SEG Tariff Factor
The Smart Export Guarantee matters more than most homeowners realise when comparing models. Octopus Energy's Outgoing Agile tariff pays variable rates up to 24p/kWh at peak times. A 4 kWp system exporting 1,800–2,200 kWh per year could earn £200–£400+ annually under a flexible SEG tariff. Forfeiting this income under a lease or PPA meaningfully changes the long-term comparison.
