PPA vs Buying Outright with 100% AIA: Which Funds Farm Solar Best in 2026?

Most farms that ask us about rooftop solar are really asking two questions at once: does the energy stack up, and how do we pay for it without raiding working capital at the worst possible time of year. The technology decision is usually the easy part. The funding decision — zero-capex PPA, buy outright with 100% Annual Investment Allowance, or asset finance — is what actually determines your lifetime returns, your balance sheet, and whether the roof works for you or for a developer. This is the 2026 framework we use, with a worked 200kW dairy example run all three ways.

The three routes in plain terms

There are only three realistic ways to fund a farm-scale rooftop array, and they sit on a spectrum from “no money down, less upside” to “all money down, most upside”.

A power purchase agreement (PPA) means a developer pays for and owns the system on your roof. You buy the electricity it generates at an agreed unit rate — typically 14–18p/kWh in 2026 — usually fixed or index-linked over a 15–25 year term. No capital outlay, and the developer carries the maintenance and performance risk.

Buying outright means you fund the full capital cost yourself and own the asset from day one. For a profitable, incorporated farm this is where 100% Annual Investment Allowance changes the maths entirely.

Asset finance is the middle road: you own the system but spread the cost over a loan or hire-purchase term, with the repayments part-funded by the energy you stop importing.

The right answer depends almost entirely on your tax position, your appetite for capital outlay, and how long you intend to hold the buildings.

The worked example: a 200kW dairy array

Take a 200kW rooftop system on a dairy unit — a realistic size for parlour, bulk tank, plate cooler and vacuum pumps running through the day. Assume an installed cost of roughly £170,000, generation of around 190,000 kWh a year, and a high self-consumption profile because milking load aligns well with daylight. We will assume you currently import at around 26p/kWh and that any export earns a Smart Export Guarantee (SEG) tariff of 8–15p/kWh. These are planning figures, not a quote — see our cost breakdown for how the numbers move with roof, DNO and consumption.

Route 1 — zero-capex PPA

Under a PPA the developer funds and owns the 200kW system. You sign a long-term agreement to buy its output at, say, 16p/kWh instead of importing at 26p/kWh.

On roughly 150,000 kWh of self-consumed solar (assuming around 80% on-site use), you save the 10p/kWh gap — about £15,000 a year — for zero capital outlay and zero maintenance responsibility. Crucially, under a well-structured agricultural PPA you typically keep the SEG export income on surplus units, which adds a few thousand pounds more. The developer takes the capital allowances and the asset risk; you take cheaper, predictable power.

Who it suits: farms that cannot or will not deploy capital, sole traders or partnerships with limited taxable profit (so AIA is wasted on them), tenants, or anyone who wants the energy benefit without owning kit. Read the full PPA for farms explainer for term lengths, rate structures and end-of-contract options.

Route 2 — buy outright with 100% AIA

This is where an incorporated, tax-paying farm pulls ahead. The Annual Investment Allowance lets a qualifying business deduct 100% of the cost of plant and machinery — including solar PV — against taxable profits in the year of expenditure, up to the £1m AIA cap. A 200kW system at £170,000 sits comfortably inside that cap.

At 25% corporation tax, that £170,000 deduction is worth roughly £42,500 off your tax bill in year one. Your effective net outlay drops to around £127,500. The energy then performs for you, not a developer: on the same 150,000 kWh self-consumed at a 26p/kWh saving you bank around £39,000 a year, plus SEG export income on the surplus. Net of the AIA relief, payback lands in roughly the 3–4 year range, after which the array generates effectively free electricity for the remaining 20-plus years of its life — and you keep 100% of the SEG.

Who it suits: profitable limited companies and farming partnerships with corporation tax to offset and the cash (or facility) to fund the build. It produces the best lifetime returns of the three routes by a wide margin. See 100% AIA for farm solar for the qualifying conditions and timing rules.

Route 3 — asset finance: own it, spread the cost

Asset finance lets you take ownership — and therefore the AIA and the full energy savings — without writing a single large cheque. You borrow the £170,000 over, say, 7–10 years and repay monthly.

The appeal is cash-flow neutrality. On our 200kW dairy, annual energy savings of around £39,000 comfortably exceed typical annual finance repayments, so the system can be broadly self-funding from day one while you still own the asset and claim the capital allowances (subject to the finance structure — hire purchase generally qualifies for AIA, operating leases do not). You sacrifice some lifetime return to interest, but you preserve working capital for stock, feed and fertiliser.

Who it suits: owner-occupier farms that want the ownership upside and the SEG income but would rather not tie up a six-figure sum. For a side-by-side of all three on the same numbers, see our PPA vs asset finance vs capital comparison.

Side-by-side: the 200kW dairy three ways

• PPA — £0 outlay, ~£15,000/yr net saving, developer owns the kit, you keep SEG, no maintenance burden, lowest lifetime return.
• Asset finance — £0–small deposit, ~£39,000/yr saving offset by repayments, you own it and claim AIA, broadly cash-flow neutral, mid lifetime return.
• Buy outright + 100% AIA — ~£127,500 net outlay after relief, ~£39,000/yr saving plus SEG, ~3–4yr payback, highest lifetime return.

The pattern is consistent across every farm we model: the more capital and taxable profit you can deploy, the better your lifetime return, and the AIA is the lever that makes outright purchase decisively the strongest route for a profitable company.

What does not change between the three routes

Whichever way you fund it, the engineering and compliance bar is identical. Any array of this scale needs a DNO connection application under G99 before commissioning, and approval timescales can influence your install date, so start early. Use an MCS-certified installer to keep SEG eligibility and warranty cover intact. If the roof is older agricultural cladding, factor an asbestos survey under CAR 2012 — many farm roofs predate the relevant bans, and a re-roof can often be combined with the solar mount to share access and scaffold costs. And under Class A, Part 14 of the GPDO (as amended in 2015, with the rooftop permitted-development ceiling raised to 1 MW from December 2023), most rooftop farm arrays sit within permitted development, though it always pays to confirm with your local planning authority.

These constants matter because they affect every route’s timeline and total cost equally — see our notes on combined re-roof plus solar where the survey and access economics often tip a borderline project into a clear yes.

How to choose — a quick decision path

Start with your tax position. If you are an incorporated farm with corporation tax to offset and access to capital, buy outright and claim 100% AIA — it wins on lifetime return every time. If you want ownership without the capital hit, asset finance gets you most of that upside while protecting cash flow. If you have little taxable profit, no appetite for outlay, or you are a tenant, a PPA for farms delivers cheaper power from day one with none of the ownership obligations.

Two further checks: how long you will hold the buildings (outright and finance reward long holds; a PPA can be cleaner if a sale or succession is on the horizon), and whether grant funding is available to sharpen the outright case further — see grants and funding.

Want the three routes modelled on your actual roof, herd and consumption? Get a tailored farm solar quote.