PPA vs Buying Solar for a Nursing Home: The Funding Routes

Most nursing-home owners want the saving without the disruption to cash. Fees are largely fixed by NHS Continuing Healthcare, Funded Nursing Care and local-authority commissioning, staffing is the dominant cost, and clinical care has first claim on every pound. So the real question is rarely “should we go solar”, it is “how do we fund it without starving the clinical budget”. There are three sensible routes, and the right one depends on your tax position, your appetite to own an asset, and how long you expect to hold the home. This guide sets out each honestly, including the catch in each.

The three routes at a glance

Route	Upfront cost	Who owns the panels	Tax relief	Best for
Power purchase agreement (PPA)	£0	The PPA provider	None to you	Operators with no capital appetite
Capital purchase	Full install cost	You	AIA / 50% FYA	Tax-paying homes wanting the best long-run return
Asset finance / lease	Deposit or £0	You (on completion)	Usually available	Owners who want the asset but not the lump sum

Each removes the capital barrier in a different way, and each has a genuine trade-off. Take them in turn.

Route 1: The power purchase agreement (zero capex)

A power purchase agreement is the route for an operator who cannot, or will not, spend capital. A funder installs and owns the system on your roof at zero cost to you, and you buy the electricity it generates at a per-kWh rate set below your grid tariff. Because a nursing home self-consumes 50 to 65% of generation against its clinical baseload, a large share of your import is replaced with cheaper on-site power, so a PPA can be cash-positive from the first year.

The trade-offs are real and worth stating plainly:

• You do not own the asset, so there is no capital-allowance benefit to you. The funder captures the tax relief and the export income.
• Contracts are long, typically 15 to 25 years, with a buyout option from around year 7 at fair market value. You are committing the building to a long arrangement, so lease length and any sale or handback need to line up.
• The saving is smaller than owning, because the funder takes a margin. You trade a slice of the lifetime return for zero upfront cost and zero maintenance responsibility.

That last point is a genuine advantage for a nursing operator: under a PPA the funder is responsible for keeping the system running, so you are not managing an asset on top of running a clinical service. Our sibling guide to power purchase agreements walks through the contract structures, and the funding and allowances page sets the PPA against the alternatives.

A PPA suits a charity-run hospice or a lease-holding home particularly well, because it protects restricted funds and clinical budgets while still cutting the energy bill. Our palliative and hospice nursing guide covers the charitable-funding angle in more detail.

Route 2: The capital purchase (best long-run return)

If your nursing company pays tax and can fund the install, buying outright gives the strongest lifetime return, because you keep the whole saving, the export income, and the tax relief. This is where the allowances matter, and where solar salespeople most often mislead, so be precise:

• Annual Investment Allowance. 100% first-year relief on qualifying spend up to £1m a year. A £50,000 install relieved in full is worth around £12,500 off your Corporation Tax at 25%. Most single-home installs are relieved in full this way.
• 50% special-rate first-year allowance, not full expensing. HMRC classes solar as special-rate plant, so it does not qualify for the 100% main-rate full-expensing figure that is often mis-quoted. Above the £1m cap, a company gets 50% in year one with the balance written down at 6% a year.
• VAT at 20%, reclaimable by a VAT-registered operator making taxable supplies, so it is a cash-flow cost rather than a permanent one. Partly-exempt providers may recover only part.
• Business-rates exemption on onsite rooftop solar and storage for self-consumption, 100% from 1 April 2022 to 31 March 2035, applied automatically.

Owning also means you carry the maintenance, which is a cost but also control. You choose who looks after the array and can hold them to a performance standard, working with an independent maintenance provider such as Solar Maintenance Solutions to keep the modelled yield on track over 25 years. Charity-owned homes access AIA through a trading subsidiary, so the ownership route is still open to them with the right structure. Confirm the treatment with your accountant before you commit.

Route 3: Asset finance and leasing (own it, spread the cost)

Between the two sits asset finance, which lets you own the system without the upfront lump sum. A finance provider funds the install and you repay over a fixed term, often five to seven years, after which the asset is yours. Structured well, the energy saving covers most or all of the repayment, so the system is close to self-funding while you build toward outright ownership.

The trade-offs:

• You pay interest, so the total cost is higher than a cash purchase, though usually less than a PPA over the full life because you end up owning the asset.
• Capital-allowance treatment depends on the finance structure. A hire-purchase agreement is generally treated as a purchase for allowances; an operating lease is not. This is exactly the sort of detail to confirm with your accountant, because it changes the effective cost.
• It is a balance-sheet commitment, which a lender will assess against the covenant of the operating company.

Asset finance suits an owner who wants the long-run economics of ownership but cannot free up the capital in one go. Our sibling guide to commercial solar finance sets out the lease and hire-purchase structures, and how the allowances interact with each.

A worked comparison for one home

Take the 50-bed general nursing home from our cost work: a 55 kWp system priced around £48,000, saving an indicative £10,000 a year. The three routes play out differently:

• Capital purchase. You spend £48,000, reclaim the 20% VAT if registered, and relieve the cost through the Annual Investment Allowance, worth around £12,000 off Corporation Tax. Effective net cost is well under the sticker price, and from year one you keep the full £10,000-a-year saving plus export income. Highest lifetime return, at the cost of the upfront outlay.
• Asset finance over six years. You put in little or nothing upfront and repay from the saving. The £10,000 annual saving covers most of the repayment, so the system is close to cash-neutral while you build to ownership, after which the full saving is yours. You pay interest, but you own a 25-year asset at the end.
• PPA. You spend nothing and pay the funder per kWh at, say, a rate that leaves you a net saving of £6,000 to £7,000 a year rather than £10,000. Smaller saving, but zero capital, zero maintenance, and no asset to manage.

Over 25 years the capital purchase wins on total pounds saved, asset finance is close behind, and the PPA gives the least saving but the least commitment. There is no universally right answer; there is a right answer for your cash position and your hold horizon. We model all three on your actual figures so the gap between them is a number, not a guess.

Questions to ask before you sign

Whichever route you lean toward, put these to any funder or installer before committing:

• What self-consumption figure is the saving based on, and from what data? A saving built on an optimistic self-consumption assumption evaporates in reality.
• For a PPA: what is the tariff, how does it escalate, and what is the buyout formula from year 7? The escalation clause matters as much as the opening rate.
• For finance: is it hire purchase or an operating lease, and how does that affect my capital allowances?
• Who is responsible for maintenance, monitoring and inverter replacement, and for how long?
• How do the lease length or contract term line up with any plans to sell or hand back the home?

A funder who answers these plainly is one to trust; one who deflects is not.

How to choose

The decision comes down to three questions.

Do you pay tax, and can you fund the capital? If yes to both, a capital purchase gives the best return. The allowances and business-rates exemption make the effective cost materially lower than the sticker price, and you keep the whole saving for the panels’ life.

Do you want the asset but not the lump sum? Asset finance lets the saving fund the repayments while you build toward ownership, at a modest interest cost.

Do you have no capital appetite, or is protecting cash and restricted funds the priority? A PPA removes the upfront cost and the maintenance burden entirely, at the price of a smaller lifetime saving and a long contract. For many charity hospices and lease-holding homes, that trade is exactly right.

For a group, the picture is layered: the shared £1m AIA cap is planned across accounting periods, so a phased rollout might buy some homes outright to use the allowance efficiently and fund others through finance or a PPA. The single-home and group rollout guide covers the portfolio approach.

Model both before you decide

We do not push one route. We model the PPA, the capital purchase and the finance option side by side against your accounts and your half-hourly consumption, so you can see the real cash-flow and lifetime figures for each before choosing. You can compare indicative costs first on the cost breakdown page or read the sector overview on the nursing-home solar homepage.

Request a fixed-price proposal and we will run all three routes for your home, so the funding decision is made on your numbers rather than a sales preference.

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