Financing Fabrication Solar: PPA vs Asset Finance vs Cash

For most metal-fabrication and engineering firms the solar decision is not really about the roof. The roof is the easy bit. The real question is how you pay for it without tying up capital you would rather spend on a new fibre laser, press brake or CNC machining centre. There are three clean answers, and the right one turns almost entirely on whether you own or lease your unit and how you want the numbers to sit on your balance sheet.

This guide compares cash purchase with the Annual Investment Allowance, asset finance, and a Power Purchase Agreement (PPA), framed specifically for a fabrication SME. If you have not yet worked out what your system should cost, read the cost breakdown first, then come back to fund it.

Why financing matters more in fabrication

Fabrication is one of the strongest solar self-consumption cases in the country. A single-shift, Monday-to-Friday, daytime operation lands its electrical demand almost exactly on top of the solar generation curve, so 70 to 90 percent of everything the array makes is used on site at your full 25 to 30p import rate rather than exported cheaply. That is what drives the three-to-seven-year paybacks the sector routinely sees, and it is why fabrication solar is unusually easy to finance: the asset generates a hard, measurable saving from day one.

The complication is that capital in a fabrication shop competes head-on with production plant. Every pound spent on the roof is a pound not spent on a machine that wins you work. Financing exists to break that trade-off. Get it right and the roof quietly cuts your running costs while your capital budget stays free for the shop floor.

Route 1: Cash purchase with the Annual Investment Allowance

Buying outright is the simplest route and, over 25 years, the cheapest in total cost because you pay no finance interest and take 100 percent of the savings. You own the asset from day one and it sits on your balance sheet.

The tax treatment matters, and this is where a lot of misinformation circulates. Solar PV is special-rate plant and machinery (HMRC CA22335). That means it is EXCLUDED from 100 percent full expensing, which is main-rate only, and from the 40 percent first-year allowance. Do not let anyone tell you full expensing applies to solar.

What does apply is genuinely valuable:

• The Annual Investment Allowance (AIA) gives 100 percent year-one relief on the first £1m of qualifying spend, and it can be set against solar. For a profitable company this is worth up to roughly 25 percent of the cost back as a corporation-tax saving in year one, and the £1m cap covers most SME fabrication installs in full.
• Above the £1m cap, a 50 percent first-year allowance applies to special-rate plant, with a 6 percent writing-down allowance on the balance thereafter.

Commercial solar VAT is 20 percent and reclaimable if you are VAT-registered, so it is not a real cost to the business. There is no 0 percent VAT rate on commercial solar; that is a domestic-only measure.

Cash suits an owner-occupier fabricator with the reserves to spend and a profitable trading position to absorb the allowance. If you want the absolute lowest lifetime cost and you can spare the capital, this is it.

Route 2: Asset finance

Asset finance is the route most of our fabrication installs actually use, and for a good reason: it is usually cash-flow positive from month one. The finance payment is spread over a five-to-seven-year term and is smaller than the electricity bill it replaces, so from the first month your combined cost (reduced grid bill plus finance payment) is lower than the bill you were paying before. You keep your capital for the laser or press brake, and the roof pays for itself out of savings you were spending anyway.

The system stays on your balance sheet as an owned asset, so a profitable company can still claim capital allowances on the equipment. This is the classic fit for an owner-occupier who does not want to deploy cash but does want to own the array outright at the end of the term.

The trade-off is interest: over the full term you pay more than a cash buyer. For most fabricators that premium is comfortably outweighed by keeping capital free for revenue-generating plant.

Route 3: Power Purchase Agreement (PPA)

A PPA is the answer to the objection we hear most often: “we rent our unit, so we can’t put solar on a landlord’s roof.” Plenty of our fabrication installs are on leased units, and a PPA is how that works with zero capital outlay.

Under a PPA a funder owns, installs and maintains the array. You simply buy the power it generates at a fixed rate below the grid price for the life of the agreement. You put in no capital, you carry no maintenance risk, and you save from day one against your import rate. Because you never own the asset, you do not claim the capital allowances, but you also never spend the capital.

This is the natural route for a tenant, especially on a shorter lease. Where you lease you will typically need landlord consent or a green-lease addendum, which aligns everyone’s interests, the landlord’s building becomes more valuable and lettable, and you get cheaper power. If your remaining lease term is short, a PPA (or a smaller, faster-payback owned system) keeps you from ever being out of pocket on tenure you might not renew. Our guide to sizing solar for a fabrication workshop explains how a shorter term shapes the array.

Side-by-side comparison

Factor	Cash + AIA	Asset finance	PPA
Upfront capital	Full system cost	None	None
Best for	Owner-occupier with reserves	Owner-occupier keeping capital free	Tenant / shorter lease
Ownership	You, from day one	You, at end of term	Funder owns the array
Cash-flow from month one	Savings only, after outlay	Positive (payment below bill saved)	Positive (power below grid)
Capital allowances	Yes, AIA 100% to £1m	Yes, owned asset	No, you do not own it
Lowest lifetime cost	Yes	Middle (finance interest)	Higher per kWh, zero risk
Maintenance risk	Yours	Yours	Funder’s

Which route fits which fabricator?

• You own the freehold and have spare cash. Buy it outright and claim the AIA. Lowest lifetime cost, full savings, done.
• You own the freehold but want capital free for machinery. Asset finance. Cash-flow positive from month one, you own the array at the end, and a new laser stays affordable.
• You lease your unit, or your remaining term is under about seven years. A PPA, with landlord consent or a green-lease addendum. No capital, no risk, cheaper power for the life of the lease. A landlord may also fund the array themselves and recover it through the rent, another green-lease variant worth raising.

A closing point on the tax detail, because it moves real money: all of the above assumes you confirm your position with an accountant. Whether the AIA is worth the full 25 percent depends on your profits and tax position in the relevant year, and the figures here are illustrative. The government’s own capital allowances guidance is the current source of truth on rates and thresholds; treat any fixed number you read online, including ours, as a starting point to verify.

Beyond capital allowances, there is more relief on the table: on-site solar and battery plant is exempt from business rates in England to 31 March 2035 where the power is consumed on site, and any exported surplus earns a supplier-set Smart Export Guarantee tariff (roughly 12 to 16p/kWh in 2026). See the full picture on our grants and funding page.

The point of modelling all three

You should not have to guess which route wins. We model cash, asset finance and a PPA side by side against your actual half-hourly meter data and your real fabrication load, welders, compressor, LEV extraction, laser chillers and CNC coolant, so you can compare like for like on your own numbers. That way the financing decision is made on evidence, not on a sales pitch, and you can feed the model straight into your own accounts or a second opinion before you commit a penny.

If you are weighing solar against a machine tool this year, the honest answer is often that you can have both. Request a fixed-price quote and we will show you all three funding routes for your unit, owned or leased, with the payback modelled from your data.