The decision between solar leasing and buying is a debate I walk through with every commercial client. Leasing eliminates the upfront capital barrier, but purchasing the system outright delivers a much higher lifetime return. In 2026, with elevated tariffs, the financial gap has become even more pronounced.
The most common question in boardrooms is whether a solar power purchase agreement is better than a loan-financed purchase. A PPA offers zero upfront cost and an immediate discount on the electricity rate, typically 10-15% below the prevailing grid tariff. However, a purchased system, even when financed, captures the full savings after the loan is repaid. Over 20 years, a 200 kWp system can yield a net present value of $450,000 if purchased, compared to $180,000 under a PPA model, assuming a 5% discount rate and 3% tariff escalation.
Leasing under a PPA or a rental agreement does avoid performance risk and maintenance burden because the solar provider owns and maintains the system. This is a valid point for companies that want solar savings without operational distraction. Yet the lease payments are typically fixed or escalate at 1-2% per year, while grid tariffs may rise faster. The customer’s savings erode over time under a fixed-lease scenario.
Comparing solar leasing and buying models
| Aspect | Solar Purchase (Cash/Loan) | Solar PPA/Lease |
|---|---|---|
| Upfront cost | High (or loan down payment) | Zero |
| Ownership | Full ownership after installation | Provider owns the system |
| Maintenance | Owner responsibility, can contract | Provider handles all maintenance |
| Savings over 20 years | All electricity savings less maintenance | Discounted rate, savings capped by PPA terms |
| Balance sheet treatment | Asset and depreciation benefit | Operating expense (off-balance sheet) |
| Flexibility to expand | Easy if inverter and roof space allow | Requires renegotiation or new PPA |
| End of term | System still generating free electricity | Option to renew, buy out at fair market value, or remove |
Which model maximises ROI?
When buying wins
If the company has access to capital or can secure a green loan at 3-4% interest, buying delivers the highest internal rate of return. A loan tenor of 5-7 years often results in positive cash flow from year one because the monthly savings exceed the loan instalment. The system becomes a free electricity generator after the loan is cleared. For a precision engineering firm in Loyang, the after-tax IRR on a cash purchase was 22%, whereas a PPA gave an equivalent 12% IRR on saved costs.
When a PPA or lease is the smarter move
A PPA works best when the building owner cannot utilise tax depreciation or when the roof lease term is under 15 years. It is also the default choice for flatted factories where the MCST prefers a simple energy contract without managing an asset. I have seen a PPA work brilliantly for a school that wanted no capex and had a limited ops team; they saved 8% on their electricity bill from day one and signed a 20-year agreement with a step-down rate.
Financing options in Singapore
Green loans and government-assisted schemes
Enterprise Singapore’s Enterprise Financing Scheme – Green provides risk-sharing for loans funding solar projects. Several local banks offer a solar loan package with a fixed rate and a 7-year tenure. We have guided clients through the application, which requires an energy savings projection from a certified energy manager. The interest rate can be as low as 3.5%, making the debt service easily covered by electricity savings.
Solar as a service and hybrid models
A hybrid model is emerging: the client pays a reduced capex and the solar provider co-invests, sharing savings for the first 10 years. After that, the ownership transfers fully to the client. This balances risk and return. I structured such a deal for a cold storage operator who was cash-constrained but wanted ownership; the provider took a 30% stake in the savings for 8 years, then stepped out.
Expert reflection
I recall a printing company that leased a 100 kWp system in 2019 under a PPA at 16 cents per kWh when the grid tariff was 18 cents. The PPA rate escalated 1% each year. By 2025, the grid tariff was 29 cents and the PPA rate was 17.5 cents. The company was satisfied with the savings but realised that if they had purchased the system, they would be reaping an extra $40,000 per year in unencumbered savings. That lesson shaped our current advisory: model both scenarios with a pessimistic and optimistic tariff escalation, then decide.
Cash flow and risk appetite dictate the choice. Enquire with Akando Solar for a side-by-side financial model comparing purchase, loan-financed, and PPA options based on your real interval data. As a solar energy company Singapore that is vendor-neutral on financing, we explain the long-term implications before you sign. For landed homeowners, similar financing logic is covered on our Residential solar panel page.
References
- Enterprise Singapore – ESG Green
- EMA Solar PV Consumer Guide
- Monetary Authority of Singapore – Green Loan Guidelines