The engineering decides how much a solar plant saves; the financing decides who keeps the savings. Cash purchase, bank debt and power purchase agreements split the same tariff spread three different ways — and the right structure depends less on the solar economics than on your cost of capital, tax position and appetite for owning generating equipment.
The three structures at a glance
| Parameter | Cash purchase | Bank loan (70–80% LTV) | PPA / lease |
|---|---|---|---|
| Upfront cost | Full CAPEX | 20–30% equity | Zero |
| Ownership | You | You (bank security) | Developer/investor |
| Savings captured | ~100% | ~85–95% after interest | ~20–40% (tariff discount) |
| Typical equity IRR | 12–20% unlevered | 18–30% levered | n/a — pure opex saving |
| O&M responsibility | You | You | Provider |
| Balance sheet | Asset | Asset + debt | Off-balance-sheet* |
| Performance risk | You | You | Provider |
*Subject to IFRS 16 lease-classification analysis — many PPAs remain genuinely off-balance-sheet, but confirm with your auditor.
Cash: highest return, highest commitment
A C&I rooftop returning $0.08/kWh of tariff spread on 1,450 kWh/kWp typically pays back in 4–6 years and runs an unlevered IRR of 12–20% — better than most companies' core-business reinvestment hurdle would suggest for an infrastructure asset. The real question is opportunity cost: if internal projects return 25%, keep the capital there and finance the solar.
Debt: the IRR amplifier
Solar's stable, predictable cash flows are ideal collateral, and green-lending programmes in most markets offer margins below general corporate lending. Financing 75% of CAPEX at 6–8% while the asset yields 12–20% levers equity IRR into the 20s — the standard structure for companies with borrowing capacity. Watch: loan tenor should be comfortably shorter than the 25–30-year asset life but long enough (7–12 years) that debt service stays below energy savings, keeping the project cash-positive from year one.
PPA: zero capital, zero hassle, smallest slice
Under a PPA, a developer builds, owns and operates the plant on your roof and sells you the energy at a discount to grid tariff (typically 10–30%), on a 10–25-year contract. You convert an engineering project into a procurement contract — attractive when capital is scarce, the roof portfolio is large, or energy is simply not your business. The trade-offs: the developer keeps most of the value; contract terms (indexation, termination, buyout schedule, roof access) need careful negotiation; and credit-worthiness requirements exclude smaller offtakers.
Decision framework
- Strong balance sheet, moderate internal hurdle rate: debt-financed ownership — the default best answer.
- Capital-constrained or non-core focus: PPA — a guaranteed discount with zero execution risk.
- Cash-rich, low reinvestment opportunities: outright purchase — nothing beats ~100% of the spread.
- Multi-site portfolios: hybrid — own the best roofs, PPA the marginal ones.
Whatever the structure, the input everyone negotiates around is the same: hardware cost. Econo Solar's distribution pricing on tier-1 modules, Sungrow inverters and mounting improves the arithmetic in every column of that table. Get the BOM priced before you model the finance.