By the PPA Funding team Last updated
A solar PPA rate can be fixed or index-linked. A fixed rate stays the same throughout the term, giving maximum certainty. An index-linked rate rises with an agreed measure (often inflation), usually starting lower. Either way, a good PPA keeps you below grid prices — the key is understanding how the rate changes.
Fixed vs index-linked PPA rates at a glance
| Consideration | Fixed rate | Index-linked rate |
|---|---|---|
| How the rate moves | Stays the same per kWh for the whole term | Rises each year by a set % or an index (e.g. RPI/CPI) |
| Year-1 price | Often slightly higher to start | Often lower at the start |
| Later years | Predictable — no increases | Climbs over time; model the later years, not just year 1 |
| Budgeting certainty | Highest — you know the rate for ~20 years | Lower — depends on the index |
| Key thing to check | That the fixed rate still beats expected grid prices | The escalator %/index and the projected rate in later years |
| Best for | Businesses that value certainty | Businesses happy with gradual rises for a lower start |
Fixed rates
A fixed PPA rate does not change over the term, so you know exactly what you will pay per unit for years ahead. That certainty is valuable for budgeting, especially against volatile grid prices.
Index-linked rates
An index-linked rate rises over time in line with an agreed index, commonly a measure of inflation. It often starts lower than a fixed rate, but increases through the term. The important thing is that a well-structured PPA remains below grid prices throughout.
What to check before signing
Whichever structure is offered, confirm exactly how the rate is set and how it changes, and compare it against your expected grid costs. A transparent provider will spell this out clearly — as we do in every proposal.
This guide is general information, not financial or tax advice. Your circumstances determine what applies — please confirm with your accountant or advisor. Get a tailored proposal →
Frequently asked questions
Will my PPA rate go up each year?
It depends on the structure. A fixed rate stays the same; an index-linked rate rises with an agreed index. Either way, a good PPA is designed to stay below grid prices. We set out exactly how your rate works before you commit.
Which is better, fixed or index-linked?
Fixed gives certainty; index-linked often starts lower but rises. The best choice depends on your outlook and appetite for certainty. We explain both against your expected grid costs.
Related guides
- Capital allowances on commercial solar: full expensing & AIA explained
- How solar improves your commercial EPC (and helps with MEES)
- How much can your business save with commercial solar?
See our funding options, commercial solar and solar by industry pages.