# Types of PPA explained: on-site, off-site, sleeved and virtual

There are several types of Power Purchase Agreement. An on-site (physical) PPA generates power at your premises; an off-site or sleeved PPA delivers power from a remote generator across the grid; and a virtual (synthetic) PPA is a purely financial contract. For most UK businesses installing their own solar, an on-site PPA is the relevant type.

## On-site (physical) PPA

This is the most common type for individual businesses. Solar (and often battery storage) is installed on your roof or land, and you buy the power it generates at an agreed rate. It is simple, visible and directly cuts the electricity you draw from the grid.

## Off-site and sleeved PPAs

Here the generation happens somewhere else — a solar or wind farm — and the power is delivered to you through the grid, often "sleeved" via your energy supplier. These tend to suit larger organisations buying significant volumes of renewable energy.

## Virtual (synthetic) PPA

A virtual PPA is a financial arrangement rather than a physical supply. The business and generator settle the difference between an agreed price and the market price, while power is bought and sold as normal. It is mainly used by large corporates for hedging and carbon goals.

## Which type applies to you?

If you want solar on your own building with no upfront cost, an on-site PPA is almost certainly what you need. We focus on funded on-site solar and battery for UK commercial sites.

## Frequently asked questions

**Which type of PPA does PPA Funding arrange?**

We focus on on-site (physical) PPAs — funded solar and battery installed at your premises, where you buy the clean power it generates at a fixed rate below the grid.

**Is a virtual PPA suitable for a small business?**

Usually not. Virtual PPAs are complex financial instruments used by large corporates. Most SMEs are far better served by a straightforward on-site solar PPA.

## Sources & further reading

- [Ofgem — energy regulator](https://www.ofgem.gov.uk)
- [Solar Energy UK — industry trade association](https://solarenergyuk.org)

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Source: [Types of PPA explained: on-site, off-site, sleeved and virtual](https://ppafunding.com/guides/types-of-power-purchase-agreements) · Author: PPA Funding team · Updated: 2026-07-30

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