AI overview
A Power Purchase Agreement (PPA) lets a business go solar with no upfront cost. The provider funds, installs, owns and maintains the system, and the business buys the power it generates at a fixed rate, usually below grid. It suits businesses that want the savings without the capital outlay or maintenance.
Key highlights
- $0 upfront, the provider funds and installs the system
- You buy the solar power at a fixed rate, usually below grid
- Maintenance, monitoring and warranty sit with the provider
- Treated as an operating expense, not a capital purchase
- Most agreements include buy-out options down the track
- Best for sites with strong daytime usage to soak up the solar
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For businesses that want the savings of solar without spending capital, a PPA is often the easiest yes.
It shifts the cost, risk and upkeep onto the provider and leaves you with cheaper, cleaner power.
Here is how it works, what to check, and which businesses it suits.
How a PPA works
Under a PPA, the provider pays for the system, installs it on your roof, and owns and maintains it for the life of the agreement.
You host the system and pay only for the power it produces, at a fixed per-kilowatt-hour rate agreed up front.
Think of it as buying the electricity rather than the hardware.
How the rate compares to the grid
The PPA rate is typically below what you pay the grid, and it is fixed for the term.
As grid prices rise, the gap usually widens, so your savings tend to grow over time rather than shrink.
Because the rate is locked, your power cost becomes predictable, which makes budgeting far easier.
Why predictable power costs help a business
Grid prices move around, and a bad year can blow a hole in a tight budget.
A PPA replaces that uncertainty with a known rate you can plan around for years.
For businesses on thin margins, the certainty can matter as much as the saving itself.
What the provider takes care of
One of the biggest draws of a PPA is that the system is someone else's responsibility to run.
The provider handles the parts most businesses do not want to think about, so you can get on with trading.
- Funding and installing the system at no cost to you
- Ongoing maintenance and any repairs
- Performance monitoring and fault response
- Managing the panel and inverter warranties
- Insurance on the equipment, in most agreements
Who a PPA suits
PPAs work best for businesses that want predictable, lower power costs without tying up capital or taking on maintenance.
They suit sites with strong daytime usage, because the more of the solar you use yourself, the more you save.
If you have capital ready and want every dollar of long-term saving, buying outright may suit you better. We model both before you decide.
What to check before you sign
A PPA is a long agreement, so it pays to read the terms closely before committing.
Most providers are upfront about these points, but you should still confirm them in writing.
- The length of the term and any annual rate increases
- Buy-out options and the price at each point
- What happens if you sell or vacate the premises
- Who insures and maintains the system
- How performance is guaranteed and what happens if it falls short
PPA versus buying outright
Buying outright costs more up front but captures the full lifetime savings, since you own every kilowatt the system makes.
A PPA spreads the benefit out, trading some long-term saving for zero upfront cost and zero hassle.
Neither is automatically better. It comes down to your cash flow, your tax position and how hands-on you want to be.
- Buy outright if you have capital and want the full lifetime saving
- Choose a PPA if you want savings without the upfront cost
- A PPA also offloads maintenance, monitoring and warranty risk
- Speak to your accountant about how each option is treated
Frequently asked questions
Do I own the system under a PPA?+
Not during the agreement, the provider owns and maintains it. Most PPAs include buy-out options so you can take ownership at set points if it suits your business.
What happens if I sell the premises?+
PPAs are designed to be flexible. Depending on the agreement, it can often be transferred to the new owner or settled at a pre-agreed figure.
Is a PPA treated as an operating expense?+
Usually yes, because you are paying for power rather than buying an asset. Confirm the accounting treatment with your accountant, as it depends on the agreement and your situation.
Can the PPA rate go up?+
The rate is fixed and known up front, though many agreements include a small, pre-agreed annual increase. It is still typically below grid and the increase is locked in writing.
What maintenance do I pay for under a PPA?+
None in most agreements. The provider owns the system and covers maintenance, monitoring and repairs for the life of the agreement.
How long does a PPA run for?+
Terms vary, but they are designed to run long enough for the system to deliver real savings while staying flexible. We walk you through the exact term before you sign.
