Many business owners want to reduce energy costs and improve sustainability with solar power. However, the high upfront cost of installing a commercial solar system can be a major barrier. Does that sound like you?
A Power Purchase Agreement (PPA) offers a way to access solar without a large investment. It allows businesses to buy solar energy at a lower cost than grid electricity without owning the system.
At PSC, we’re experts in PPAs. We help commercial clients find solar solutions, regardless of the obstacles they might think they’re seeing. PPAs are a great way to save money while using solar energy.
In this article, you’ll learn about the following:
- What is a Commercial Solar Power Purchase Agreement (PPA)?
- Key Benefits of a Commercial Solar PPA
- How Does a Commercial Solar PPA Work?
- Common Objections & Misconceptions to a Commercial Solar PPA
- Is a Commercial Solar PPA Right for Your Business?
By the end of this article, you’ll understand what a PPA is, how it works, and what businesses should consider before signing an agreement.
What is a Commercial Solar Power Purchase Agreement (PPA)?
A Power Purchase Agreement (PPA) is a financial arrangement where a business purchases electricity from a solar system installed on the property’s roof.
You wouldn’t own the system. Instead, PSC installs, maintains, and operates it. You’d purchase your energy from us if you choose this option.
Why would you choose to do this?
PPAs differ from leasing agreements because businesses do not pay for the system itself, only the energy it generates. This model allows companies like yours to benefit from solar power without financial risks related to equipment maintenance and depreciation.
You would pay only for the electricity generated at a lower rate than grid power. PPAs are long-term agreements, typically lasting 10 to 20 years. They provide predictable energy costs without requiring businesses to invest capital in solar equipment.
The cost of energy goes up every year. Getting your energy from a PPA will save you a lot of money in the long run.
If you’re interested in learning more about solar systems, you might want to check out our introductory article titled, New to Solar: Start Here.
Key Benefits of a Commercial Solar PPA
PPAs offer several advantages for businesses that want solar energy without the financial burden of ownership:
No Upfront Costs: We cover all installation and equipment costs, making solar adoption easy.
Lower Electricity Rates: PPAs offer electricity at a fixed or reduced rate compared to the grid. Rates are often 40-60% lower than standard utility prices.
Zero Maintenance Responsibility: We handle all system maintenance and repairs, reducing your time worrying about energy needs.
Predictable Energy Costs: You can lock in a set rate for electricity, protecting against future utility rate increases. They will come around again. Eventually, they always do.
If you’re interested in learning a bit more about weighing the cost of solar against the cost of the grid, you might want to check out the following article titled, Cost of Solar Panels vs. Cost of Energy from the Grid.
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How Does a Commercial Solar PPA Work?
A solar provider, like PSC, handles installing, monitoring, and servicing of the solar system on your roof.
The process works as follows:
- Site Assessment: PSC evaluates your business’s energy needs and available space for solar panels. We bring in engineers to analyse the location to determine optimal panel placement and system size.
- System Installation: We install the solar system at no cost to your business. The installation typically takes a few weeks and involves mounting panels, wiring, and grid integration.
- Electricity Generation: The system generates power for you to use. If you need more energy (and you might), you will continue to draw that from the grid.
- Energy Billing: You’ll pay for the electricity at a contracted rate, lower than grid electricity prices.
- Ongoing Maintenance: PSC monitors and services the system to make sure it operates efficiently. You do not have to worry about system performance issues. We keep track of that.
- End of Term Options: At the end of the contract, you may want the option to extend the agreement, purchase the system at a reduced cost, or have it removed. In some cases, you might explore buyout options after a certain period anyway, so that you can own the system later at a lower price.
If you’re interested in learning a bit more about the importance of monitoring and programming your energy, you might want to check out the following article titled, What is Consumption Monitoring?
Let’s talk solar savings. Click here.
Common Objections & Misconceptions to a Commercial Solar PPA
Businesses often have concerns about PPAs. Here are some common objections and their explanations:
What’s the catch? How does the solar provider make money?
We make money by selling electricity to you over time. We also benefit from government incentives and rebates.
There are no hidden fees; our profit comes from operating the system efficiently. We also own the system, want to maintain it so it performs for you.
Will I save as much money with a PPA as I would if I bought the system outright?
Buying a solar system outright can lead to higher long-term savings but it requires a significant upfront investment. A PPA allows businesses to access solar savings without using capital.
The savings are lower than full ownership but still substantial. Businesses with large cash reserves may find ownership more beneficial, while companies with tight budgets or other investment priorities may prefer PPAs.
What happens at the end of the contract?
At the end of the PPA term, businesses usually have three options:
- Extend the agreement and continue purchasing solar power.
- Buy the system at a fair market price, which is often lower than initial costs.
- Request removal of the system at no cost, returning to traditional grid power if desired.
What if solar technology improves, and I’m stuck in a contract with outdated panels?
While solar technology continues to evolve, modern panels have long lifespans and remain efficient for decades. Honestly, it’s a bit of a non-issue that doesn’t come up.
If you’d like to learn a bit more about our aftercare, you might want to check out the following article titled, Penrith Solar Centre’s Service Department Safeguards the Future of Your System.
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Is a Commercial Solar PPA Right for Your Business?
A PPA is a good option for businesses that:
- Want to reduce energy costs without upfront investment.
- Prefer fixed, predictable electricity rates over long periods.
- Do not want to manage solar system maintenance or repairs.
- Have stable, long-term operations that align with contract terms.
- Seek to meet sustainability goals with minimal financial risk.
Businesses with capital to invest and prioritise savings may benefit more from purchasing a system outright.
Companies should analyse cash flow, operational plans, and long-term energy needs before deciding.
If you’re interested in learning a bit more about solar panel efficiencies, you might want to check out the following article titled, How Efficient Are Solar Panels? Shade, Heat, and Seasonal Considerations in NSW, Australia.
Final Thoughts: Is a PPA for You?
PPAs provide a practical way for businesses to access solar energy without major expenses. They lower electricity costs, remove maintenance concerns, and support sustainability goals.
Whether you choose a PPA or outright ownership, investing in solar helps reduce costs and achieve environmental targets.
At PSC, we understand what you’re weighing while investigating PPAs. Working with an experienced provider like PSC will make sure you get the best terms, the best benefits, and a reliable system. It’s what we do.
If you’re interested in learning a bit more about AIKO solar panels, one of our preferred brands, you might want to check out the following article titled, Everything You Need to Know About Aiko Neostar N-Type ABC All Black Solar Panels.
