The Commercial Solar Sector in Australia
According to a recent industry report, Australia crossed the 25GW mark for installed PV capacity, which is roughly calculated at 1kW of PV installed per person. This is encouraging the Australian commercial solar sector to grow at a fast pace as the country steadily charts its trajectory to become a global leader in solar power generation.
While businesses can always choose to install a solar power system in a commercial property, it can be challenging for some to access solar in terms of infrastructure requirements, costs, or if the business is on rental property.
Using Solar Without a Solar Power System
Commercial establishments looking to avail the benefits of solar power can choose to opt for either a solar power purchase agreement or go for solar leasing options.
While both choices come with their respective advantages, it is important to know which one can help your business fulfil its energy consumption requirements while also being sustainable, without having to install an actual solar system.
We know, sounds confusing, right?
Let’s clear the air around solar PPAs and solar leasing, understand how they work, and what both options entail.
Solar PPA vs. Solar Leasing
Businesses thinking about going green and deciding to install solar panels may find it difficult to know where to begin. Business owners looking to make a smart investment decision without putting a burden on overhead costs may want to consider their options and decide to go for either solar PPA or solar leasing before purchasing a solar system directly.
Here’s a Detailed Explanation of How Solar PPA Works
What is Solar PPA?
Solar PPA is a contract between two parties – one that generates electricity (the provider) and one looking to purchase electricity (the customer). It is usually long-term but may give the customer an opportunity to buy the system outright later.
How Does Solar PPA Work?
Being the customer in a PPA arrangement, a business has to arrange the space for installing and mounting a solar system. Following this, the PPA provider takes on full responsibility of installing, maintaining, and owning the solar system. All the business has to do is purchase electricity generated by this solar power system from the provider according to agreed upon rates and terms.
Duration of Agreement
While a solar PPA usually lasts anywhere from 10 to 25 years, it depends on the agreed upon timeline set by the customer and the PPA provider. Customers can choose to buy out the system at the end of agreement period.
What is Solar Leasing?
Business opting for solar leasing in Australia pay a fixed monthly amount to their solar retailer for using a solar system, without having to own a system outright. It basically allows businesses to bypass upfront costs and pay for a solar power system over a specific period of time at a mutually agreed upon monthly amount + interest.
How Does Solar Leasing Work?
Solar system lease allow businesses to get solar installed on their property by a CEC-approved solar provider. Once it is installed, the business pays for the solar power system on a monthly basis irrespective of power generation capacity. Meanwhile, the solar provider owns and maintains the solar system.
Duration of Agreement
The duration of agreement for solar leasing could last from anywhere between 5 to 15 years depending on the terms of lease agreement between the business and solar provider. Just like at the end of a solar PPA agreement, customers have an option to buy out or purchase the solar system after the leasing term is over.
Quick Overview of the Difference Between Solar PPA & Solar Leasing:
- Solar PPA is a contract between two parties. The generating party and the consumption party. Solar leasing is like owning regular electricity where you have to pay a monthly bill and one can avoid the direct cost of burning or renting a solar system.
- Under Solar PPA the consumer party owns the solar systems for the time mentioned in the contract but in Solar leasing, the party never owns the solar system they just use the electricity generated. The ownership remains with the electricity provider only.
- The other difference is that under Solar PPA the contract is for 10 to 25 years but under Solar leasing, the contract is for 5 to 15 years.
While Solar PPA and Solar Leasing are both great options for businesses to benefit from solar power without any additional responsibilities or added costs, it depends on their specific requirements. The main differences between both are the duration and the pricing structure, with solar PPA offering more flexibility over solar leasing.
Therefore, ensure that whichever option you choose proves to be beneficial in the long run.
- Are you confused between Solar PPA and Solar Leasing? If yes, then read away this blog to resolve all your queries.
- Know the difference between the two solar system operations and choose the most suitable one for your business.
- The main difference that you must read carefully is the term of contract and the cost involved in both.
Connect with our experts to get an obligation-free solar consultation for your business today!
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