Whole-bill thinking: where an onsite PPA fits in your electricity costs

When a business considers selling its solar system and buying the electricity it generates under an onsite power purchase agreement (PPA), the natural question is: what happens to our electricity costs? Answering it properly means looking at the whole bill, not just one rate.

What's on a commercial electricity bill

• Energy charges for electricity bought from the grid, often varying by time of day.
• Network charges, which recover the cost of the poles and wires and may include demand charges based on your peak usage.
• Fixed or daily supply charges.
• Environmental and market charges passed through by your retailer.
• Any credit for electricity exported to the grid.

What an onsite PPA covers

An onsite PPA is about the electricity generated by the solar system on your premises and used by your business. You would pay for that electricity at the price set out in the agreement. Everything you still draw from the grid continues under your retail contract, along with the network, fixed and other charges that apply to your connection.

That means a percentage difference in the price of solar electricity is not the same as a percentage difference in your total bill. The effect on your total costs depends on how much of the system's output your site uses, how your tariff is structured and how the PPA is priced over time.

Questions worth asking about any PPA

• How is the price set, and does it change over the term?
• How long is the term, and what happens at the end of it?
• What happens to electricity the site doesn't use — and who receives any export payments?
• Who is responsible for maintenance, and what happens if the system underperforms?
• What happens if the business relocates, or the premises are sold or re-leased?
• Who holds rights to renewable energy certificates and environmental claims?

Comparing like with like

A fair comparison sets your expected total electricity costs if you keep owning the system against your expected total costs under the proposed arrangement, alongside the value of any capital released. Your accountant or energy adviser can help model this using your actual interval data and tariff.

Our approach is to give you clear terms to evaluate — not headline percentages. If you'd like to explore whether your system could suit an arrangement like this, start with an assessment.

This article is general information only and is not financial, legal or tax advice. Consider your circumstances and seek independent advice before making decisions.