Solar finance for businesses: purchase, loan, or power purchase agreement

The three main ways Australian businesses finance commercial solar - outright purchase, commercial finance, and Power Purchase Agreement (PPA) - and the cash flow, ownership, tax and strategic implications of each. Not financial advice; speak to your accountant.

Key findings

• Outright purchase delivers the strongest long-term return and gives you the STC rebate plus the depreciation deductions.
• Commercial finance lets you own the system while spreading the cost. Interest is generally tax-deductible. The most common path for owner-occupier businesses.
• A PPA needs no upfront capital - a third party owns and maintains the system, you buy electricity at a fixed rate. You don't get the rebate or write-off.
• PPAs suit fewer businesses than most PPA providers suggest.
• The right structure depends on cash flow, tax position, lease, and how long you'll occupy the premises. Your accountant is the first call, not your installer.

Option 1: Outright purchase

You pay upfront and own the system. The STC rebate is applied to your invoice. You also claim the depreciation deductions, and any components costing less than the instant asset write-off threshold can be deducted immediately. Typical payback: 4 to 8 years, depending on tariff, load profile and battery sizing.

Best for owner-occupiers with strong cash position, in a profitable tax position, planning to stay long enough to capture full payback.

Option 2: Commercial finance (loan)

Borrow, purchase, repay over 3 to 7 years. You own the system from day one. Rebate still applies. Interest is generally deductible. If repayments are less than the electricity savings, the system is cash-flow positive from month one - achievable for most well-sized systems in 2026.

Watch for: interest rates that erode the case, balloon payments that weren't modelled, and financing through the installer rather than your own bank.

Option 3: Power Purchase Agreement (PPA)

A third party installs and owns solar on your premises. You buy electricity at a fixed rate, typically below grid. Nothing upfront. Provider maintains the system. Contracts run 10 to 20 years.

Because you don't own the system, you can't claim the STC rebate or the instant asset write-off - the provider does. Over a 15 to 20 year contract, total PPA cost often exceeds outright ownership.

How to compare options properly

• Get your accountant involved before you sign anything. How the system is depreciated changes the first-year economics significantly.
• Model total cost over 10 and 20 years on the same basis (net present value).
• For PPAs, check the annual escalator rate (typically 1 to 3%) in writing before signing.
• Understand what happens at lease/contract end - get it in writing.