Side by side
Commercial solar PPA vs buying outright, and on-site vs off-site PPAs
In short
Buying outright suits a business that wants ownership, the certificate income and long-run savings. A PPA suits one that wants no upfront cost. Either way, the contract should say who owns the certificates. We do not provide financial or tax advice; speak to your accountant.
Two questions get mixed together here. The first is whether a business should buy a commercial solar system outright or sign a power purchase agreement (PPA). The second is what kind of PPA, on the premises or at a distant generator. Certificates run through both, which is why this belongs on a certificate site.
Buying outright versus an on-site PPA
| Buy outright | On-site PPA | |
|---|---|---|
| Upfront cost | Yes, the full system price, less any STC discount | Typically none; the provider funds and owns the system |
| Who owns the system | You | The PPA provider, for the term |
| Electricity | Yours, at the cost of owning and maintaining it | Bought from the provider at an agreed rate or schedule |
| Certificates | Yours: STCs, or LGCs in the case of a large generator | Usually the owner’s, so the provider’s, unless the contract says otherwise |
| Maintenance risk | Yours | Usually the provider’s |
| End of term | You keep the system | Options vary: buy out, renew or remove |
The certificate line is the one buyers often overlook. If you own the system, the STC value reduces your net price or comes to you directly. In a PPA, the provider may keep the certificate value and price that into the tariff. Neither is wrong; the point is to see it written down.
What certificates are involved
Systems up to 100 kW create STCs, and from 1 October 2026 systems above 100 kW and up to 1 MW also create STCs with a fixed five-year deeming period. That changes the maths for owning a mid-size system: more of the value arrives on day one. See /mid-scale-solar-stcs/. Above 1 MW, systems create LGCs, which have been oversupplied and cheap in 2026 (roughly $6 to $9 in September). For the size line, read LGC vs STC for a 100 kW system. Use the STC calculator for a rough STC figure.
On-site versus off-site PPA
An on-site PPA puts the generator on your roof or land. You use the power directly and may export the surplus.
An off-site PPA buys output from a generator elsewhere, such as a wind or solar farm, usually with a retailer sleeving the supply or with a financial contract in place of physical delivery. The value to the buyer is often the renewable claim, which is evidenced by certificates. The contract should state which certificates transfer to you, for example LGCs, and for how long. As the LGC scheme ends in 2030 and the Guarantee of Origin scheme continues beyond it, ask what happens to the certificates after that date.
| On-site PPA | Off-site PPA | |
|---|---|---|
| Generator location | Your premises | A separate site |
| Typical buyer | Business with roof or land | Larger electricity user |
| Physical supply | Direct behind the meter | Through the grid |
| Certificates | Depends on system size and contract | Usually LGCs or equivalent, per contract |
Questions to ask in the first meeting
Ask a PPA provider for the tariff schedule and any escalator over the term, the minimum take or volume commitment, the treatment of certificates in writing, and the end-of-term options with a buyout price. Ask an installer selling an outright purchase for the system price net of STCs, the STC count and the assumptions behind it, the deeming period used, and the warranty on panels and inverter. Then put both on the same basis: cost per kWh over, say, ten years, with the same assumptions about usage and tariffs. If the business may move premises or sell, ask what happens to a PPA on transfer and whether an owned system adds to the value of the site. Tax and accounting treatment differs between the two and is for your accountant to advise on.
A fair verdict
Buying outright gives ownership and the certificate income; a PPA trades those for no upfront cost and shifted maintenance risk. Which is better depends on your cost of capital, how long you hold the site and your tax position, and we cannot advise on that. Compare the net cost per kWh over the term under each, with the certificate treatment spelled out. For certificate questions on commercial systems, see the LGC pillar, STC trading and how it works.
How we wrote this. Energy Merchants is a certificate trader, so we have a horse in this race. Statements about other providers are taken from their own public websites on the date shown above and are attributed. If something here is out of date, tell the desk and we will fix it.
Sources: Clean Energy Regulator: Small-scale renewable energy systems · Clean Energy Regulator: Large-scale generation certificates
Questions
Before you decide
Who gets the STCs or LGCs under a PPA?
What is the difference between an on-site and an off-site PPA?
Is a PPA better for a system above 100 kW?
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