Power Purchase Agreement (PPA)
vs
Capex (Self-Funded)
Making the right choice for your business.
At ASTRO Renewables, we understand that navigating the world of solar energy financing can be complex. Businesses today have two primary pathways when it comes to adopting solar energy: Power Purchase Agreements (PPA) or Capex (Self-Funded) solar systems.
Both offer significant advantages but serve different needs based on your financial goals, risk appetite, and long-term sustainability plans.
Below, we break down the key differences to help you make an informed decision.
Upfront Investment
Capex (Self-Funded)
This model requires a significant upfront investment to purchase and own the solar system outright. However, once installed, you own 100% of the system and can enjoy full financial benefits in the long term, including ownership of the asset and almost free electricity after the payback period. This option is ideal for businesses looking to invest in long-term savings and asset ownership.
PPA (Power Purchase Agreement)
With a PPA, you get to adopt solar without any initial capital outlay. The system is owned and financed by a third-party developer, who covers all installation and equipment costs. In return, you purchase the electricity generated at a fixed or predictably escalating rate, allowing you to save on energy bills from day one without any financial risk. PPAs are the preferred route for companies prioritising no upfront costs and immediate savings.
Capex (Self-Funded)
With Capex, full ownership means you have complete control over the solar system. You can customise the installation, manage upgrades, and benefit from government incentives like tax credits and accelerated depreciation. This gives you autonomy in managing your energy infrastructure but also requires more direct involvement in maintenance and system performance.
PPA (Power Purchase Agreement)
In contrast, PPAs are about outsourcing the headache of owning and managing the system. The third-party provider retains ownership, handles maintenance, repairs, and system performance. This means no operational burden on your end, allowing you to focus on your core business while benefiting from predictable energy savings.
Ownership
& Control
Operation &
Maintenance
(O&M)
Capex (Self-Funded)
Owning the system also means you are responsible for ongoing operation and maintenance. Regular O&M is essential to ensure optimal system performance and maximise its lifespan. While this can seem like a significant responsibility, companies like ASTRO Renewables offer tailored O&M packages to keep your system running efficiently. However, the cost of repairs and upkeep is a key factor to consider in the Capex model.
PPA (Power Purchase Agreement)
One of the major benefits of a PPA is that the O&M is entirely covered by the provider. From routine maintenance to unexpected repairs, everything is taken care of at no additional cost to your business. This translates to zero worries about system downtime or maintenance, making it an attractive choice for companies that want to minimise operational disruptions.
Capex (Self-Funded)
While the upfront costs are higher, the long-term savings are substantial. After the system’s payback period, the energy produced is essentially free, drastically reducing your business’s reliance on grid electricity. You also gain access to financial incentives and tax benefits, adding to your return on investment (ROI). Over the long term, this can lead to considerable cost savings and a more sustainable energy strategy.
PPA (Power Purchase Agreement)
With a PPA, savings start from day one. The electricity generated is sold to you at a lower rate than the market price of grid electricity. Additionally, with fixed or predictable pricing, you are protected from the volatility of energy markets, offering budget stability for 15-25 years. This model is particularly beneficial for businesses looking to achieve energy cost savings without dipping into capital reserves.
Energy Savings & Financial Benefits
Flexibility
& Risk
Capex (Self-Funded)
With ownership comes responsibility. The Capex model offers long-term control and financial return but also comes with risks, such as changes in energy policy, maintenance costs, or potential system underperformance. However, for companies with a long-term vision, this model can provide independence from the grid and ensure energy security.
PPA (Power Purchase Agreement)
On the flip side, a PPA shifts these risks onto the energy provider. The third-party handles performance risk, operational issues, and any financial uncertainties related to the solar system. Essentially, a PPA is designed to minimise risk and ensure your business is always paying less for energy than it would with traditional utility companies.
At ASTRO Renewables, we recognise that every business has unique financial and operational needs when transitioning to solar.
Capex (Self-Funded)
This is the best option for businesses that want long-term control, ownership, and maximum financial returns from their solar investment.
PPA (Power Purchase Agreement)
For businesses that want to avoid upfront costs, offload maintenance responsibilities, and benefit from predictable energy savings without the complexities of ownership, a PPA is the smart financial decision.
CONCLUSION
No matter which model you choose, solar energy offers a sustainable and cost-effective path towards reducing your energy costs and carbon footprint. Get in touch with ASTRO Renewables today to explore how we can help you achieve your energy goals with a tailored solar solution.
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