Solar PPA Explained: How South African Businesses Get Solar with Zero Upfront Cost
Not every business has R1.5 million to spend on solar. A Power Purchase Agreement (PPA) removes the capital barrier entirely. You get solar on your roof, you pay less for electricity than you pay Eskom, and you don't spend a cent upfront.
Here's how it works — in plain language.
What Is a Solar PPA?
A PPA is an electricity supply agreement between your business and a solar provider. The provider installs a solar system on your property at their cost. They own it, maintain it, and insure it. You simply buy the electricity it generates — at a rate that's typically 20-30% below your current Eskom tariff.
Think of it like this: instead of buying the cow, you're buying the milk — at a discount.
You get:
- Solar power at a lower rate than Eskom
- Zero upfront investment
- No maintenance responsibilities
- No technology or performance risk
- A fixed or low-escalation rate while Eskom increases 12%+ annually
The provider gets:
- A predictable revenue stream from your electricity payments over 15-20 years
- Return on their capital investment through the tariff margin
It's a commercial arrangement where both sides benefit.
PPA Rate vs Eskom — The Widening Gap
The real power of a PPA becomes clear when you project costs forward. Eskom tariffs have been increasing at 10-15% annually for over a decade. The 2025 increase was 12.74%. A PPA rate typically escalates at CPI (5-6%).
Example: Solar portion of a R60,000/month electricity bill
| Year | Eskom Cost/month | PPA Cost/month | Monthly Saving |
|---|---|---|---|
| 1 | R60,000 | R45,000 | R15,000 |
| 5 | R96,000 | R55,000 | R41,000 |
| 10 | R170,000 | R70,000 | R100,000 |
| 15 | R300,000 | R90,000 | R210,000 |
| 20 | R530,000 | R115,000 | R415,000 |
The gap between PPA and Eskom rates widens every year. By year 10, you're saving R100,000/month on the solar portion alone. Over 20 years, cumulative savings run into the millions.
How the PPA Process Works
Step 1: Assessment — An installer evaluates your roof, consumption, and suitability. No cost, no obligation.
Step 2: Proposal — You receive a PPA rate, projected generation, and savings comparison with Eskom. Everything is specific to your facility.
Step 3: Agreement — You sign a PPA contract (typically 15-20 years) specifying the rate, escalation, and terms.
Step 4: Installation — The provider funds and installs the system. Takes 2-4 weeks for most commercial installations. Minimal disruption to operations.
Step 5: Generating — The system starts producing power. You pay the PPA rate for solar electricity and continue buying any shortfall from the grid at normal rates.
Step 6: Ongoing — The provider monitors, maintains, and services the system for the contract duration. Your only obligation is paying the monthly solar electricity bill.
Who Should (and Shouldn't) Choose a PPA
A PPA is a strong fit if:
- You don't have capital for a solar purchase
- You prefer operating expenditure over capital expenditure
- You're a tenant (your landlord consents to the installation)
- You want zero risk — no technology risk, no maintenance
- You need a simple board approval (it's an electricity contract, not a capital project)
- You're a property owner wanting to offer tenants cheaper power
A PPA may not be the best choice if:
- You have capital and want maximum long-term savings → outright purchase with Section 12B gives you more savings over 25 years
- You want Section 12B tax benefits → you need to own the system, and PPA means you don't
- Your monthly electricity bill is under ~R30,000 → PPA providers typically need a minimum system size to make the economics work
- Your building lease is shorter than the PPA term
What Happens at End of Contract
When your PPA contract ends (typically after 15-20 years), you have three options:
Buy the system at a pre-agreed residual value. Since it's 15-20 years old and largely depreciated, the price is typically very low. You then own the system outright — free solar electricity for the remaining 10-15 years of system life.
Renew at renegotiated terms. The system is fully depreciated, so rates may be more favourable.
Have it removed at the provider's cost. Rarely chosen because the economics overwhelmingly favour options 1 or 2.
Questions to Ask a PPA Provider
Before signing any PPA, get clear answers to:
- What is the exact PPA rate and annual escalation? Get the number and the formula.
- What's the contract term? And what are the early exit provisions?
- Who handles maintenance, and what's included? Panel cleaning? Inverter replacement? Monitoring?
- What performance guarantee exists? If the system underperforms, what happens?
- What are the end-of-contract options? Purchase price, renewal terms, removal process.
- What happens if I sell/leave the property? Is the contract transferable?
- Is the provider financially stable? A 20-year contract requires a provider that will be around for 20 years.
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Find Out If a PPA Is Right for Your Business
Our free assessment includes a full PPA evaluation alongside purchase and finance comparisons — so you see all your options with real numbers specific to your facility.
Get Your Free Assessment → Or call Albert directly: (083) 287 5986