The Clean Energy Finance Corporation (CEFC), after surviving another government attempt to legislate its dismantling, has announced $120 million worth of financing for solar leasing deals and Power Purchase Agreements (PPAs) in Australia. Split between three companies across three market segments, the funding could help to make pay-as-you-go solar more accessible and more attractive to a larger number of homes and businesses.
Finance programs have been available in Australia since 2012, but have not taken the residential or commercial solar markets by storm as they have in the United States–in California, for example, they account for 75% of new residential installations. But by injecting more confidence into the market via the $120 million, the CEFC is aiming to “to help expand and deepen the solar PV market” down under.
Up to $70m will go towards financing programs available through SunEdison Australia, the Australian subsidiary of US-based SunEdison, a solar panel manufacturing company and solar energy services provider. SunEdison will offer both solar leases and PPAs to small-scale solar system owners. (Difference explained below.) Meanwhile, Angeleno Group-backed Kudos Energy will have up to $30m for PPAs for the commercial and multi-unit residential market, and Australian panel manufacturer Tindo will have access to up to $20m for PPAs for commercial and residential customers.
“By expanding the financing options available and introducing new financing models tailored for different market segments, we can help more individual households and businesses to make better use of our resources and save on their energy costs,” said Oliver Yates, CEO of the CEFC.
Solar leasing programs and PPAs are similar in that in both cases the system is not owned by the individual, business or other organisation to which it is supplying electricity; instead, they are owned by a third party or jointly through investors. In both scenarios, the third party owner is responsible for the installation (which is usually done at no up-front cost to the home/business) and ongoing maintenance of the system, with contracts extending to 20+ years.
The primary differences between the two arrangements are subtle: Under a solar leasing scheme, the home or business is actually leasing the equipment itself, with certain terms and conditions stipulated in contract which govern how much power the lessee can expect it to produce. At the end of a solar lease’s contract, ownership options may also be made available. In contrast, under a PPA arrangement, the company that owns the system sells only the electricity that is generated by the panels, generally with no option to own the system.
To date, purchase has been the favoured option for going solar in Australia, thanks in part to low solar system prices across the country, allowing for relatively short payback times (4-6 years) on systems with expected lifespans of 25+ years.
Read more: Is a solar lease right for your home or business?
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