Understanding the types of PPA is essential for businesses aiming to secure affordable, sustainable, and reliable energy. From onsite solar arrangements to complex financial VPPAs, each model offers unique benefits and challenges. Selecting the right PPA type can deliver significant cost savings and help meet your ESG objectives.
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Power Purchase Agreements (PPAs) have emerged as powerful instruments in Australia's evolving energy landscape. For businesses seeking cost stability, sustainable practices, and energy independence, understanding the various types of PPA is crucial. Whether you're managing a corporate facility, a retail chain, or a manufacturing site, knowing which PPA suits your operational and environmental goals can significantly influence your energy strategy.
In this guide, we delve into the five primary types of PPAs every business should consider, their key differences, and how to select the right option for your unique energy needs.
A Power Purchase Agreement is a long-term contract between a business (energy buyer) and an energy provider (seller or generator) to purchase electricity at a predetermined rate. These agreements allow companies to secure power—often from renewable sources—without bearing the upfront cost of energy infrastructure.
PPAs are structured to offer both cost savings and price predictability, and they come in various forms, depending on how the electricity is generated, delivered, and priced.
An Onsite PPA involves the installation of renewable energy systems—typically solar panels—at the business’s premises. The provider owns, operates, and maintains the system, while the business buys the generated electricity at an agreed rate.
| Feature | Onsite PPA |
| Installation Site | Customer’s property |
| Upfront Cost | $0 for the business |
| Contract Duration | 10–25 years |
| Best For | Businesses with high daytime energy use |
An Offsite PPA involves buying energy from a renewable energy project located away from the business premises. The electricity is supplied through the grid, and the business receives both the power and associated environmental benefits like LGCs.
| Feature | Offsite PPA |
| Energy Delivery | Via national grid |
| Renewable Certificates | Included (e.g. LGCs) |
| Ideal For | Large organisations with multiple sites |
Unlike traditional PPAs, a Virtual PPA is a financial agreement rather than a physical energy delivery arrangement. The business agrees to pay a fixed price for renewable electricity, while the generator sells the energy on the wholesale market. The business receives financial settlement and LGCs based on market price movements.
| Feature | Virtual PPA (VPPA) |
| Energy Delivery | None (financial hedge) |
| Risk Exposure | High – depends on market fluctuations |
| Benefit Type | Financial + sustainability |
A Sleeved PPA involves a third-party retailer who manages the PPA contract between the business and energy generator. The retailer “sleeves” the power through their retail operations, handling grid delivery, billing, and compliance.
| Feature | Sleeved PPA |
| Retailer Involvement | High |
| Admin Complexity | Low |
| Best For | Businesses seeking a low-touch PPA experience |
Retail PPAs allow businesses to purchase renewable energy through a retailer at a negotiated rate, often aggregated with other buyers. These agreements offer a blend of PPA benefits with the simplicity of traditional energy procurement.
| Feature | Retail PPA |
| Target User | SMEs and retail chains |
| Flexibility | Medium |
| Pricing Model | Wholesale-linked |
| PPA Type | Energy Delivery | Financial Model | Suitable For | Key Risk |
| Onsite PPA | Physical | Fixed | Businesses with space | Weather-dependent |
| Offsite PPA | Physical (grid) | Fixed/Hybrid | Large users | Grid-related charges |
| Virtual PPA | None | Financial hedge | Sustainability-focused firms | Market price swings |
| Sleeved PPA | Physical | Retail-integrated | Admin-leaning businesses | Retailer dependency |
| Retail PPA | Physical | Wholesale-linked | SMEs and group buyers | Limited negotiation |
The right PPA for your business depends on several factors:
Engaging with energy procurement experts can help your business assess these factors and navigate the complexities of choosing the best-fit PPA.
Understanding the types of PPA is essential for businesses aiming to secure affordable, sustainable, and reliable energy. From onsite solar arrangements to complex financial VPPAs, each model offers unique benefits and challenges. Selecting the right PPA type can deliver significant cost savings and help meet your ESG objectives.
Energy Action specialises in helping Australian businesses assess, negotiate, and implement tailored PPA solutions. Whether you're exploring your first agreement or expanding your clean energy portfolio, our expert team is here to guide you every step of the way.
Secure your energy future today—contact Energy Action for personalised PPA advice and strategy.
The most common types are Offsite PPAs and Retail PPAs due to their flexibility and scalability. Large corporates often choose Offsite PPAs for direct engagement with renewable projects, while SMEs prefer Retail PPAs for simplicity and cost effectiveness.
PPAs generally range from 5 to 25 years, with most agreements falling within the 10 to 15-year range. Contract length influences pricing, flexibility, and risk exposure, making it an important consideration during negotiations.
Risks include price volatility (for VPPAs), supplier underperformance, and contractual inflexibility. It’s crucial to conduct due diligence and seek legal or financial advice before signing a long-term PPA.
Yes. Through Retail PPAs or aggregated PPA models, smaller businesses can participate in renewable energy contracts without the need for large-scale infrastructure or complex negotiations.
A consultant like Energy Action can provide market insights, risk analysis, and negotiation support to ensure your PPA aligns with business goals. Their expertise helps avoid costly pitfalls and secures favourable contract terms.
