A solar power purchase agreement (PPA) is different from buying solar panels outright. Instead of purchasing the system, a solar company installs panels on your roof at no upfront cost — and you agree to buy the electricity they generate at a set price per kWh for a long term, typically 20–25 years. The appeal is obvious: no capital outlay, renewable energy. The risk is equally significant: you're entering a multi-decade contract tied to your home. Solar PPAs are relatively common in commercial settings but are growing in residential use across Australia. The ACL's unfair contract terms provisions apply to standard-form consumer contracts — and many residential solar PPA contracts contain terms that may not survive scrutiny under that regime.
What is a Power Purchase Agreement?
A solar power purchase agreement is a long-term contract between a solar provider and a property owner, in which the provider owns, operates, and maintains the solar system installed on the owner's roof, and the owner agrees to purchase the electricity generated at a contracted rate. The rate may be fixed, escalating annually by a set percentage, or indexed to a benchmark. Key variables are: the contract term (typically 20–25 years), the escalation rate, who pays for maintenance and repairs, what happens if the system underperforms, and what occurs if the homeowner sells the property during the term.
Red flags to watch for
PPAs often include 2–5% annual price escalators on the contracted electricity rate. If grid electricity prices rise more slowly — or fall — the PPA rate can exceed what you would pay the grid. The financial case for the PPA depends critically on this assumption, which should be stress-tested.
A 20-year PPA attached to your home must either be transferred to the buyer or terminated when you sell. Transfer may not be possible (buyers may not want the obligation), and early termination fees can be substantial — sometimes tens of thousands of dollars. This can complicate or delay settlement.
The solar provider, as system owner, typically claims the Small-scale Technology Certificates (STCs) upfront. Some contracts also assign the feed-in tariff entitlements to the provider. Verify precisely which financial entitlements you retain and which you assign under the agreement.
If the system generates less electricity than projected — due to panel degradation, shading, or equipment failure — you still pay for your grid electricity. A contract without a minimum performance guarantee and a remedy (maintenance, credit, or termination right) for underperformance shifts all production risk to you.
PPA contracts commonly require the homeowner to maintain roof condition, allow access for maintenance, and not install shade structures or solar-obstructing features. Breach of these obligations may void the performance guarantee or trigger termination provisions.
Some PPAs automatically renew unless terminated with significant advance notice — sometimes 6–12 months. Without actively exercising a termination option at the end of the contracted term, you may find yourself locked into a continuation of the same contracted rate.
Your legal rights
Residential solar PPAs in Australia are governed by the Australian Consumer Law (Schedule 2, Competition and Consumer Act 2010), particularly the unfair contract terms provisions (ss 23–28) and misleading conduct prohibitions (s 18). The Clean Energy Regulator administers the Small-scale Renewable Energy Scheme and STC regime. State-specific electricity legislation applies to grid connection and feed-in tariff arrangements — each state's electricity regulator (e.g., AER, IPART in NSW, ESC in Victoria) sets minimum retailer standards. Australian Energy Market Commission rules govern network connection. ASIC may have jurisdiction over PPAs with financial product characteristics. Complaints can be directed to the Energy and Water Ombudsman (state-based) or the ACCC. The Energy Charter and Clean Energy Council codes of conduct provide additional standards for member companies.
Questions to ask before you sign
- 1What is the annual escalation rate, and how does it compare to forecast electricity price movements over the contract term?
- 2What are my options — and the associated costs — if I sell my property before the contract ends?
- 3Who retains the STCs and any feed-in tariff entitlements under this agreement?
- 4Is there a guaranteed minimum output, and what remedy applies if the system consistently underperforms?
- 5What maintenance obligations do I take on under this contract — including roof access and structural requirements?
- 6What is the process to terminate at the end of the contract term, and is there an auto-renewal clause?
Disclaimer: This guide is for educational purposes only and does not constitute legal advice. Contract law varies by jurisdiction and individual circumstances. Always consult a qualified legal professional before making decisions based on this information.