Loans from commercial organisations

Learn about the types of loans available from commercial organisations for installing a rooftop solar system for your home or small business.

Various commercial loans and financing options exist to help you get rooftop solar for your home or business. These are subject to individual lender requirements and eligibility criteria, so you should always read the fine print.

The options discussed are limited to types of loans available for the specific purpose of purchasing and installing rooftop solar. They may be available from solar or electricity retailers or financial institutions.

If you take out a loan to fund your solar system, your payback period — the time it takes to pay off your system — will probably be longer than if you pay the upfront cost yourself.

Green loans

A green loan is a loan offered by financial institutions specifically to finance environmentally friendly products, such as electric vehicles, water tanks and rooftop solar.

Green loans usually have lower interest rates than personal loans, but stricter eligibility requirements. You should talk to a financial advisor or your bank about:

  • access to green loans
  • interest rates
  • loan terms
  • other associated fees.

Interest-free finance

Interest-free finance from a solar retailer is another way for you to purchase and install a solar system.

Although you do not pay interest with this option, suppliers may charge more for the system and installation. You should also be aware that interest-free finance arrangements may have different loan servicing fees. This will depend on the relevant laws in your state or territory.

Do not confuse commercial interest-free finance with the interest-free loans available through state and territory governments. For more information about government interest-free loans, see Government rebates and loans for solar.

Solar leasing

Solar leasing is when a solar retailer pays for supply and installation of a home or business solar system at no upfront cost to you. You then pay back the cost in monthly instalments. The term of the lease might be 5 or 10 years, after which you will own the solar system.

Solar leasing allows you to:

  • get the savings benefits of your solar system while you pay it off
  • use the savings to reinvest in other areas. 

However, solar leasing repayments can have high interest rates.

If the leased solar system is for your business, you may be able to claim tax-deductions against the repayments. You should ask your accountant for details.

Solar power purchase agreement

Under a solar power purchase agreement (PPA), a solar retailer arranges to install and maintain a home or business solar system and covers the cost. In return, you pay the solar retailer an agreed rate (c/kWh) for the electricity.

Solar PPAs may be limited to systems above a certain minimum size, often 10 kilowatts.

The main benefits of a solar PPA are:

  • lower or no upfront costs (depending on the terms of the contract)
  • the immediate benefits of solar for your home or business
  • lower rates for electricity than under a normal electricity plan

The terms of a solar PPA may be negotiable. For example, you could agree that:

  • the solar retailer owns the solar system and you only buy the electricity
  • you own the solar system and the supplier only pays for financing and maintenance.

What you negotiate will impact the upfront purchase costs and ongoing maintenance costs. Speak to your independent legal and financial advisor for further information.

A PPA typically lasts 10 to 15 years, but can be longer or shorter. What you pay over the life of your contract may be more than the cost of buying your own solar system. You should also consider that your circumstances may change over these years.

When negotiating, read the contract carefully and seek legal advice if necessary. You should consider:

  • how much the electricity will cost (the electricity cost may be indexed to the consumer price index over time)
  • how long the contract will be
  • who gets the credits from any excess electricity exported to the grid
  • whether you pay for all of the solar generation or only what you use
  • who will maintain the system
  • what happens if you exit the agreement early.

Environmental upgrade agreement

An environmental upgrade agreement (EUA) is a 3-way finance arrangement between a finance provider, a building owner and a participating local government for environmentally friendly investments, such as rooftop solar.

The finance provider lends funds to a building owner on commercial terms for upgrades which could include installation of a rooftop solar system. The agreement includes specifications for the upgrades, the amount borrowed and the repayment arrangements.

The owner repays the loan to the local government over time as a special rate or charge. This is typically billed along with other council or government rates, and the local government forwards the received loan payments to the finance provider.

EUA availability and project eligibility vary across Australia. Check with your local government for details.

An EUA overcomes 2 major barriers to solar projects.

1. Access to low-cost loan funds

Because the loan is attached to the property and repaid through the local government rates system, a building owner can secure the loan at a lower interest rate and for a longer term than other loans. If the property is sold, the remainder of the loan liability passes to the new owner.

2. Enabling solar on rental properties

An EUA allows the building owner to pass a portion of the project cost onto tenants who benefit from lower electricity bills. This helps overcome the common ‘split incentive’ issue where a building owner may not invest in solar because only the tenant benefits.

EUA legislation is set up to ensure that tenants do not pay more as a result of the agreement.