On-Site vs. Off-Site Solar PPAs: Which Fits Your Business Energy Needs

Choose an on-site solar PPA if your main goal is to reduce purchased electricity at suitable business premises. Choose an off-site PPA if you need more renewable electricity than your site can produce or want to cover several locations. On-site savings depend on when you use the power and which grid charges you avoid. Off-site savings depend on delivery costs or, with a virtual PPA, market-price settlements. Neither option guarantees a lower total bill.

All financial examples use hypothetical prices in Chinese yuan (CNY), not market quotes or savings forecasts. Local rules determine whether each PPA structure is available, which grid charges apply, and which environmental attributes qualify.

Which PPA Fits Your Priority?

You can combine the options. A business using 5 million kWh annually and consuming 800,000 kWh from rooftop solar still needs 4.2 million kWh from other sources.

Check the Roof, Lease, and Daytime Load

For commercial and industrial rooftop installations, usable area excludes access routes, setbacks, and obstructions. The engineer also needs module weight, mounting loads, and roof condition—not just the proposed system’s power rating.

A lease with eight years remaining leaves a seven-year mismatch with a 15-year PPA. Resolve contract transfer, early termination, and equipment removal before signing. The U.S. EPA identifies lease stability and restrictions on property changes as considerations for on-site agreements.^[1]

Then check how much generation your business can use. Suppose annual demand is 4 million kWh, solar generation is 1 million kWh, and on-site consumption of that generation is 850,000 kWh:

• Solar self-consumption is 85%: 850,000 ÷ 1 million.
• Solar covers 21.25% of business demand: 850,000 ÷ 4 million.
• Remaining electricity purchases are 3.15 million kWh.

Use at least 12 months of hourly or 15-minute data. In a basic model without storage or other on-site generation, take the lower of solar output and demand in each interval, then add the results. Measure both at the same electrical boundary and account for any operating or export limits.

Calculate On-Site Savings from Avoided Charges

This example excludes tax differences and changes in demand charges. Do not substitute your average bill rate for the CNY 0.85 avoided cost: fixed fees may remain, and solar may not reduce demand charges if your peak occurs after sunset.

Surplus generation needs a separate calculation. If on-site consumption avoids CNY 0.85/kWh but exports earn CNY 0.30/kWh, using another 100,000 kWh on site is worth CNY 55,000 more than exporting it. That assumes export revenue belongs to your business and PPA payments remain unchanged.

Also calculate each contract year. A price starting at CNY 0.60/kWh and increasing 2% annually reaches about CNY 0.717 in year 10 and CNY 0.792 in year 15. Ask the developer to identify the module model and annual output-loss assumptions. The relevant module specifications and warranty documents should support those equipment assumptions; they do not guarantee whole-system annual generation.

Size Off-Site Purchases Around the Remaining Need

A business consuming 20 million kWh annually needs 10 million kWh of qualifying renewable electricity attributes to meet a 50% annual matching target. If on-site solar supplies 1.5 million kWh with eligible attributes, the remaining requirement is 8.5 million kWh.

For a multi-site business, group locations by electricity market and existing supply contract. A chain of 40 stores using 200,000 kWh each has demand of 8 million kWh, but different contract expiry dates, delivery rules, and certificate boundaries may prevent a single procurement arrangement from covering every store.

Compare the Delivered Off-Site Price

At 5 million kWh, Option B costs CNY 150,000 less under these assumptions. Each quote should distinguish fixed charges, variable charges, and exclusions. Estimated balancing costs are not a guaranteed rate.

Model Virtual PPA Payments Alongside Your Electricity Bill

A virtual PPA does not deliver electricity to your premises. You retain a supply arrangement and separately settle the difference between the PPA’s contract price and its market reference price.^[2]

In a simple two-way settlement, a contract price of CNY 0.40/kWh and a reference price of CNY 0.30/kWh require your business to pay CNY 100,000 on 1 million kWh. At a reference price of CNY 0.50/kWh, you receive CNY 100,000 on the same volume.

The settlement may only partly offset a supply-price increase. On equal volumes of 1 million kWh, a CNY 0.08/kWh increase in your supply price adds CNY 80,000 to your bill. If the PPA reference price rises by CNY 0.02/kWh, the settlement improves by CNY 20,000. Your combined cost still rises by CNY 60,000.

Use the contract’s actual settlement intervals and volumes. Check how it treats negative prices, curtailment, and additional credit support before relying on annual averages.

Verify the Renewable Energy Attributes

Buying 5 million kWh of qualifying attributes against 5 million kWh of annual consumption may support an annual renewable electricity claim under the applicable rules. It does not establish renewable supply in every hour. GHG Protocol’s Scope 2 Guidance sets criteria for contractual instruments used in market-based emissions accounting, including exclusive claims, retirement, timing, and market boundaries.^[3]

• Ownership: Specify whether project certificates transfer to your business or remain available for the developer to sell.
• Eligibility: Match certificate geography and generation dates to your reporting requirements.
• Retirement: Name the responsible party and set a deadline for documentary evidence.
• Substitution: If another project supplies replacement certificates, describe their actual attributes rather than assigning them to the original solar project.^[4]

Test the Cost of Business Changes

If outage protection is a priority, price it separately. Standard grid-connected solar usually cannot operate independently during an outage. A 200 kW critical load needs 400 kWh delivered over two hours, plus allowances for losses and reserves. The installation also needs equipment designed for operation while disconnected from the grid.