Power Support Agreements Are Replacing Traditional PPAs in South Africa's C&I BESS Market: What the Lease-to-Own Financing Shift Means for Off-Take Risk, Asset Ownership, and Contract Bankability in 2026

Power Support Agreements Are Replacing Traditional PPAs in South Africa's C&I BESS Market

What the Lease-to-Own Financing Shift Means for Off-Take Risk, Asset Ownership, and Contract Bankability in 2026

1 June 2026 | SolarXgen Editorial | Johannesburg

South Africa's commercial and industrial (C&I) energy storage market is undergoing a quiet but significant structural shift. As battery energy storage system (BESS) costs fall and grid uncertainty persists, a new class of contractual arrangement — the Power Support Agreement (PSA) — is emerging as a practical, bankable alternative to the traditional Power Purchase Agreement (PPA) for behind-the-meter C&I deployments. At the same time, lease-to-own financing structures are gaining traction, reshaping who owns the asset, who carries the risk, and what lenders will accept as security.

The Market Context: Why Change Is Happening Now

South Africa's C&I embedded generation sector is at a scale inflection point. Commercial and industrial solar and battery storage projects continue to roll out at pace across South Africa, with approximately 5.6 gigawatts of C&I embedded generation capacity installed by January 2026, according to the Centre for Renewable and Sustainable Energy Studies (CRES). Falling battery costs, escalating electricity tariffs, and mounting grid constraints are reshaping both public procurement and private investment strategies, pushing energy storage from the margins to the centre of the country's power transition.

On the cost side, utility-scale BESS capital costs outside China reached approximately US$125/kWh by late 2025, translating to a levelised cost of storage around $65/MWh for large, contracted projects — meaning storage is no longer a premium add-on but an economically compelling component of energy systems across all market segments, particularly as Eskom and municipal tariffs continue to escalate well above inflation.

From PPAs to Power Support Agreements: What Is Changing?

Traditional C&I solar PPAs, under which a developer owns and operates the system and the client purchases electricity at a fixed tariff, have been the dominant model for funded solar projects in South Africa. PPAs are structured particularly where preserving capital or managing upfront costs is a priority — under a PPA, the developer owns and operates the system, and the energy user buys the electricity generated at an agreed rate over time, typically without any upfront capital investment.

However, applying this model directly to BESS creates friction. The revenue stream of battery energy storage projects can be uncertain, and practice is still developing in relation to how power purchase agreements can best deal with the double-edged sword of developers looking to be paid for battery-stored power while not being placed at risk from failure to deliver power if the energy isn't available.

A Power Support Agreement (PSA) sidesteps this problem by shifting the contractual focus from energy delivered to power capacity made available. Rather than billing per kWh discharged, the PSA structures a fixed monthly availability or capacity charge — analogous to a tolling arrangement — in exchange for the right to draw on dispatchable BESS capacity during peak or outage events. This separates the performance risk of generation from the availability obligation of the storage asset, making contracts easier to underwrite.

Contracted revenue arrangements play a critical role in making BESS projects bankable, and BESS offtake structures are not just revenue tools for developers and asset owners — they are also strategic hedging instruments. Contracts providing guaranteed revenue improve bankability by providing predictable cash flows, making the project more attractive to lenders and investors by reducing merchant risk — and bankable revenues can then unlock non-recourse debt and improve capital efficiency for asset owners.

The Lease-to-Own Financing Shift

Running parallel to the PSA trend is the rise of lease-to-own structures for C&I BESS. Under this model, the developer finances, installs, and retains legal ownership of the BESS asset during the contract term. The commercial property owner pays a structured monthly lease fee — often fixed or CPI-linked — and gains the right to acquire the asset outright at the end of the term at a pre-agreed residual value.

Several companies across the continent are working to solve financing challenges by providing turnkey offerings with leasing, lease-to-own, power purchase agreements, and other financing solutions. Power purchase agreements and lease structures remain effective alternatives to outright equipment purchases, particularly for corporate and capital-constrained customers who prefer to transfer performance and investment risk to service providers.

The critical distinction versus a standard PPA is asset ownership trajectory. A lease agreement is unlike a PPA in that the consumer pays a fixed monthly amount rather than agreeing to purchase the power generated at a set price per kilowatt-hour — and unlike a PPA, monthly lease payments remain the same throughout the year, with the risk associated with the volume of solar energy produced and consumed residing with the property owner. In a lease-to-own BESS structure, however, that risk allocation is typically modified by guaranteed performance undertakings from the developer, preserving bankability for both parties.

Implications for Off-Take Risk and Contract Bankability

For lenders and investors, the key question remains: can the contract service debt? Industry experts note that "projects fail because of structuring" — they fail because the offtake is weak, because grid access is uncertain, because development capital is insufficient, or because the risk allocation between parties is fundamentally unbankable. Credible counterparties, clear dispatch frameworks, robust EPC structures, bankable O&M contracts, and experienced management teams are all required.

Project finance structures for merchant storage assets remain complex due to revenue uncertainty across multiple grid service revenue streams and evolving electricity market compensation frameworks — making bankable long-term revenue certainty through power purchase agreements and capacity contracts essential for overcoming capital cost barriers to grid-scale BESS deployment in South Africa.

PSAs, when properly structured, address this by offering the fixed-revenue profile lenders require. Developers are urged to work with credible partners to demonstrate the ability to manage the risk of collection — and contracts should be bankable, with some form of bank guarantee needed to give investors confidence that their investments will be recovered.

What This Means for Commercial Property Owners

For South African commercial property owners and C&I tenants, the PSA and lease-to-own combination offers a practical pathway to grid resilience without heavy capital outlay. Key implications include:

• No upfront capex: The developer funds, builds, and maintains the BESS. Developers are offering customised solar PV and BESS in long-term partnership arrangements, with no upfront investment required, taking on the responsibility of funding, engineering, constructing, operating, and maintaining the installation.
• Predictable cost base: Fixed or indexed availability fees replace variable per-kWh billing, making energy budgeting more reliable under rising Eskom tariffs.
• Path to asset ownership: Lease-to-own contracts allow businesses to acquire a fully depreciated BESS asset at term end, creating balance-sheet value unavailable under a standard PPA.
• Resilience against load shedding and SAWEM volatility: The "Duck Curve" — a midday surplus of solar power — is becoming a standard feature of the South African grid, creating a massive arbitrage opportunity for BESS, which can charge at near-zero prices at noon and discharge during the lucrative evening peak.
• Growing market scale: Data collected by AFSIA estimates more than 31.8 GWh of storage projects are currently under development in Africa, underpinning developer confidence and supply chain depth.

The Road Ahead

SAPVIA sees 2026 as the year this transition moves from early adoption to mainstream practice, driven by favourable storage economics, sustained tariff pressure, and growing confidence in the technologies. Continued growth in behind-the-meter battery deployments paired with rooftop and ground-mount solar is expected — not only among energy-intensive users seeking supply security, but also across C&I and residential customers, with grid defection likely to grow in 2026.

At SolarXgen, we are actively structuring PSA and lease-to-own BESS solutions for C&I clients across South Africa. As contract architecture evolves, so does our ability to deliver funded, bankable, and ownership-ready storage that works for your balance sheet — not just ours.

SolarXgen Advisory: If your business is evaluating BESS under a PPA, PSA, or lease-to-own arrangement, contract bankability and off-take structure are the critical variables. Speak to our project finance team before signing any energy agreement in 2026.