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As more businesses in Malaysia turn to solar energy to cut electricity costs and meet sustainability goals, 2 main contract options have emerged for getting solar systems installed with zero capex, namely Supply Agreement for Renewable Energy (SARE) and private Power Purchase Agreement (PPA).

SARE is a tripartite agreement between Tenaga Nasional Berhad (TNB), customer and a Registered Solar PV Investor (RPVI). It comes with a standard contract format that includes TNB in the process especially for billing and collection. On the other hand, a Private PPA is an agreement between the solar provider and the customer (usually a business). It is more flexible and can be tailored to fit specific commercial goals.

To ease the understanding, here’s a side-by-side comparison on the key legal and business differences between SARE and private PPA:

Description	SARE	Private PPA
Parties	Tripartite: TNB, TNB Customer, RPVI	Bilateral: RPVI and Customer
Legal Structure	Standardised agreement administered by TNB	Customised contract negotiated privately between parties
Regulatory Framework	Can be used under both NEM and SELCO schemes	Can be used under both NEM and SELCO schemes
Billing Mechanism	Energy charges consolidated and collected via TNB electricity bill	Separate billing issued by RPVI to the customer
Asset Ownership	RPVI retains ownership during the term; transferred to customer upon expiry	RPVI retains ownership during the term; transferred to customer upon expiry (optional)
Dispute Resolution	Typically resolved through negotiation between senior representatives; if unresolved, disputes proceed to court litigation	Usually resolved through arbitration, as specified in the contract, often under AIAC rules
Termination Consequences	Provides a mutual buyout mechanism, where either party may be required or entitled to purchase or sell the solar PV system depending on which party defaults. Buyout price is based on current market value	Often includes a compulsory buyout obligation on the customer upon termination, including in cases of default. Buyout price is usually regulated or predefined
Service Fee (for TNB)	TNB imposes a tiered billing and collection fee under the SARE framework, ranging from 2 sen/kWh for systems below 500 kWp to 0.5 sen/kWh for systems between 2,000–10,000 kWp, based on installed capacity per SARE	No fees are payable to TNB, as it is not a party to the arrangement. However, RPVI typically incurs administrative charges for billing, and collection
Bankability	Bankable	Bankable
Suitability	Preferred by investors seeking stable, lower-risk investments with standardised terms	Suitable for businesses with flexibility in structuring deals and confident in managing bilateral risks
Flexibility	Limited flexibility due to standardised format	High flexibility in terms, pricing, risk allocation

Conclusion: Which One Should You Choose?

Both SARE and Private PPA can be great options, depending on your business needs. If you want something with more structure and TNB’s involvement in billing, SARE is likely the better fit. But if you prefer a custom deal that gives you more control over the terms, then a Private PPA might suit you better.

Whichever route you take, it is important to pay close attention to the legal details, especially what happens if the contract ends early. Clauses around termination, payment obligations, and asset handovers can have major business implications. Getting the right legal advice upfront can save you a lot of headaches down the line.

This Article is written by Yeo Shu Pin (Partner) of Messrs. Shu Pin & Associates.

Disclaimer: Every attempt to ensure the accuracy and reliability of the information provided in this publication has been made. This publication does not constitute legal advice and is not intended to be used as a substitute for specific legal advice or opinions. Please contact the author(s) for a specific technical or legal advice on the information provided and related topics.