Residential or Commercial Use

Power Purchase Agreements (PPA) are forecasted to drive 75% of the commercial and industrial solar sales in the future. And why not? Almost everyone wants to go solar; they just have a hard time affording it.

Remember, a PPA will work for residential and commercial applications.

A PPA (or sPPA as in “Solar Power Purchase Agreement”) is an arrangement wherein a power company pays the up front costs for a solar power project in exchange for a contract requiring a customer (the land or building owner) to buy the resulting electricity. It’s the same business model that utilities use to buy power but is now being used to help solar projects for individual buildings.

At a quick glance, a Power Purchase Agreement provides the property owner with the following:

*Third party financing company purchases a solar electric system for your property then charges you for the electricity generated.
*No up-front capital required.
*No maintenance of the system or risk.
*Property owner secures a long term contract for power, often at below current utility rates, thereby stabilizing an operating cost (utility rates) that was once highly variable.
*Option to purchase the system at fair market value after a set period of time usually 15-20 years or can be renewed on favorable terms.

With a solar PPA the customer can avoid the hassle of having to run their solar facility but have the security of knowing that their energy costs are never going to rise due to an increase in fuel costs or supply shortages.

Other Purchase Options

There is always the option of buying or leasing-to-own a solar-power system and each has its own advantages. When you buy the facilities outright you own the system and control all the power generated from it. On the downside it takes significant capital to be able to afford to purchase all the equipment and you are responsible for all the maintenance.

By leasing-to-own you can get a solar-power system installed with a small down payment and continuous fixed monthly payments for a set duration. You still have to maintain the system, but at least it is more affordable than paying for it up front.

Things to Consider

While participating in a solar PPA sounds like the best option, it needs to be carefully considered. Keep in mind that with a sPPA you do not own the equipment, and having a consistent supply of reliable energy is completely dependent on the company that operates and maintains the facilities. At the very least you should thoroughly investigate any company offering a solar PPA to ensure that they have a good track record with their previous clients.

Is SPPA Right For You?

To decide if participating in a Solar Power Purchase Agreement is right for you or your company you should consider the following:

Consumption – less power consumption is better, as this will keep the cost of the facilities at a reasonable level, meaning that the cost of your electricity will be manageable.

Ownership – you must have the land available to build the facility, either owned or leased for a minimum of 20 years

Solar-Support – the net cost to your business will be less if you live in an area that offers tax incentives and rebates for solar energy equipment

Electricity Costs – the higher your costs per kWh of electricity, the better off you will be by switching to solar power

Conclusion

A solar PPA offers an alternative to expensive start-up costs for those who want to switch to solar energy for their energy needs. With the ability to lock-in the electricity rate for 20 years, as well as eliminating the need for maintenance on the facility a Power Purchase Agreement is certainly something to think about if you want to start using solar power.

Download The Customer’s Guide to Solar Power Purchase Agreements from the Rahus Institute