A Solar Power Purchase Agreement, or Solar PPA, allows businesses to avoid debt and/or not directly own energy assets while still reaping the benefits solar technology can offer. It is an alternative path for businesses unwilling or unable to make a significant capital investment but still value sustainability and wish to save on utility bills.
What is a solar PPA?
Solar PPAs are contractual financial agreements between a customer and a third-party developer. This is agreement is not a lease. The energy system is installed on the customers property and employed by them. The third-party developer, also known as the solar service provider, sells they system’s power back to the customer at rate typically lower than the local utility one. The customer pays a simple monthly or yearly payment for stable electricity that does not disrupt an existing mortgage. This funding framework involving the customer and third-party developer is known as a solar services model.
A solar PPA is a performance-based agreement. This means that the customer only pays for what the system produces. This payment can be at a fixed rate but does typically contain an annual price escalator ranging from 1 to 5 percent. This accounts for system inefficiency, aging, inflation and maintenance. The solar services provider will pay for solar panels and other system equipment installed during the project.
Benefits of solar PPAs
There are many benefits to solar PPAs for both the customer and the third party developer. With a solar PPA, the customer avoids many barriers normally involved with installing on-site solar systems. These include complicated design and permitting processes, financial and performance risk and upfront capital expenditure. The customer will also experience financial benefits sick as cash flow and lower utility bills along with predictable energy pricing and a potential property value increase. Along with these benefits, your business will clearly demonstrate its commitment to the environment and reduce its carbon footprint.
For the third-party developer, there are also financial benefits. These include federal investment tax credits and income generated from power sales to the customer housing the solar system. For nonprofits who can’t take advantage of federal tax credits, there are PPA contracts available that partner with tax equity investors who take the tax credits in exchange for an equity investment. This investment will decrease the cost for the customer.
Interested in Solar PPAs?
EnergyLink team members are experts in energy project financing. We know how to get the best financial setup for your organization and handle the tedious parts that come with bringing your energy project to life. If you are interested in solar technology EnergyLink has the capability to handle not only the funding phase but also the design and build ones. Click the link below to learn more or speak to a team member at (866) 218-0830.