Power Purchase Agreements | EnergyLink

Power Purchase Agreements

Utilize the cash flow advantages of a well-funded PPA to design, build, and fund renewable and energy efficiency improvements at scale

What is a power purchase agreement?

A Power Purchase Agreement is a long-term electricity supply contract between three parties: a developer, an investor, and a customer (you) with roof or land space who is wanting to adopt renewable technologies. The developer designs, builds, and acquires funding for all renewable systems installed, so there are no upfront costs to the customer. The capital from the project comes from the investor. After all systems are installed, the developer then charges the customer a fixed rate each month for the electricity they use from the system. This rate is usually lower than the retail rate the customer’s utility company usually charges for power is.

The customer benefits from lower, predictable electricity costs and the developer benefits from receiving those payments, as well as the tax credits earned from the installation and other government incentives such as grants and Renewable Energy Certificates (RECs).

Benefits of funding your next renewable energy project with a Power Purchase Agreement

Lower electric rates than utility retail rates

No responsibility for maintenance or repairs

No upfront costs to install renewable systems

Benefits investors get from owning PPA-funded energy systems

Predictable cash flow from client electric service payments

Ability to redeem and earn all tax credits from systems installed in the project

Ability to sell Renewable Energy Certificates, depending on the state

What can power purchase agreements fund?

PPAs are available for renewable energy products, and are most often used for larger project applications, predominantly because lower electric rates can be secured when investors are more confident in the project (depending on the state and the investor). Larger project sizes provides more confidence for the investor.

Solar

Using a Solar Power Purchase Agreement, financial models and system payback show the best economic results for utility scale applications upwards of 1 megawatt.

Wind

Using a Wind Power Purchase Agreement, economic results and performance are more favorable in larger applications upwards of 1 megawatt.

Industries who could benefit most from using a PPA

Can other energy improvements be added to PPAs?

Energy efficiency and storage upgrades are generally not covered by Power Purchase Agreements. If those are involved in a project, they will likely be tacked on but listed as cost-adders. Other energy improvements outside of this scope cannot be added to PPAs.

Cost adders

Encompassing energy efficiency upgrades such as battery energy storage, LED lights, and Building Automation Systems (demand management).

Not covered

HVAC upgrades, roof replacement, and insulation upgrades cannot be added to Power Purchase Agreements.

PPA alternatives your organization should consider based on your specific project needs

Energy Service Agreement (ESA)

Giving the option to fund combined heat and power as an alternative source of power generation and battery energy storage upgrades.

Solar Service Agreement (SSA)

Funding solar with greater flexibility in the way the agreement operations, allowing it to be structured as a PPA, lease, or levelized PPA.

Managed Energy Service Agreement (MESA)

Using third party funding for an entire energy project, but allowing the opportunity to buy out ownership of all installed systems after 7 years.

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