How Power Purchase Agreements (PPAs) Allow Businesses And Homeowners To Go Solar.

PR Log (Press Release) – Sep 18, 2009 – A financing option known as a Power Purchase Agreement (PPA) is available to business and home owners who are looking to go solar but for a fraction of the cost.  A Power Purchase Agreement (PPA) is a legal contract between an electricity generator (PPA Provider) and a host site owner/lessor (business/home owner). The business/home owner purchases energy from the PPA Provider at a contractual price (typically at current or discounted utility rates) for a negotiated number of years.  This allows business/home owners to lock in current energy costs all the while going green.  The biggest advantage to the business/home owner is a predictable monthly electricity payment not subject to utility price volatility.  Although most PPA contracts will have an inflation escalator year to year (typically 3-5%), it is still below the historical utility increase of 7+% each year.  

In addition to securing energy costs, under the terms of a PPA, the PPA provider assumes the risks and responsibilities of ownership such as the purchase, operation, and maintenance of the solar facility.  However, because the PPA Provider is the owner of the solar system, all tax credits, grants, and utility rebates belong to the PPA Provider.  If you are looking into a PPA you should weigh the advantages and disadvantages summarized below:

Advantages
   Current/Discounted Utility Costs
   Hedge Against Rising Energy Costs
   Long-term Predictable Energy Prices
   Use of Solar Energy For A Fraction Of The Solar System Market Value
   Customer Only Pays For Energy Produced
   Customer Can Advertise It’s Use Of “Clean Energy”

Disadvantages
   Client Not Eligible For Tax Incentives, Grants, And Utility Rebates
   Client Does Not Own System
   Client Pays For Energy Produced Regardless of Actual Usage
   15 to 25 Years Of PPA Payments Depending On Contract Terms