A solar Power Purchase Agreement (PPA) is an agreement where a host customer allows a solar project, owned by another party, to be installed on their property and agrees to purchase all the electricity produced by the array. Typically there is no upfront cost to the customer and the rate to purchase the power is predetermined for a set period of time. The party owning the project is responsible for all cost associated with operating and maintaining the solar system. PPA’s typically range from 10-25 years but may provide an option to purchase the solar project before the end of the term.
The benefits to the host customer are a fixed or escalating rate that is typically lower than the local utilities retail rate. The reduced energy costs allows the host customer to save a substantial amount of money over the length of the agreement. Another benefit to the customer is no upfront cost. This allows customer who are not looking to spend money on solar to still be able to benefit from the savings solar provides.
The benefit to the party who owns the system is the income received from the host customer for the electricity delivered. The owner of the system will also receive all the tax benefits and other state and local incentives which comes from solar. An owner of a PPA solar project usually can realize returns greater than what they would receive if they invested their money in the stock market.
The Power Purchase Agreement is a great solution for an investor looking for an excellent return or a host customer looking to reduce energy costs. A Power Purchase Agreement can be used in all segments of the market such as residential, For Profit and Nonprofit Entities. The Power Purchase Agreement has substantially expanded the market to those who never thought it possible to be benefiting from solar.