You may have heard of solar PPA? But what exactly is it? If you want to know about solar PPA, then read on.
Introduction of solar PPA
Solar PPA stands for Solar Power Purchase Agreement, which is a financial agreement. For most people, solar PPA is a popular financing option. With a solar PPA, homeowners don’t have to pay the upfront cost of installing a solar system. In it, developers arrange for the design, permitting, and installation of solar energy systems on the homeowner’s property for little to no cost. At the same time, homeowners will pay the electricity generated by the solar panels at a fixed price below the retail price of the local utility.
This lower electricity price is used to offset the cost of homeowners buying electricity from the grid, while developers receive revenue from those electricity sales and any tax credits and other incentives the system generates.
The PPA is typically 10 to 25 years, and the developer remains responsible for the operation and maintenance of the system for the duration of the agreement.
Advantages of solar PPA
No or low up-front investment costs: The developer is responsible for determining the up-front costs for the sizing, procurement and installation of the solar PV system. Without any up-front investment, homeowners can start saving money as soon as the solar system goes live.
Lower energy costs: Solar PPA provides a fixed, predictable cost of electricity for the duration of the agreement. A fixed-price plan maintains the same price for the entire term of the PPA, which can save homeowners even more as utility prices rise over time.
Low cost of risk taking: Developers are responsible for the performance and operational risks of the solar system.
Potential increase in property value: Solar PV systems have been shown to increase the value of residential properties. The long-term nature of these agreements allows the PPA to be transferred along with the property, providing customers with a way to invest in their home with little or no cost.
Disadvantages of PPA
Long-term savings through a PPA are much lower than savings obtained through outright purchases of solar panels or through a solar loan. Also, you may not be able to take advantage of certain solar incentives, such as federal tax credits or local incentives like SREC, which will save you a lot of money.
You must sign a long-term contract. These contracts sometimes prevent you from doing things like planting trees or doing construction work at home because it could affect solar panel production.
Also, if you are trying to sell your home, while you do have the ability to pass on the PPA to the next owner, it may be difficult to find a buyer willing to enter into the agreement.
In addition to solar PPAs, you can also get solar system installations in other ways.For example,direct purchase of solar systems with cash, lease of solar panels, solar loans.
Before you are ready to invest in a solar system, you need to have a solid understanding of these methods. By comparing, you may be able to get an investment approach that is more suitable for your situation.