Solar Power Purchase Agreement – Why Should You Know About It?

Solar Power Purchase Agreement

A solar power purchase agreement (PPA) is a financial agreement where a developer helps the homeowner by arranging for the design, permitting, financing, and installation of a
residential home solar system on the home owner’s property at little to no cost. PPA is a contract where the developer sells the power generated by the solar system to the host customer at a fixed rate that is typically lower than the local utility’s retail rate. This decreased price on the power serves to offset the electricity purchased by the customer from the grid. While the developer gets income from these sales of electricity, tax credits, and other incentives generated from the system. PPAs typically range from a period of 10 to 25 years and the developer takes the responsibility for the operation and maintenance of the home solar system for the entire duration of the agreement. At the end of the PPA contract term, a customer may be able to extend the PPA, have the developer remove the system, or choose to buy the solar energy system from the developer itself.

Advantages of PPAs To Solar Customers

  • No or Low Upfront Capital Costs : Homeowners can have peace of mind, as the developer handles the upfront costs of various things such as sizing, procuring, and
    installing the rooftop solar panels. So, with no or low upfront investment, the host customer (homeowner) is able to adopt solar and begin saving money as soon as the system becomes operational.
  • Decreased Energy Costs : When you choose to go with Solar PPA, you will have a fixed, predictable cost of electricity for the duration of the agreement which is structured in two ways. One of the ways is fixed escalator plan wherein the price the customer pays for the energy rises at a predetermined rate that may range between 2% – 5% which is often lesser than projected utility price increases. The other alternative is the fixed price plan that maintains a constant price throughout the term of your solar Power Purchase Agreement, irrespective of the utility prices that rise over time.
  • No or Very Low Risk : When you get into a PPA contract, the developer is responsible for system performance and operating risk. The homeowner does not have to face the risk of maintaining the system.
  • Better Leverage of Available Tax Credits : When you choose to go with solar PPA, the developers take the chance of utilizing the available tax credits to reduce system costs burden on homeowners.
  • Potential Increase In Property Value : A solar PV system helps increase residential property values. The long-term nature of these agreements allows PPAs to be transferred along with the property, thus providing customers a means to invest in their homes at little or no cost.

PPA Considerations

  • Solar Renewable Energy Credits (SRECs) : SRECs show that a certain amount of electricity was produced using a solar PV system. SRECs are typically bought and sold by load-serving entities, typically the regulated utilities to meet obligations associated with state-level renewable energy standards. Generally, in PPAs, SRECs are owned by the developer. So, when getting into a PPA, it is important for a customer to clearly understand who owns and can sell the SRECs generated from the PV system, the tradeoffs with respect to PPA price, and the risks attendant to SREC ownership.
  • How To Finance : You can make research on your own or can get to know the best finance options available with the help of solar panel installers or the developer.
  • Site Up gradation : While the developer is responsible for installation, operation, and maintenance of a solar PV system, the homeowner (host customer) may need to spend some money in his/her property in order to support the installation of the system, lower the cost of installation or to comply with local authorities standard rules and regulations.
  • Possible Higher Property Taxes : While a PV system may help to raise the site’s property value, there may be or may not be an increase in property taxes when the property value is reassessed depending on the regulating authorities’ ordinances.

We hope this article is helpful for the ones looking to go for a Sustainable living. We at Wattz, the leading solar panel installers for residential homes have already completed many projects for many homes in Dubai. So, if you are looking for green energy options, book an appointment with us today.

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