If you’re here, then chances are you have decided to take the plunge & switch to solar energy. Give yourself a pat on back! You’re contributing a lot towards an ecological movement. Solar energy is a great choice for many building owners, house owners, and even for the tenants who want to lower their electricity cost. After deciding to switch to solar, the first solar bill will make the corners of your mouth turn up. But you know what! Solar Power Purchase Agreement can be a great alternative to save your electricity cost but little confusing when you try to study about it. This is why you must take time to understand how solar PPA actually works. Let’s get started.
What is Solar PPA?
Solar PPA is actually called as solar power purchase agreement. It is a mutual deal between two parties one who is the buyer and the other who is the seller where the seller helps the buyer or the house owner in installation, design, financing and maintenance of residential home solar system for little to no cost.
While many people would prefer to go solar to reduce their electricity bills and relay on the grid, many others simply can’t afford to the upfront cost of buying the solar panels outright.
However, if you cannot afford to the price of a solar PV panel or a solar system that doesn’t necessarily mean that you are missing out the environmental benefits of solar.
In this case, few customers lease their solar panels, and others go for a PPA (Power purchase agreement). In this PPA an outside company that owns the solar panel systems handles the legal requirements, arranges the installation and maintenance, reaps the benefits of tax and incentives, and allows you to utilize the solar energy by purchasing it from them rather than relying upon a local solar power company.
The time period of PPA rage from a period of 10 to 25 years during this period the developer takes responsibility for the operation and maintenance of the home solar system and the customer can be able to extend the time period of agreement when the contract is near to end. Now we have seen what is PPA lets also look into the benefits of it.
Benefits of a Solar Power Purchase Agreement
The PPA has various kinds of benefits and makes the process simple and affordable they include:
No/Minimal Upfront Costs:
Solar PPA grants an immediate pay off to the energy consumer or host. As the developer takes care of all the financing, procurement and installation process, the customer saves the energy bill while utilizing the solar services.
When you choose to go solar the solar developer takes the complete responsibility of solar operational risk and performance leaving the home owner in peace.
When you sign on a PPA contract you will have a fixed and predictable energy cost for the entire duration of the agreement structured in two different ways. One of which is escalator plan and the other alternative way is fixed price plan.
Fixed Escalator plan:
In the fixed escalator plan the house owner pays money for the energy he had used at a predetermined rate which may range between 2% to 5% which is usually lower than the increased projected utility price.
Fixed price plan:
In this plan the price of the solar service utility remains constant throughout the solar Power Purchase Agreement term without having any relation to the utility prices that rise in over time.
Tax Credit Leverage:
Compared to a solar energy consumer, solar developers are more capable of utilizing the tax credits that help in reducing of overall cost of a solar system.
Solar PPA VS Solar Lease
Now here most of the people are confused between a solar PPA and solar lease because of the matching identity for both in many aspects let us study them more clearly.
Whether you get a solar PPA or a solar lease it depends upon your choice, and while coming to the savings you will still save money on your raising electricity bill with both of them while using clean and renewable energy. However, a solar PPA or the solar power purchase agreement has more potential to save your money until the end of your contract because of the monthly payments that are directly related to the amount of energy the solar power panels have produce.
For an instance, let’s say in September the solar panels on your roof top had produced 800 kWh of the solar electricity and your PPA Company charged you $0.12 per kWh. Then, in October the panels had produced only 600 kWh of electricity because there are less sunny hours in that particular month. Then your PPA payment would only be $72 because of the less energy produced.
While taking about a solar lease, your payment would remain same all over the year, no matter how less or how much power the solar PV panels produce. In leasing you might not save as much as you save in PPA during long term. And paying for one flat lease payment makes the payment process much easier. You don’t have to panic about the fluctuating monthly payments, and you can also build your budget easily based on your standard monthly payment.
Things to consider during solar PPA agreement:
Although solar PPA gives you an excellent avenue to reduce energy bills and solar savings but still few factors must be taken into consideration.
Solar PPA has many advantages in terms of immediate savings and accessibility with other benefits. But there are also few up slopes while purchasing solar power panels so, always make a thorough research on the financing options with the help of solar panel installers.
Solar Renewable Energy Credits:
Solar RECs show the particular amount of electricity produced by the solar system and it is particularly owned by the developer. So while signing on PPA it is necessary for the customer to check who owns and has the rights to sell SRECs generated by the solar system.
Site Up gradation
The developer is responsible for the installation, maintenance and operation of the solar panels but sometimes the house owner also needs to spend some amount of money to support the installation process so comply with the local authority standard rules and regulations before going ahead.
Higher Property Taxes
The solar PV system may boost the property value but also the same way there are higher property taxes but this varies from state-to-state owing to policies and regulations. So make sure you consult a tax professional for a clarity on this issue.
We hope this article have helped you to a greater extent. We at Wattz have supplied solar systems for many homes and workspaces in Dubai with a great developing and supplier background. If you are looking to go solar and contribute towards a green energy movement do give us a call and book your appointment today.