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Chapter 3: Solar Programs Cost & Savings

Going Solar with a Power Purchase Agreement (PPA)

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IN THIS LESSON

Discover how a Power Purchase Agreement (PPA) works and why it’s a popular option for going solar. We’ll cover the pros and cons of PPAs, including how they affect upfront costs and monthly savings, and how they differ from other financing options.

What Is a Power Purchase Agreement (PPA)?

A Power Purchase Agreement (PPA) is a financial arrangement that allows you to install solar panels on your property without paying for the system upfront. Instead, a third-party company owns and maintains the solar equipment, and you agree to buy the electricity it generates at a set rate, typically lower than your utility’s rates.

How Does a PPA Work?

Here’s a step-by-step look at the PPA process

1. Site Evaluation and Proposal

The solar provider assesses your property to determine system size and energy potential. Based on this evaluation, they offer a PPA contract detailing your expected savings and monthly payment.

2. Installation

Once you agree to the terms, the provider installs the system at no cost to you. They handle all permitting, design, and setup.

Benefits of Choosing a PPA

Opting for a PPA has several advantages, especially if you prefer not to pay upfront for a solar system. Key benefits include:

  1. Zero or Low Upfront Cost: With a PPA, you avoid the high upfront cost of buying solar panels, making it accessible for more homeowners.

  2. Immediate Savings: Since the PPA rate is generally lower than utility prices, you start saving on electricity right away.

  3. Maintenance-Free: The provider handles all maintenance, repairs, and monitoring, so you don’t have to worry about upkeep.

  4. Flexibility: Many PPAs include options to purchase the system outright after a set period or transfer the agreement if you sell your home.

Considerations When Choosing a PPA

While PPAs offer many advantages, there are also some factors to consider

Is a PPA Right for You? If you’re interested in going solar without a large initial investment, a Power Purchase Agreement could be an ideal choice. A PPA provides a cost-effective way to access solar energy, save on monthly bills, and avoid the hassle of maintenance.

Interested in Learning More?
Contact SolarShip Corp to see if a PPA is available for your property and get a personalized estimate for your energy savings.

3. Monthly Payments for Solar Energy

Instead of paying a utility company for electricity, you pay the solar provider a predetermined rate per kilowatt-hour (kWh) for the energy your system produces. This rate is usually lower than standard utility rates, which means immediate savings.

4. Maintenance and Monitoring

The solar provider retains ownership of the equipment, so they are responsible for all maintenance and repairs, keeping the system running at optimal efficiency.

  1. Long-Term Commitment: PPAs typically last 20-25 years. PPAs are easily transferable to new homeowners making them a good option for short or long term time frames.

  2. Fixed or Escalating Rates: Some PPAs offer a fixed rate, while others include an escalator (a slight annual increase in your per-kWh cost). Make sure you understand your rate structure, and what is the best option for you and your home.

  3. Ownership Limitations: Since the solar provider owns the system, you won’t be eligible for tax credits or incentives that come with ownership, like the federal solar investment tax credit (ITC). However these incentives still contribute to getting you the lowest solar rate possible.

Comparing a PPA to Other Financing Options

Here’s how a PPA stacks up against other popular solar financing options

  1. Solar Lease: Similar to a PPA, a solar lease allows you to use the system without owning it, but instead of paying per kWh, you pay a fixed monthly fee.

  2. Solar Loan: With a loan, you own the solar system and are eligible for tax credits. Monthly payments go toward system ownership, and once the loan is paid off, you benefit from free solar energy. However, loans require a credit check and involve talking on debt.

  3. Cash Purchase: Buying a solar system outright provides the highest return on investment and access to all incentives. While the upfront cost is high, this option yields the most long-term savings.