Power Purchase Agreements (PPA)
A solar power purchase agreement (PPA) is a financial agreement where a developer arranges for the design, permitting, financing and installation of a solar energy system on a customer’s property at little to no cost. The developer sells the power generated to the customer at a fixed rate that is typically lower than the local utility’s retail rate. This lower electricity price offsets the customer’s purchase of electricity from the grid while the developer receives the income from these sales of electricity as well as any tax credits and other incentives generated from the system. PPAs typically range from 10 to 25 years. The developer remains responsible for the operation and maintenance of the system for the duration of the agreement. At the end of the PPA contract term, the 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.
Benefits to Solar Customers
• Low or no upfront costs
• Reduced energy costs
• Limited risk
• Developers can better leverage available tax credits
• Potential increase in property value
How do SPPAs work?