Power Purchase Agreements

What is a Power Purchase Agreement?
A Power Purchase Agreements (PPA) is a long-term legal contract between an energy provider and an energy user. SolSource works with a number of national PPA providers and can provide agreements for solar PV systems ranging from 250kW to 2MW.

How a PPA Works
The Power Purchase Agreement is a contractual relationship between an electricity generator (typically, a utility company, known as a PPA Provider) and a building or (host) site owner or lessor. The heart of the agreement is to provide solar electricity at guaranteed long-term rates. The host site owner purchases energy or capacity from the PPA Provider. The PPA provider secures funding for the project, maintains and monitors the energy production of the system, and sells the electricity to the host at a contractual price for the term of the contract. The term commonly runs between 10 to 25 years. In some contracts, the host has the option to purchase outright the generating equipment from the PPA provider at the end of the term. Other options may include renewing the contract with different terms or having the equipment removed. The PPA provider handles insurance on the photovoltaic system.

Benefits of a PPA
A PPA allows the host to utilize renewable solar energy without making a large up-front capital expenditure. By doing so, the host is able to reduce their environmental impact and help meet part or all of their mandated renewable energy commitment. As importantly, the host locks in an energy rate that, over the term of the contract, results in significant cost savings given ever-rising utility rates. In addition, a PPA gives a tax-exempt entity (e.g. a school, non-profit, government, etc.) the opportunity to take advantage of Federal tax incentives for solar energy. By assigning system ownership as well as all rebates and tax credits to the PPA provider, the host facility is able to reduce the installed cost of the system significantly, therefore resulting in a lower per-kWh rate to the host. The host, in turn, enjoys stable energy prices on a clean energy system maintained by the PPA owner.