A power purchase agreement is a contract to purchase electricity.
A key point here is that a PPA is not a leased agreement. This is because customers are buying electricity, not a solar system. The benefit here is that the expense of the solar system does not appear on the customer’s balance sheet, which can be helpful for businesses.
It’s a lot like a traditional electricity provider – except that here, providers are investing in a new clean energy production system, so a commitment to buy clean electricity is a part of the deal.
There are a number of variations on the PPA theme – here’s a summary of the ones most relevant to solar electricity.
Rooftop solar electricity has the rather marvellous advantage of generating energy right where it is being consumed. PPAs that focus on rooftop solar are called “behind the meter” PPAs because the electricity flows directly into a site, behind the point at which grid-based electricity does -being the meter.
The major advantage of this format is that you don’t have to pay network charges, which typically make up 35% – 50% of grid-based electricity.
These PPAs are well suited for businesses, schools, and other organisations who love the idea of going solar and paying less for electricity, but don’t want to pay anything upfront, and don’t want to have to monitor or maintain the system. Businesses also like PPA’s because it’s a lot less work than buying a solar system. There is no need to research providers and work with installers. There is no need to get a loan.
The main benefit is that the business remains connected to the grid. This is important because good solar power generation is weather dependant. Hence, a business will feel comfortable knowing they will always have power, but they get the benefit of using cheaper solar power for much of the day.
At the end of the PPA agreement, some providers will transfer ownership of the solar system to the building owner. This can be a good deal because panels generally come with 25-year power generation warranties, so at the end of a 10-year agreement, you’ll have up to 15 more years to enjoy ‘free’ solar energy. You may need to replace inverters that have shorter warranties, but it’s often not a major cost upgrade.
Some PPAs are production-based whereby the customer pays for all the energy produced whether they use it or not. Others offer consumption-based agreements whereby they pay only for what is used.
Some PPAs will increase the price per kWh over the life of the agreement to allow for inflation. Some offer a fixed price that will not change for the term of the agreement. Some customers prefer a longer agreement to ensure this price is locked in lower.
We design each system based on the unique requirements of each customer. This ensures installing the right number of panels with the right tilting to deliver the energy they need.
It also means tailoring the agreement – for example, it can range from 10 years to 25 years or more. As mentioned, sometimes longer agreements are attractive because the price per kWh is generally lower, it’s locked in for longer, and because some customers would prefer to have us maintain the solar systems for as long as possible.
If you are renting, a 10-year agreement might be a problem. We understand. We ask our renting customers to commit to just 12 months. After that they’re free to move out if they need to. We just need to be sure the panels stay put, even if you don’t.
We will ask the owner of the building for permission to keep the panels in place for 10 years. Luckily, they’re usually happy with this since they’ll be getting a free solar at the end of the agreement with over 10 years warranty on the panels (and they’re usually not using the roof anyway).
With each installation, we include a smart meter that helps us with faster billing but also with alerts for dips in power delivery. If an alert comes up you may not know it, but we’ll see it and schedule maintenance to fix it.
We’re 100% Australian owned and operated and we use Coffs Solar Energy as our local CEC Approved Solar Retailer for a quality locally warranted installation.
We believe in doing business person to person. So if you ever have a question or a problem just give us a call and talk to a real person.
Our agreements are just 7 pages long. They are laid out in clear sections. They’re designed to make it easy for businesses and organisations to switch to solar.
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