What is a Solar PPA Power Purchase Agreement?

A solar (PPA) power purchase agreement is a financial agreement where a solar developer arranges for the design, permitting, financing and installation of a solar roof, solar farm or solar parking lot on a customer’s property at little to no cost. The developer sells the solar energy generated to the host customer at a fixed rate that is typically lower than the local utility’s retail rate. This lower electricity price serves to offset the customer’s purchase of electricity from the grid while the solar developer receives the income from these sales of electricity as well as any tax credits and other incentives generated from the system. PPA agreements typically range from 10 to 25 years and the developer remains responsible for the operation and maintenance of the system for the duration of the agreement.

Benefits of PPA's to property owner
  • No or low upfront capital costs for solar system: The developer handles the upfront costs of sizing, procuring and installing the solar system. No upfront investment and the customer able to save money as soon as the system becomes operational.
  • Reduction of energy costs: Solar PPA's provide a fixed, predictable cost of electricity for the duration of the agreement and are structured in one of two ways:  
    1. Fixed escalator plan, the price the customer pays rises at a predetermined rate, typically between 2% - 5%. This is often lower than projected utility price increases. 
    2. Fixed price plan, on the other hand, maintains a constant price throughout the term of the PPA saving the customer more as utility prices rise over time.
  • Limited risk: The developer is responsible for the solar system performance and operating / maintenance risk.
  • Better leverage of available tax credits: Developers are typically better positioned to utilize available tax credits to reduce system costs.  For example, municipal hosts and other public entities with no taxable income would not otherwise be able to take advantage of the Section 48 Investment Tax Credit.
  • Potential increase in property value: Solar systems have shown to increase property values. The long term nature of these agreements allows PPA's to be transferred with the property and thus provides customers a means to invest in their home at little or no cost.
  • Extension: At the end of the PPA contract term, a customer may be able to extend the PPA, or have the developer remove the system or choose to buy the solar energy system from the developer. 
  • Transferable:  PPA's agreements are typically transferable if a sale or the property occurs.
A solar lease is another form of third-party financing that is very similar to a PPA, but does not involve the sale of electric power. Instead, customers lease the system as they would an car.  In both cases, the system is owned by a third party while the host customer receives the benefits of solar with little or no up-front costs. These third-party financing models have quickly become the most popular method for customers to realize the benefits of solar energy.

Colorado, for example, first entered the market in 2010 and by mid-2011 third-party installations represented over 60% of all residential installations and continued to rise to 75% through the first half of 2012. This upward trend is evident throughout states that have introduced third-party financing models.

Apparently, Walmart is a big fan of PPA's and has entered into a lot of agreements at some stores. 

What is a Solar Utility CCA or Community Collective Aggregation?

A solar Community Collective Aggregation (CCA) is an optional buying group organized by a municipality or a group of municipalities to benefit electric customers. (CCA) is a state policy that enables local governments to aggregate electricity demand within their jurisdictions in order to procure alternative energy supplies while maintaining the existing electricity provider for transmission and distribution services.

  • Came out of the Utility Deregulation Act of 1997 to enhance the competitive market
  • A CCA would enter into an electricity supply contract for all customers who remain on default service within a given municipality. 
  • Customers can participate in the long-term fixed rates
  • Customers are automatically enrolled, unless they opt-out

Benefits of Community Choice Aggregation

  • Solar & Wind - more options to generate power using renewable energy and distributing power on the grid 
  • Choice - No longer "stuck" with utility default rates
  • Stability - Municipality can seek long-term rates to avoid market volatility 
  • Savings - CCA obtained rates are generally below to substantially below average default rates. 
  • Economic Development - Stable and lower utility rates provide a competitive advantage for businesses choosing locations 
  • Pro-Consumer - Contract terms and conditions are designed to protect consumer rights
  • No Penalties for Consumers - Opt-out anytime and go back to default service or choose another provider
  • Environment - less fossil fuels used by traditional coal, gas and nuclear power plants.  

Currently, there are only 4 CCA utilities in California and there will be 22 in the State by the end of 2017. Look to Silcon Valley for some leadership ideas for other municipalities looking to do the same.

Top 10 Solar Roof Business Installers for 2016

The Minneapolis-based retail giant topped all other American big businesses installing solar, according to a new report from the Solar Energy Industries Association (SEIA). Here are the top 10 solar retail stores. To date, top US corporations have added nearly 1,100 MW of solar energy — in over 38 states, Puerto Rico, and Washington, DC. In 2016 alone, US corporations have added 142 MW, more than all of 2015, which topped out at 129 MW.   Read more
  1. Target — 147 MW
  2. Walmart — 145 MW
  3. Prologis — 107.8 MW
  4. Apple — 93.9 MW
  5. Costco — 50.7 MW
  6. Kohl’s — 50.2 MW
  7. IKEA — 44 MW
  8. Macy’s — 38.9 MW
  9. General Growth Properties Inc. — 30.2 MW
  10. Hartz Mountain Industries — 22.7 MW
We have mapped several hundred of these locations you can search on our solar map.

Popular Posts