Solar power purchase agreements (PPAs) are a type of financial agreement where homeowners “rent” a solar system in exchange for discounted rates on renewable energy.
PPAs have become less popular in recent years as owning a solar system has become more affordable. PPAs can make solar more affordable for many homeowners, as there are no up-front costs or maintenance.
However, because the homeowner does not own the system under a PPA, how much they can save is limited. Additionally, PPAs are restricted in some states. As a result, Blue Raven Solar does not offer PPAs, but they could still be a viable option for some homeowners.
Under a PPA, a homeowner pays for energy generated by solar panels installed on their roof. Your solar installation company will install the solar panels free of charge and maintain ownership of the system.
Unlike a cash purchase or solar loan financing, where the homeowner owns and pays for the solar system equipment, homeowners with PPAs only pay for the electricity the panels generate. This helps homeowners save money because they pay a discounted rate for their energy.
There are three parties involved in a solar PPA: the local utility company, the homeowner, and the solar company.
Your solar company administers the PPA. They will design, permit, install, and maintain the solar project over your contract term. Since the solar company owns the solar system, it can also claim incentives like the investment tax credit (ITC).
The homeowner “hosts” the solar system, meaning the solar company installs the solar system on their roof for use. As a result, the homeowner receives discounted energy prices below the utility rate. How much a household pays as part of the agreement depends on their energy usage, local energy costs, and the amount of energy the panels produce.
Finally, the utility company continues to provide traditional energy to the homeowner as necessary. If you live in an area offering net metering programs, your utility will distribute any net metering credits for excess energy sent back to the grid.
Solar PPAs and solar leases are both agreements where your solar installer fits panels on your roof that you do not own. Instead, you pay the company each month to use the system (a lease) or the energy it generates (PPAs).
Under a PPA, your monthly payments will fluctuate based on how much electricity the panels produce. For instance, if the panels produce more energy in the summer, you would pay more than in the winter when productivity is lower. On the other hand, with a solar lease, you pay a fixed price each month.
With a solar PPA, you are technically paying your solar installation company for the energy the installed panels produce at a discounted electricity rate. Under a solar lease, you are paying to use the solar equipment on your roof rather than the electricity.
PPAs do have their advantages, as they can save homeowners money and reduce their carbon emissions.
PPAs are appealing to many homeowners because they require little or no upfront costs for equipment, and the solar company handles and pays for all maintenance throughout the contracted term.
You will save some money on energy bills with a PPA, although it won’t be as much as if you owned your solar panel system. You can expect to pay about 20% less for electricity with your PPA compared to traditional energy.
Because you’ll power your home with clean energy, going solar with a PPA means you’ll decrease your household carbon emissions. A PPA can make renewable energy sources more accessible for households who cannot otherwise afford to own a solar system.
