A solar power purchase agreement (PPA) allows the end user to pay for solar per kilowatt hour, similar to how you pay a utility bill. A third-party financing company pays for – and owns – the actual system which is put on your business’s property. They pay for the installation, operation and maintenance of the system. They recoup their investment by selling the power generated by the system back to you at a fixed rate, usually lower than the rate offered by the local utility. You lock in this rate for the duration of the agreement, usually 15-30 years. Your monthly payments are based on the energy the system produces.
The financing company receives any tax credits and incentives from the installation of the system. At the end of the term of the contract, you may be able to extend the agreement, purchase the system, or have the developer remove it.
With a PPA, you will receive two bills. The first is from the utility for the balance of the energy costs. It will reflect the credits you receive when you overproduce electricity, demand charges, and any ancillary fees. The second is from the financing company. It will reflect a cost per kilowatt for the energy that is generated by the solar system.