A Solar Power Purchase Agreement (PPA) is a financial arrangement where a solar company arranges for the design, permitting, financing and installation of a solar energy system on a customer’s property at little to no cost. The company sells the Net Metering credits or the power generated to the host customer at a fixed rate that is typically lower than the local utility’s retail rate (in Vermont, only utilities can sell electricity to consumers).
This lower electricity price serves to offset the customer’s purchase of electricity from the grid while the solar company receives the income from the sales of Net Metering credits or electricity as well as any tax credits and other incentives generated from the system. PPAs 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. At the end of the PPA contract term, a customer may be able to extend the PPA, have the project owner remove the system or choose to buy the solar energy system from the owner.
Power Purchase Agreement Benefits
No or low upfront capital costs: The developer handles the upfront costs of sizing, procuring and installing the solar Photovoltaic (PV) system. Without any upfront investment, the host customer is able to adopt solar and begin saving money as soon as the system becomes operational.