SOLAR JOE – PPA 101

The Solar Power Purchase Agreement (PPA) is how I see solar going mainstream.  If your credit score is 650 or better, and your roof is in good condition, you can literally go solar without spending a dime upfront. 

In a PPA, you pay only for the power that the solar panels generate at a fixed rate per kilowatt hour (kWh).  In Southern California, your sun baked roof can potentially offset your entire electric bill.

Here are some details you should understand about a PPA:

$0 UPFRONT COSTS:  Without a large investment upfront, you are able to adopt solar and begin saving money as soon as the system becomes operational.

DEVELOPER OWNS THE SOLAR SYSTEM:  This is how a PPA makes solar easy to adopt.  The developer designs, permits, installs, and then monitors and maintains the system for the duration of the 25 year agreement.  They guarantee the system’s performance and only charge for the power that the system generates.  If anything goes wrong with the system, it’s their problem, not yours.

Its a good investment for the developer because solar panels are tough, there are no moving parts, and a properly installed system is super reliable.  They are banking on the reliability of the system.

REDUCED ENERGY COSTS:  You get a fixed, predictable cost of electricity for the duration of the agreement.  This rate will increase by about 2.9% per year, far lower than projected utility price increases.

TAX CREDITS:  Tax credits and incentives are factored into the lower rates that you will pay for solar power.

POTENTIAL INCREASE IN PROPERTY VALUE:  Solar Photovoltaic (PV) systems have been shown to increase residential property values, and PPAs can be transferred when a home is sold.  This gives you the means to invest in your home at little or no cost.

25 YEAR AGREEMENT:  a big step (in the right direction) 🙂

YOU WILL STILL RECEIVE A UTILITY BILL:  Remember, you’re still on the grid.  Sometimes your system pushes power into the grid, other times your power will come from the grid.  This is called “net metering” and there is a small charge for just being connected.

PERFORMANCE IS GUARANTEED:  If the system under-performs, you’ll be reimbursed for the amount the system underperforms.  If the system over-performs, the power from overproduction is free.  The performance guarantee is an important part of the PPA.  It protects you from getting stuck with a system that underperforms.  Keep in mind that performance is calculated yearly, not monthly or daily.  In the US, solar systems perform better in the summer than they do in the winter, so overall performance has to be averaged out over an entire year.  

DEVELOPER MONITORS AND MAINTAINS SYSTEM:  Its up to the developer to keep the system up and running, so if the system is damaged or stolen, they’ll fix or replace it for free.  Golfballs not included.  Interestingly, damage from golfballs isn’t covered.  Also, its up to you to maintain shade conditions, keep plants trimmed etc.

IF YOU SELL YOUR HOME, the PPA is transferred to the buyer.  If the buyer doesn’t qualify for some reason, for $250 they can assume the PPA.  So basically, the buyer is guaranteed to qualify.

END OF TERM:  At the end of the term, you can renew the PPA, purchase the system, or have it removed.

So there you have it, Solar Joe – PPA 101, subject to change, and limited on detail.  All of this is included in the actual PPA.  We’ll sit down together to discuss the PPA in more detail.