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“A PPA is a popular choice among entities that want to take advantage of the clean energy production but do not necessarily want to own the PV system.”

In solar, it is important to make sure you are getting the most out of your system and making every component work for you.  This does not stop at the material used in your system, it is also important to evaluate every financial option for your project.  One financing vehicle that is particularly beneficial for a commercial solar project is a PPA or Power Purchase Agreement.  A PPA is a popular choice among entities that want to take advantage of the clean energy production but do not necessarily want to own the PV system.  This particular type of financing requires minimal to no upfront capital cost and provides a quicker payback than most. Though the business would not own the system hardware or take advantage of the federal tax benefits, the business owner is able to still reap the financial benefits of going solar. 

      When evaluating a standard PPA offer there a few things you need to pay close attention to:

      First, the price per kWh is a crucial number to look at as it structures your base payments over the life of the PPA.  The price can vary depending on project scope, goals of the system, and other variables that your lender will walk you through.

       Second, it is important to look at the escalator for the provided price per kWh.  Similar to your electric bills constantly growing each year, some PPA lenders choose to offer an escalator on a lower price per kWh. This helps the project financials move with the expected market increases, while still offering you a lower price than what you’d be paying with your local utility. 

      Finally, you need to look at the cumulative savings for the life of the project.  This measurement helps you see the benefits of a PPA and going solar in the long-term.  Typically, you will see small positive cash flow in the beginning years that gradually increases as you move through the life of your solar system. By the end of your PPA, you should have paid off your upfront costs and then some.  In conclusion, it is important that you carefully consider your options when looking for a financing option for your project.  PPAs are a great option that offer positive benefits to a project that cannot be paid for through a cash purchase.

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        About the author

        Simon Ivey is the Commercial Sales Manager for Aurora Energy and has been with the company since 2021. Prior to starting with Aurora, Simon worked in the renewable energy sector with a small solar firm in Florida for three years in commercial solar sales and marketing, helping to install solar for commercial businesses and government facilities. He  graduated from Samford University in 2019 and is currently pursuing a master’s degree in solar energy and renewable energy systems at Penn State University.

         When Simon is not studying or powering businesses with clean energy, he enjoys watching the Montreal Canadiens and spending time with his dog Sailor.

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          1 Comment

          Steve Jones · February 9, 2022 at 8:58 pm

          What a great article with great insight around a topic and direction that we are fortunate enough to be learning about and heading in. Mr Ivey is on the cutting edge and we are fortunate to be led on this journey by him and his renewable energy colleagues.

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