What is Solar PPA?
A Solar Power Purchase Agreement (PPA) is a method of financing solar panels where the retailer (or generator) builds, owns and operates the solar PV system. They are called power purchase agreements because the purchaser (or off-taker) sells electricity generated by the solar system for a fixed price and a fixed period.
The electricity is generated by the solar power system and is charged at a kWh rate (either for the total production of electricity by the consoles or by the site consumption). This is known as either a Production or a Consumption Solar PPA.
The arrangement is typically between 10 to 30 years and usually has an annual price increase for the duration of the term. There is no upfront cost, but the purchaser needs to buy the kWh as agreed in the PPA agreement.
Solar PPA Agreement is suitable for:
● Commercial solar projects
● Solar Battery & Diesel Generator projects
● Off-grid solar projects
Advantages of a solar power purchase agreement
- No upfront costs
- Cashflow positive from day 1
- Predictable energy pricing
- Can be 50% cheaper than grid electricity rates
- No system performance or operating risk
- No liability for system underperformance / malfunction
- No need to work with installers
- Electricity remains an operational expense
- Remain grid-connected – built-in redundancy
- Full O&M servicing + 24/7 remote monitoring
- Potential to easily expand and add new technologies
- Reduce your business’s carbon footprint
Solar PPA vs. Solar Lease
Solar PPAs and a traditional lease are both forms of solar financing with many similar benefits.
However, the main differences are:
Pricing
With a solar lease, you pay a flat monthly fee for the solar panel system, which should be less than what you were paying on your monthly electricity bills. For example, if your business is paying $2,000 a month for electricity, you’d be looking for a lease that was less than $2,000. In contrast, with a solar PPA, you pay a guaranteed price per kilowatt of electricity produced or consumed (depending on your contract) by your new solar energy system. This price will be lower than the price per kilowatt hour you pay for grid electricity. For example, if you pay 20 cents per kilowatt hour for grid electricity, your solar PPA terms should charge you less than this amount.
In contrast, with a solar PPA, you pay a guaranteed price per kilowatt of electricity produced or consumed (depending on your contract) by your new solar energy system. This price will be lower than the price per kilowatt hour you pay for grid electricity. For example, if you pay 20 cents per kilowatt hour for grid electricity, your solar PPA terms should charge you less than this amount.
Duration
Another difference between solar PPAs and leases is their duration. Solar leases can be as short as 3-5 years, whereas a solar PPA typically lasts at least 10 years in duration, sometimes as long as 30 years.
PPA Solution
Win Win
- Provide cost relief to your site. We will generate solar electricity from an asset installed on your premises, and you buy the solar power it produces – the rest is supplied by your existing grid retailer.
- We install the solar, with you having nothing to pay other than buying the low-price energy fixed rates
Post Term Rate
- At the end of the initial term, you can either take the pre-agreed post term rate offer or choose to not renew your account with us.
Buyout anytime during the term or after term with pre-agreed prices.
- At the end of the initial term, you can either take the pre-agreed post term rate offer or choose to not renew your account with us.
Which financing option is right for your business?
So, which is right for you – a solar PPA or a solar lease?
That’s where Kuga Energy can help!
With extensive experience in commercial solar financing, we have the skills and expertise to help you determine the best possible arrangement for your business.
Contact the Kuga team so we can have a chat about how to cut your electricity costs with a renewable financing solution that’s cashflow positive from day 1!
How does Solar PPA Work?
It’s important to be aware that this arrangement covers your electricity costs for daytime power usage only. When the sun goes down, your business will have to purchase electricity from the grid – this will not be at the same low rate as the arrangement.
The rate for night-time grid electricity can be negotiated on your behalf by the provider or directly with the electricity retailer of your choice.
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