A power purchase agreement (PPA) is a payment method ideal for someone who is looking to turn to clean energy without installing or owning a solar panel system themselves. The homeowner will have a system installed on their roof with virtually no price to them but will pay for their energy consumption via the system. The homeowner will pay the installer for their energy usage, which is almost guaranteed to be lower than what they would pay for a traditional utility.
Solar PPA Costs
Even though a homeowner has a very low upfront cost and no ownership in the system, there are still costs associated with this agreement. There are different types of PPAs. You should be aware of your solar company’s price per kWh and any increases or escalators that there may be over time.
Some companies will offer you an incredibly low price per kWh to begin with, only to increase the price drastically with an annual rate escalator that you may not have been made aware of. A lot of PPAs can last up to 25 years, so getting trapped in a contract with a utility bill that is growing exponentially can cost you thousands of dollars.
Solar PPA Pros & Cons
Pros to PPA
- Good for temporary homeowners
- Good if you can't pay upfront costs
- Good if you can't handle the upkeep of a system
Cons to PPA
- Can increase in price over time
- Can’t receive the federal tax credit
- Can complicate a home sale
PPAs can be great if you don't have the means to purchase your own system or the time to worry about maintaining the system. Additionally, homeowners who don’t plan on staying in their homes for a long time may not want to pay thousands for a new system. However, with all this being said, making sure you have a reputable installer can make all the difference. Installers may use escalators to drive up prices, and while you are locked into a long-term contract, you have no option but to pay.
Is a Solar Lease Different?
PPAs are very similar to solar leases, with only a few small differences. A lease includes a monthly payment at a fixed rate that may increase over time. A PPA is charged based on energy usage and should only increase if the homeowner uses more energy. Thinking about your energy usage and your own needs can be helpful when making the choice between the two.
Is a PPA Right for You?
Solar PPAs are great for homeowners looking to do their part toward clean energy. These offer a relatively low maintenance clean energy option for less than you would pay with regular electricity. However, lifetime savings are lower with PPAs than purchasing and owning a system.
Interested in learning more about PPA's? Get a Free home energy assessment to see if a PPA is right for you.