Installing a solar system on your property is one of the best investments that you can make. A well-managed and properly installed system can qualify for numerous tax credits and can increase the value of your home.
If you are looking to invest in solar energy, understanding the different options for financing your installation is an essential first step. That’s where solar PPAs come in.
What is a Solar PPA?
A power purchasing agreement (PPA) is like a solar lease. It is essentially a rental agreement with a solar company. With a PPA, the solar system will be installed and maintained by the solar company, but they will own your system and benefit from your tax incentives.
PPAs allow you to pass the heavy lifting to a solar developer while you enjoy less expensive electricity rates.
The solar partner that you hire will hand all the details including:
- Filing documents for solar incentives
Also, in a PPA, you pay the solar company for the electricity that is produced by your system.
This electricity costs less than the electricity you would purchase from your utility company, saving you money over time. Unlike a lease, there is no monthly cost that you will pay for the system itself.
Generally, the electricity that you purchase through your PPA will be increased at a predetermined rate, usually 2-5% a year. This helps you to save on your electricity bill immediately, and the amount that you save will increase over time as the electricity rate increases.
Compared to a solar lease, a PPA will end up saving you about the same amount of money. The only differences that you might find are within the terms of the agreement. Both types of agreements might include a path to ownership, depending on the terms of the solar company.
Benefits of Solar PPAs
There are several benefits of solar PPAs, including:
- No upfront installation costs
- Predictable energy pricing
- No need to take out a loan
- No system performance or operating risks
- Potential reduction in carbon footprint
- Potential increase in property value
- Support for the local economy and job creation
- Energy independence
Possible Cons of PPAs
Though there are many benefits, there are also a few possible negatives to agreeing to a PPA:
- More complex negotiations
- Potentially higher transaction costs
- Potential increase in property taxes
- The administrative cost of paying two separate electricity bills if the system does not meet your home’s electricity load
- Not qualified for solar incentives
- Obligated into a long-term contract
- Cannot earn income or use net-metering
What is the Better Choice? A PPA or Solar Lease?
Whether you decide to buy your solar system outright, lease it, or agree to a PPA, the bottom line is that you will be saving money on electricity and lowering your carbon emissions.
As the weather changes and sun levels weaken, solar panels produce different amounts of energy depending on weather conditions, even in the Sunshine State! In Florida, solar PPA bills will likely be higher in the months of April-September when it is the hottest and UV rays are the strongest. Your PPA bill will be lower in the cooler months when sun rays are weaker, and your panels produce less electricity.
What option best fits your needs will ultimately depend on what you are comfortable with financially. Owning typically gives you the best financial incentives, such as the solar investment federal solar tax credit, or ITC. Solar leasing gives you peace of mind knowing how much your solar bill will cost each month. With a solar PPA, you may end up saving more money than with a solar lease.
Learn More About Solar PPAs
If you are interested in installing a solar system on your property or learning more about solar PPAs call our solar pros at Solar Bear Orlando for a consultation! We will help you decide which route is best for you!
Call us at (727) 471-7442 today!