Commercial Solar PPA's

Solar PPA's (Power Purchase Agreements) are an attractive way to "go solar" and save substantially on electricity costs without requiring any monetary investment (!). 

Instead, the system is owned and operated by a third party, responsible for all costs and maintenance.  Electric cost reductions of 30% and more are typical, depending on your current rate.  The only requirement is that you, the "host" property owner, purchase all the power the system produces. Systems are therefore sized up to the historical usage, ensuring over production is not an issue.  (In fact, intentional over production would not achieve state approval). 

More on Solar PPA's

Solar PPA's represent the vast majority of the commercial solar installations in the state of New Jersey. Their cost savings and simplicity offers tremendous appeal.  The landlord need not raise any capital for purchase of equipment, nor be concerned with ownership and maintenance of the solar panel system.  Instead, he / she enjoys a fixed rate for power which is well under the current rate.  The otherwise unused rooftop asset is productively utilized and the additional rooftop shading is always welcome.

The sole obligation of the host property owner is to buy the power produced at the agreed rate.  Contract terms are 15-20 years, locking future power costs.  Instead of being at the whims of a deregulated power industry, (averaging 6% annual increases), the NJ landlord knows future power costs will only increase at a modest fixed rate of about 3%.  Although current costs may be $.15 cents or more without solar, the PPA rate will be between .09 - .13 cents depending on circumstances, current NJ incentive outlook and the aggressiveness of the developer. 

Of course the PPA developer seeks profit that is attained only partially through the electric rate payments.  Additionally, the Solar Renewable Energy Credits, or SRECs, that the system produces help offset the system cost.  These Credits can be sold in the open market to power companies to defer the capital investment.  The system will also be depreciated, producing tax credits, and the fed will refund 30% of the total system cost through 2011.  All-in-all, the PPA developer can make a respectable return, albeit accepting associated risks along the way.

 

 

If you sign a PPA, how concerned
should you be about the make, brand
or other technical features if you're
only required to buy the resulting power?