Power Purchase Agreement

A power purchase agreement is simply an agreement to purchase power at an agreed-upon price ($/kWh). A reputable solar company offering you a PPA should very clearly inform you what the price per kWh is for your agreement. Be mindful that many companies offer fairly low “starter”-rates, for example, $0.155/kWh, with no money down if you qualify, BUT the contract includes an annual rate escalator, usually between 1-2.9% per year, for the entire 20 year PPA. While this may not sound like a lot, it can equate to thousands more than a flat-rate PPA over the course of the agreement. Note that monthly PPA payments are the product of your agreed-upon $/kWh rate and the kWh production of your system during that relevant month or period.

Leasing Solar Panels with a Power Purchase Agreement (PPA)

A recent development in the solar financing industry was the creation of a Power Purchase Agreement, wherein a financier finances the installation, and the homeowner pays them in return over 20 years through a new kWh/$ payment structure. Therefore, you would only be paying for the energy that is actually produced monthly by your system, and your monthly payment to the financier will fluctuate month-to-month.

In this PPA scenario, the homeowner is eliminating a tier structure and replacing it with a new, single rate. PPAs almost always have an escalator rate increase as part of the Agreement. This means that a rate could increase at the start of the new year for the duration of the rental. For instance, if you started out in Year One with a PPA rate of $0.15/kWh and an escalator of 2%, by year 5, your rate is $0.1612.

Topics

Buy Solar Panels

What Is Ownership? Ownership of the system is when you purchase your solar panels outright with cash, or you finance the system and pay it...

Learn More

Solar Loans

A solar loan provides a key differentiator from a lease, ownership. With ownership comes another major benefit, added home equity. A recent study from Lawrence...

Learn More

Solar Lease

A solar lease is very similar to your current utility bill. The energy will be generated on site via clean solar energy, and the customer...

Learn More

See how much solar panels cost in your area.

Please enter a valid zipcode.


Please enter a valid zipcode.

Zero Upfront Cost. Best Price Guaranteed.