A Power Purchase Agreement (PPA) is an arrangement in which a solar service provider designs, builds, owns, operates, monitors, and maintains a Solar system, and a customer agrees to site the system on its roof or elsewhere on its property and purchase the system's electric output from the solar services.
The Victorian Government defines a solar PPA or solar power purchase agreement
as an activity where “a business provides, installs and maintains, at no initial cost, a solar panel system to a customer and in exchange, the customer buys the electricity provided by the solar panels for an agreed price and for an agreed period.
Any electricity that is not used is sold to a licensed retailer.”
For the purposes of this article, we will refer to the business that installs the solar system as the ‘the developer’.
Given that the customer buys the energy generated from that solar system at a rate (c/kWh) generally lower than the rate they would get from the grid, they are able to enjoy the savings of the solar system from the first day it is generating energy, without having to invest their own capital.
The income the developer receives from the sale of electricity acts as their return on investment for paying for the installation of the solar system.
Furthermore, as the developer owns the solar system, they are entitled to receive the renewable energy credits and other incentives that are a byproduct of the solar system.
Solar PPA terms typically range from 10 to 20 years. During this time, the developer is usually responsible for the operation and maintenance of the system.
At the end of the contract, the customer is given the option to extend the Solar PPA, buy the solar system from the developer, or pay for the solar system to be removed.
Are you considering a Power Purchase Agreement?
In addition to no upfront , the advantages for commercial operations, government entities and other organisations of sourcing solar power via a solar PPA include:
The key benefits of a Solar PPA:
The solar PPA Provider will own and maintain the solar PV system with $0 upfront costs. This allows you to free up capital to invest in your own organisation, and take advantage of cheaper, cleaner electricity straight from your roof.
Your solar PPA Provider will take care of all the operations and maintenance in relation to the system, with no cost to you.
A PPA will give you certainty in relation to the price of electricity generated from the solar system for the life of the contract. We’ll also give you options:
A fixed price for the length of the contract with no increases.
A lower starting price with an agreed escalation rate.
CPI linked increases
We can provide you with various price options that suit your business’s needs.
Building Improvement and Green Ratings
A commercial scale solar power system can add significant value to a building. It can also greatly assist in achieving improved GreenStar and NABERS ratings.
Reduced Greenhouse Gas Emissions
It’s likely that a significant portion of your current electricity supply is sourced by burning coal and gas and transporting it hundreds of kilometres. Electricity generated under a Solar PPA is generated on-site and has no carbon emissions.
Other Benefits of Solar
There are other benefits of installing a commercial solar:
Reduced peak demand changes which can lead to lower electricity tariffs
Green benefits for your brand