A power purchase agreement is a contract to purchase electricity.
They are growing in popularity now because of the growth of the renewables industry.
Wikipedia says: A power purchase agreement (PPA)... is a contract between two parties, one which generates electricity (the seller) and one which is looking to purchase electricity (the buyer).
A key point here is that PPAs are not leases. This is because customers are buying electricity, not a solar system. The benefit here is that unlike with a lease, the expense of the solar system does not appear on the customer's balance sheet, which can be helpful for businesses.
It's a lot like a traditional electricity provider - except that here, providers are investing in a new production system, so a commitment to buy the electricity is usually part of the deal.
There are a number of variations on the PPA theme - here's a summary of the ones most relevant to solar electricity.
Large scale renewable production like wind farms and solar farms are very expensive. Companies building them need to be sure demand will be strong and revenues will flow. So they offer large electricity buyers (usually businesses) agreements at very attractive prices.
This way they lock in customers and a price that will be profitable. These have grown in popularity in Europe and the US in recent years.
Rooftop solar electricity has the rather marvellous advantage of generating energy right where it is being consumed.
PPAs that focus on rooftop solar are called "behind the meter" PPAs because the electricity flows directly into a site, behind the point at which grid based electricity does - the meter.
The major advantage of this format is that you don't have to pay network charges, which typically make up 35% - 50% of grid-based electricity.
These PPAs are well suited for businesses, schools, and other organisations who love the idea of going solar and paying less for electricity, but don't want to pay anything upfront, and don't want to have to monitor or maintain the system.
Businesses also like them because it's a lot less work than buying a solar system. No need to research providers and work with installers. No need to get a loan.
Because the sun doesn't shine all the time, many businesses will to stay connected to the grid. So they have they feel comfortable knowing they will always have a power, but they get the benefit of using cheaper solar power for much of the day.
Within this group of PPAs, there are a number of variables - here are some important ones.
At the end of the PPA agreement, some providers will transfer ownership of the solar system to the building owner. This can be a good deal because panels generally come with 25 year warranties, so at the end of a 10 year agreement, you'll have 15 more years to enjoy 'free' solar energy. You may need to replace inverters which have shorter warranties, but it's often not a bad deal.
Some PPAs are production based - the customer pays for all the energy produced whether they use it or not. Others offer a consumption based agreements - pay only for what you use.
Some PPAs will increase the price per kWh over the life of the agreement to allow for inflation. Some offer a fixed price that will not change for the term of the agreement. Some customers prefer a longer agreement to ensure this price is locked in lower (and is lower).
And here are a few of the ways Upstream Energy's PPAs are a bit different.
We design each system based on the unique requirements of each customer. This ensures installing the right number of panels with the right tilting to deliver the energy they need.
It also means tailoring the agreement - for example it can range from 10 years to 25 years or more. As mentioned, sometimes longer agreements are attractive because the price per kWh is generally lower, it's locked in for longer, and because some customers would prefer to have us maintain the solar systems for as long as possible.
If you are renting, a 10 year agreement might be a problem. We understand.
We ask our renting customers to commit to just 12 months. After that they're free to move out if they need to. We just need to be sure the panels stay put, even if you don't.
We will ask the owner of the building for permission to keep the panels in place for 10 years. Luckily, they're usually happy with this since they'll be getting a free solar at the end of the agreement with over 10 years warranty on the panels (and they're usually not using the roof anyway).
With each installation, we include a smart meter which helps us with faster billing but also with alerts for dips in power delivery. If an alert comes up you may not know it, but we'll see it and schedule maintenance to fix it.
We're 100% Australian owned and operated. And we use local CEC accredited installers around Australia - so our customers help to drive the local economy when they work with us.
We believe in doing business person to person. So if you ever have a question or a problem just give us a call and talk to a real person.
Our agreements are just 7 pages long. They are laid out in clear sections. They're designed to make it easy for businesses and organisations to switch to solar.
Jot your details in the form below and we'll be in touch very soon.