What is the Solar Power Purchase Agreement?

picture of solar ppa agreement

Solar panels provide homeowners and businesses with a plethora of benefits including conserving our environment by cutting down on fossil fuels, increasing your home’s value, and best of all – saving on electricity bills in the short and long term. One of the most popular ways to invest in solar is through a solar power purchase agreement (SPPA) which requires no initial down payment and can be installed in a matter of months. CRJ contractors is  here for you through every step of the process to successfully invest in solar. We help our clients by informing them of their buying options by first learning about their goals for investing in solar. Investing in solar is often overlooked because it requires a substantial down payment or can seem too big of an undertaking. However, we understand the various options each homeowner has when it comes to investing in solar. SPPA’s are the perfect match for someone who wants to save on electric bills while conserving the environment, but at the same time doesn’t want to make big financial risks in doing so.  

picture of solar ppa agreement

Benefits of Solar PPA to Solar Investors

The Solar Power Purchase Agreement (SPPA) is a financial agreement between a solar panel host (you as a solar investor) and a third-party solar services provider. These providers will install solar panels onto your home for little or no cost by contracting other solar panel companies or doing it themselves. They will design, configure, and install your PV system at no cost. In exchange, you will agree to pay for the solar energy produced from the grid, which is typically a fraction of what utility companies charge. For example, if you pay 15 cent per watt to your utilities company, the solar service provider may offer you a bargain of 11 cents per watt as per agreed on your contract. The solar energy that you buy will then be deducted from your overall electric bill. In cases where you produce more energy from your solar panels than you use to power your home, net metering is an excellent way to save extra money. A difference between 15 cents per watt compared to 11 cents per watt may seem miniscule; however, eventually those pennies saved will add up to thousands of dollars over the life of the PPA contract, which is normally 10-20 years

PPA’s are ideally a win-win for both parties: solar customers and solar service providers. You as a solar customer can start saving money on electricity bills immediately without worrying about solar panel installation, repairs, or taking out loans. Meanwhile, your provider will retain ownership of the solar panel system, processing incentives for buying the system outright: receiving Federal Solar Tax Credits and rebates for their purchase. PPA’s make the most sense for those interested in going solar, but don’t have enough capital to fund solar projects on their own, or similarly, for those who would rather not take out large loans to go solar. 

PPA Average Solar Savings

As stated, the energy generated through the solar panels will directly be applied toward your utility company’s electricity bills, which means even a slight difference of pennies will add up to serious savings over time. Generally, solar PPA’s allow customers to offset their electricity bill by 10-30% of the price they pay a utility company, saving an average of $35 per month, which over a 20 year contract, can amount to $8,400 of savings. Each contract is different though, so it is best to shop around to see who offers the best rates of kilowatt per hour of electricity. 

One thing to keep in mind is that the price your solar service provider charges will increase by 2-5% each year to account for operational inefficiencies as the solar panels age, the cost of monitoring and maintaining solar panels, in addition to matching the rising retail rate of electricity. When searching for a great deal for a PPA, we recommend you use our expertise to find the best deal possible. Getting into a bad agreement can mean thousands of dollars in the long term, while a great deal can mean an additional thousand dollars in your pocket. 

Solar Leasing Versus Solar PPA

Solar leasing and solar PPA’s are very similar in that you are “renting” the solar panels to save on electric bills. In both cases, you don’t own the system and there is a $0 downpayment, meaning you can start saving right away. However one key difference with PPA is that you are paying for the exact amount of energy produced from the solar panels (at an agreed upon set kilowatt per hour); whereas with a lease, you are paying a set fee regardless of the amount of solar energy conducted. PPA’s provide reliable estimates of how much you will be saving through performance checks, so you’ll be able to rely on how much you will be saving at the beginning of the contract. Also, for those who live in a sunny state like Colorado, you will naturally conduct more energy than if you lived in Washington, thus you will save more on your electricity bills on average.

infographic of solar ppa versus solar lease

Solar PPA Benefits

In summary there are several key benefits to going with a solar power purchase agreement:

  1. $0 down
  2. Lowers electricity costs by 10-30%, depending on solar service provider
  3. Solar systems will be designed, updated, monitored, and repaired under PPA
  4. Potential for increase in home value for residential installations 
  5. All PPA’s come with a performance check so you can expect exactly how much you’ll save each month.

Power Purchase Agreements Paving a Way Forward  | CRJ Contractors

Power purchase agreements are a smart way to save on your electricity bills with little hassle and zero dollars down. More and more, people are seeing the value of investing in solar as it keeps our environment clean and just makes economic sense. Oftentimes, customers are not sure whether they should invest in solar because of the risks involved alongside high costs of investing in solar. Solar PPA’s make it much easier for investors to take the plunge and go solar for the reasons we’ve highlighted throughout this post. Needless to say, you should not make your decision alone! At CRJ Contractors, we love to talk to solar enthusiasts about how going solar today can save you hundreds of dollars tomorrow and thousands of dollars in years to come. If you have any questions about power purchase agreements, contact us today to learn more!

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