A Power Purchase Agreement or PPA is a financing arrangement that was created solely for the solar industry and is one of the most common ways solar is financed. In a PPA the home owner or business owners agrees to buy all the power that their solar panels produce. There's no material or labor cost. No maintenance cost. The customer simply pays for the power. The solar company owns the system and therefor is completely responsible for any upkeep of the system and ensuring a guaranteed level of production.
The biggest benefit of a PPA versus staying with the utility is that with a solar PPA the homeowner can usually get a price for their power that's substantially less than what they pay their utility. In addition to that they also have the option to get a fixed price for their solar power that will never increase.
The benefits of a Power Purchase Agreement (PPA) versus a solar loan are that the solar system is insured and the power output is guaranteed. While all systems come with 25 year warrantees on panels, there can sometimes be a gap in coverage for instance if there is damage from a natural disaster such as an earthquake or if you have a 25 year manufacturer warranty, but only have a 10 year labor warranty. Additionally the Power Purchase Agreement is usually transferred from one homeowner to the next when a house is sold. This reduces the risk the homeowner may bare of having to pay off a loan when they sell their home.
Power Purchase Agreements are most attractive to the following set of people.
What is the difference between a PPA and a lease? There's one technical difference and one very concrete difference. The technical difference is that with a lease you're paying for the equipment whereas with a PPA you're paying for the power. The biggest difference in how it affects you, the buyer is that with a PPA you have the option to purchase the system whereas with a lease you do not. For that reason I recommend a PPA over a lease.
Whether you finance your solar with a loan a lease or a PPA, the most important thing is to understand your options and make sure you're making the decision that best suites your needs. Speak with an IndieSolar expert today to find out what makes the most amount of sense for you.
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Matthew's been selling and designing residential solar since 2009.