What is a Solar Power Purchase Agreement?
A Solar Power Purchase Agreement (or SPPA) is an agreement between a host customer and a developer/investor who arranges for the design, permits, installation and maintenance of a solar energy system at no cost to the host customer. The developer then sells the power generated by that system to the host customer at a rate lower than the local utility’s retail rate which can either be fixed or rise slightly each year. The typical agreement ranges between 10 and 20 years. It is a win-win situation since the developer receives tax credits and other government incentives and receives the income that the system generates as well.
They are a good option for consumers:
Who want a $0-down option, and/or are unable or unwilling to use the Federal Investment Tax Credits (ITC) and state tax credits.
Benefits to Host Customer
- No or low upfront capital costs
- Reduced energy bills
- Limited Risk
- Developer can better leverage available tax credits
- Increase in property value – 10% estimated
- Option to purchase the system after 7-10 years for fair market value
Note: Generally the PPA rate lower than the utility rate and is calculated to rise slightly over the years, but unlike utility rates, your PPA rate is pre-negotiated for the lifetime of the agreement. So, instead of paying for “dirty” grid power with rates that can go up at any time and by any amount, you’re paying for clean, renewable energy generated through your solar panels and you know exactly how much you’ll be paying for that energy for as long as the term of your agreement. If the monthly PPA payment is lower than your electric bill, a PPA makes economic sense for you. However, the financial benefit from tax credits, rebates and the sale of SREC’s will go to the system owner.