What is A Solar Power Purchase Agreement (PPA): Benefits & How to Qualify

Solar Power Purchase Agreement

Some of the main features of a power purchase agreement include no upfront cost for the equipment or the installation as well as no additional cost for long-term maintenance and repairs of the equipment. This removes many of the downside risks you can face when considering a solar installation from your home.

In this article, I will go over what exactly is a power purchase agreement (PPA), what are the main features and benefits, and who stands to benefit the most from a power purchase agreement. I'll also go over how you can see if your home qualifies to take advantage of this program and get started. It's definitely not a one-size-fits-all solution and depends on the situation of the individual homeowner.

So What is a Power Purchase Agreement or PPA?

A power purchase agreement is a long-term solar agreement where the homeowner qualifies to purchase electricity at a significantly reduced rate from the solar provider without having to pay any upfront or out-of-pocket costs. The biggest solar provider of the power purchase agreement is Sunrun, you can read more about them here.

One analogy that may make more sense is that A Power Purchase Agreement is like a long-term deal with your favorite streaming service, but instead of endless movies, you get a steady supply of clean energy.

As a homeowner, you're in the driver's seat – no upfront costs, just a commitment to use the energy generated on your rooftop.

The repairs and maintenance are covered for the duration of the agreement. PPA's also includes long-term rate protection to protect homeowners from dramatic spikes that come from traditional utility companies.

The solar company also conducts a thorough home inspection to make sure they can provide robust warranties through the life of the agreement.

How Do PPA's Benefit Homeowners?

No Upfront Cost and Long Term Rate Protection

No upfront costs mean you can start saving from day one. And get this – you lock in a fixed rate for the energy you use, this is a great option for homeowners who do not want to wait for a break-even period which is usually 10-12 years into the future.

Another major benefit for homeowners is that the federal tax credit is built into the lower rate you purchase your electricity for, this is great for those who are retired or unsure whether they can take full advantage of the federal tax credit.

Power purchase agreements also include long-term rate protection which is agreed upon at the proposal stage when your solar provider is assessing your home. This rate protection protects from unjust rate increases usually experienced by traditional utility companies.

Reduced Downside Exposure from Repairs and Maintenance

One of the main concerns homeowners face when exploring their solar options is ongoing repairs and maintenance. The cost of the solar equipment itself can range anywhere from $3,000-$20,000.

If you were to finance or purchase your equipment outright, you would simply adopt the warranties provided by the manufacturer of the equipment, which usually last about 10 years.

Just like with any warranties, there is an increased probability of equipment failure after warranties expire, leaving you with a repair bill that could potentially wipe out any savings you may have expected over the lifespan of the solar system.

With a power purchase agreement, these risks and concerns are completely eliminated by the fact that the solar provider is responsible for taking care of your system for its lifespan.

Worry-Free Installation Process

One of the many frustrating parts about a solar installation is it takes a considerable amount of time to navigate the process with permits, coordinate inspections, and get the right information if you were to do the entire process yourself.

However, if you go with a vetted and qualified solar vendor when going with a PPA, they are the ones who take care of the entire process for you and simply give you updates along the way, the major time requirement on your end is making sure you are present for the initial home inspection which usually takes no more than one hour.

How Do You Qualify for the Power Purchase Agreement?

Home Qualifications:

During the inspection, you may find that you need a modification to your electrical panel or some minor work done to your roof.

However, Solar companies who provide power purchase agreements many times can provide subsidies and funding to help you go solar.

The solar company you are working with should be able to tell you what type of funding they can assist you with if something were to come up or be discovered during the inspection process. The major areas of the home that are being inspected are the roof, electrical panel, and attic.

You can find out if your home qualifies for a power purchase agreement by filling out the form on this page.

Financial Qualifications:

There are no income requirements or specifications you need to qualify for the power purchase agreement. The main area that solar companies are financially concerned with is whether or not you have a 650 or above credit score.

This is because the main sponsor of the Power Purchase Agreement is usually a publicly traded company and needs to make sure they will be around for the foreseeable future.