As the move toward clean energy worldwide picks up speed, more and more homeowners are looking into solar power as an alternative to standard power sources. However, the high cost of installing a solar system can keep many people from making the switch. Agreements to buy solar power (PPAs) can help with this. People who get power purchase agreements (PPAs) can enjoy the benefits of solar energy without paying for ownership, upkeep, or installation. Instead, a third-party company owns the solar system and sets a price for the power it generates.

Homeowners can lower their carbon footprint and energy bills and help make the future greener by using PPAs. And they can do all of this without making a significant initial investment. But what do PPAs do, and are they the best choice for you? We will discuss everything you need to know about Solar Power Purchase Agreements.

What Is A Solar Power Purchase Agreement?

A Power Purchase Agreement (PPA) is an agreement between a homeowner and a solar provider. The provider owns, installs, and maintains the solar system, and the homeowner pays for the power it produces. When you get a PPA, instead of buying a solar system directly, you don’t have to pay for it upfront, and the provider becomes the system’s owner.

PPAs work a lot like leases, which are usually less than what the local utility company charges. In situations when it may be more than your local utility company is, you’ve considerably UPSIZED your system to account for anticipated electricity increases, such as the addition of an electric vehicle, upgraded HVAC system, new jacuzzi, or kitchen remodel with electric appliances.

How Does a PPA Work?

There are a few main parts to PPAs:

1. System Management

Under a PPA, the homeowner does not own the solar system; the third-party provider does. This means that during the agreement, the provider oversees setting up, maintaining, fixing, and ensuring the system works at its best.

2. Payment Plan

One of the best things about PPAs is that they have flexible payment arrangements, which usually look like this:

kWh Rates: Homeowners pay a lower price per kilowatt-hour (kWh) of electricity, generally much less than the local utility charges.

3. Fixed vs. Rising Rates

Your PPA can have a fixed rate that ensures the cost per kWh stays the same throughout the deal.

Or, your PPA can have an escalator, in which the per-kWh rate increases every year, usually by 3-3.5% to keep up with inflation and rising maintenance costs. Even with the escalator, your monthly payments are lower and more predictable compared to utility company rate, tax and surcharge increases which could range as much as 10-23%.

4. Contract Length and Termination Options

Most PPAs last between 15 and 25 years. When they end, homeowners have several choices, such as:

• Agreement Extension: Solar energy will be purchased as planned under a new PPA.

• System Purchase: Pay what the solar system is worth on the market.

• Remove It: If the user stops using solar energy, the provider can take down the system for free.

How A PPA Can Help Your Finances

PPAs offer several financial benefits that make them a good choice for homeowners:

• Zero-Upfront: PPAs don’t require a down payment like buying solar panels directly, so more homeowners can use solar energy.

• Lower Electricity Costs: Homeowners can save on their energy costs immediately because PPA rates are usually lower than regular utility rates.

• Cost-free maintenance: The service provider pays for all repairs and upkeep, so there are no surprises.

• Without Tax Credit Eligibility: Homeowners must apply for tax credits and rebates when they own solar panels. With a PPA, however, homeowners can benefit from solar energy without claiming incentives. PPA can work better for homeowners on fixed incomes or W-2 employees who typically don’t owe federal taxes.

PPA vs. Other Solar Financing Options

If a PPA doesn’t work for you or you have larger federal tax liabilities, purchasing outright or financing could be the better route to take. The 30% federal income tax credit could save your thousands of dollars.

With a solar loan, people borrow money to buy a system and pay it back over time. This choice allows them to get tax breaks while also saving money in electricity. Unlike PPAs, however, solar loans may require a small upfront payment, a principal pay down in 12-18 months, and you’re responsible for upkeep. So, understand your loan terms.

Use the sun to power your home—Dowd Solar Group offers affordable, hassle-free solar solutions.

Should You Get A PPA?

A PPA can be an excellent choice for homeowners who:

• Want to switch to solar power but don’t want to pay a lot of money upfront.

• Would rather not deal with system ownership or upkeep.

• Wants a lower electricity bill without changing their debt-to-income ratio.

• Do not qualify for tax breaks.

Future of PPAs

As the use of solar energy continues to grow, PPAs will be very important in making green energy more accessible.

PPAs are an inexpensive and risk-free option for receiving solar energy. They enable homeowners to enjoy clean power without spending money or managing a system.

Dowd Solar Group can help you get clean energy without having to pay any upfront costs. Get a free quote today!