What Are Solar Power Purchase Agreements?
Solar energy provides a wealth of benefits to your Missouri or Northwest Arkansas home. Solar panels, generators, and batteries help you reduce energy costs and meet your electricity needs during a grid failure or natural disaster. There are other ways you can save when you go solar, too. A Power Purchase Agreement allows consumers to avoid the expensive costs associated with solar panels, inverters, permits, and construction.
What Is A Solar Power Purchase Agreement?
When you invest in solar energy for your home, you can obtain a loan to cover the costs or enter into a third-party lease. A solar PPA is a financial arrangement through which you allow a third-party developer to install, own, and operate an energy system on your property. You then purchase the solar system’s electric output for a predetermined period.
Many homeowners choose a PPA because it’s an easy, low-cost, and maintenance-free way to install a solar panel system and receive stable and often low-cost electricity with no upfront costs. The third-party developer benefits as well, as it enjoys the revenue from the sale of the electricity and any related incentives or tax credits.
When the PPA contract term is over, you can either extend the PPA, have the developer remove the system from your property, or purchase outright one of the developer’s solar energy systems.
Benefits of a Solar Power Purchase Agreement
Solar PPAs have many benefits, but they aren’t for everyone, especially those who want to take advantage of any associated tax deductions. But if you want to become energy-independent without substantial upfront costs, a solar PPA might be the perfect solution.
The top benefits of a PPA include:
- No or low upfront costs. Most solar PPAs offer zero-down arrangements, so you don’t start paying until your system is generating electricity for your home. You also save on maintenance, as you don’t own the equipment and aren’t responsible for its upkeep.
- Reduced energy costs. With a PPA, the developer sells you solar-generated electricity at a price lower than your local utility provider. Some PPAs have a fixed price through their term; others might have an escalator clause.
- Better leverage of tax credits. While homeowners have access to solar power-related tax credits, as a rule, developers are better positioned to use available systems to reduce system costs.
- Potential property value boost. The National Renewable Energy Laboratory found that a home’s value increases by $20 for every $1 reduction in annual utility bills. That’s a return on investment of 20 to 1.
Some costs you might incur with a PPA include upgrades to your property before installation, increased property taxes based on a higher home value, and early termination fees.
Finally, keep in mind that if you sell your home before the PPA contract is over, you’ll have to pay the developer the remaining value of the PPA or transfer the contract to the new homeowner. A good course of action is to consider which available financing option best fits your circumstances.
Is Solar Energy Right for You?
One of the primary reasons homeowners switch to solar power is to shield themselves from increasing electricity bills. While installing solar panels can save you money no matter where you live, your specific savings often depend on local utility rates.
If you’re ready to move forward with installing solar panels at your Missouri or Northwest Arkansas home, you can depend on Solera Energy to make the process as smooth as possible. We’re the area’s leading solar provider and the first to introduce solar here more than a decade ago. Our dedicated team guides you through the solar installation process and is always available to answer any of your questions, including any you might have about financing and PPAs.