The Solar Power Purchase Agreement (SPPA) is an alternative to financing and owning the system. It offers you an opportunity to install solar power at your facility without paying upfront costs or worrying about system operation and maintenance. Sometimes referred to as a “third party” ownership model, this approach lets you focus on your core mission, while solar experts manage your energy system. For 10 to 15 years, you enjoy predictable, pre-set electricity prices, and power from a solar system that is a source of pride for your organization.
- Demands no upfront expense in order to buy solar power
- System owner is responsible for operation and maintenance of equipment
- Provides predetermined electricity rates for term of contract
- Offers production monitoring and metering by experts
- System owners take responsibility for operation and maintenance of equipment
- Supports renewable energy industry and local jobs (for installation and maintenance)
- Offers possible path to meet your green policy objectives
- Places emphasis on ensuring maximum productivity of solar system
- Option to purchase the system at fair market value after set time period
- Ongoing administrative costs of paying separate electricity invoices, and allowing access to equipment by maintenance personnel
- The host customer (building owner) may need to verify with the system owner that possible
changes made to the property will not effect solar production
The SPPA structure
Your organization contracts with a solar services provider that is responsible for financing, designing, installing, monitoring, and maintaining your project. You do not pay for the installation, but instead buy the electricity the system generates. You make your payments to the solar services provider for the electricity the solar system produces, just as you now pay your utility for electricity from large central power plants.
You determine the level of payment in advance, so you know what your power costs will be over the life of the SPPA contract, usually 10 to 15 years. In this way, SPPAs offer very different terms than utilities. With the permission of regulators, your utility increases your electricity rates at any time.
Many believe that electricity rates will rise significantly as climate change legislation is adopted because most electricity in the U.S. is produced from carbon-intensive fuels, such as coal and natural gas. So it is difficult to predict your future energy costs when you buy power from a utility. SPPA contracts avoid unexpected price fluctuations because the cost of the fuel is known: sunshine is always free.
This diagram shows the different participants involved with a SPPA:
Costs, incentives, tax benefits and structures are always changing. If your organization considered solar previously and it was too costly, now is the best time to take a second look. Let’s use what has been provided for us, the power of the sun. Be an inspiration to the community and your organization, lead by example. Right now, with the value of the SPPA structure, is an ideal time to get green with solar savings and benefits.
Here is an sample illustration of savings by using a SPPA model: