The Power Purchase Agreement

When evaluating a standard PPA offer there a few things you need to pay close attention to:

First, the price per kWh is a crucial number to look at as it structures your base payments over the life of the PPA.  The price can vary depending on project scope, goals of the system, and other variables that your lender will walk you through.

 Second, it is important to look at the escalator for the provided price per kWh.  Similar to your electric bills constantly growing each year, some PPA lenders choose to offer an escalator on a lower price per kWh. This helps the project financials move with the expected market increases, while still offering you a lower price than what you’d be paying with your local utility. 

Finally, you need to look at the cumulative savings for the life of the project.  This measurement helps you see the benefits of a PPA and going solar in the long-term.  Typically, you will see small positive cash flow in the beginning years that gradually increases as you move through the life of your solar system. By the end of your PPA, you should have paid off your upfront costs and then some.  In conclusion, it is important that you carefully consider your options when looking for a financing option for your project.  PPAs are a great option that offer positive benefits to a project that cannot be paid for through a cash purchase.