Solar Power Purchase Agreement (Solar PPA) Explained
A solar power purchase agreement (PPA) is a financial contract with a third-party solar developer who finances, installs, and manages a solar energy system on your residence at low or no cost. The agreement allows the solar developer to retain ownership of the solar system on your property and sell the generated electricity to you at a fixed rate, usually lower than the rate set by utilities. A solar power purchase agreement, also referred to as an SPPA or a PPA, is an alternative path to getting solar energy for your home.
When buying solar panels, you’re typically responsible for selecting the solar panel company and the solar equipment and organizing any associated documentation to get the federal tax incentives. A solar PPA can be an easier way to get solar energy without buying and maintaining a costly solar system. PPAs let you pass the heavy lifting to a developer while enjoying less expensive green electricity rates and using a renewable solar resource to offset pollution.
Solar PPA vs. Solar lease
Residents who choose not to finance or purchase their solar energy system can benefit from solar energy by either leasing or having a PPA. When you lease solar panels, you pay a fixed monthly amount for leasing or buy electricity generated from the leased panels from a solar provider at an established rate per kilowatt-hour (kWh). When you enter a solar PPA, you only pay for your energy usage at an agreed price per kWh.
A solar PPA doesn’t work for solar panels on an RV, camper, or other non-permanent dwellings. A PPA is also different from community solar, where a solar facility provides solar power to multiple residences at once.
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