What’s a Solar PPA? | 2023 Guide to Power Purchase Agreements
There are three parties involved in a solar PPA: the local utility company, the homeowner, and the solar company.
Your solar company administers the PPA. They will design, permit, install, and maintain the solar project over your contract term. Since the solar company owns the solar system, it can also claim incentives like the investment tax credit (ITC).
The homeowner “hosts” the solar system, meaning the solar company installs the solar system on their roof for use. As a result, the homeowner receives discounted energy prices below the utility rate. How much a household pays as part of the agreement depends on their energy usage, local energy costs, and the amount of energy the panels produce.
Finally, the utility company continues to provide traditional energy to the homeowner as necessary. If you live in an area offering net metering programs, your utility will distribute any net metering credits for excess energy sent back to the grid.
Solar PPA vs. Solar Lease
Solar PPAs and solar leases are both agreements where your solar installer fits panels on your roof that you do not own. Instead, you pay the company each month to use the system (a lease) or the energy it generates (PPAs).
Under a PPA, your monthly payments will fluctuate based on how much electricity the panels produce. For instance, if the panels produce more energy in the summer, you would pay more than in the winter when productivity is lower. On the other hand, with a solar lease, you pay a fixed price each month.
With a solar PPA, you are technically paying your solar installation company for the energy the installed panels produce at a discounted electricity rate. Under a solar lease, you are paying to use the solar equipment on your roof rather than the electricity.
