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To Buy or Not to Buy? Solar System Purchase Vs Power Purchase Agreement
Jun20

To Buy or Not to Buy? Solar System Purchase Vs Power Purchase Agreement

Solar System Purchase vs. Power Purchase Agreement  Long before there were any federal or state funds to help offset the initial investment of a residential solar system, installations were on the rise.  Solar adoption has increased significantly since the inception of the federal solar tax incentive in 2006, which rebates 30% of the purchase price of the system.  In 2007, the California Solar Initiative was implemented to offset all or part of the cost of installation in proportion to the system’s actual or projected performance.  With all of this support from the government, it’s no wonder that more people have gone solar in the last two years than the last twenty years combined!  A portion of these new systems were not purchased by homeowners however. Companies like Sun Run and Solar City offer the benefits of solar without the upfront cost of the system through the contracted sale of solar electricity in what is known as a solar power purchase agreement, or solar PPA.  A solar PPA brings a mini-power plant right to a home-owner’s roof, so there is no additional charge for delivery, which usually accounts for as much as 40% of an average electricity bill.  No delivery charges plus savings from federal and state rebates drive the cost down, making solar electricity rates cheaper than the majority of grid rates.  For more information on these agreements and how they work, see this informative article about SPPAs . Up until recently, homeowners have had no choice when it comes to buying power.   Customers sign up for an indefinite PPA with their local utility when they move in to a new residence and watch their electricity bills increase every year.  Now homeowners have the option to buy their own power plant and create electricity on-site or defer the ownership of the same system to a solar services provider, in which case they tack on another utility bill but potentially protect themselves from electricity rate hikes. So which option will work best for you?  That depends on several factors, including your own values in regards to ownership.  Put simply, for those who don’t have the up-front capital to invest in their own system, the SPPA may make more sense as long as the combination of their post-solar utility bill and the solar bill is less than what they were paying on the pre-solar utility bill.   If ownership is important to you, but funds are still a factor, there are financing options available which will result in a monthly payment towards the purchase of the system.   This purchase option ends up looking very similar to a system lease,...

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Solar Power Purchase Agreements

If you are looking for the benefits of solar electricity with little to no upfront cost, minimal risk, and no maintenance responsibilities, you may want to look into a Solar Power Purchase Agreement (SPPA).  The sections below begin with a short and simple summary under each heading, followed by a more in-depth explanation to aid in understanding this solar option. What is a normal Power Purchase Agreement (PPA)? A PPA is an agreement in which the customer agrees to buy electricity from a power source at a particular rate per kilowatt-hour (kWh). Everyone who buys electricity from a utility company such as PG&E or Southern California Edison enters into a PPA without much choice in the matter.  You agree to pay for the generation, transmission, and distribution of the electricity from their power plant in a tiered rate schedule per kWh for an indefinite amount of time.  Typically, these rates increase every year in proportion to the utility’s increasing costs. The Public Utilities Commission (PUC) sets a limit to how much profit these companies make every year, so their increasing costs are caused by anything from increasing salaries and pensions to making repairs caused by weather, accidents, or the aging infrastructure of the grid.  Whatever the cause of the increasing cost of electricity, homeowners have little choice but to continually pay more for what they use, or use less grid power.  The latter choice is where solar options (purchase, lease, or PPA) come in. What is a Solar Power Purchase Agreement (SPPA)? An SPPA is similar to a PPA, except that the source of power is located on the homeowner’s property, and the agreement often includes a contracted increase in rates as well as an amount of time the user agrees to purchase the power. An SPPA is an agreement in which a third-party owns, operates, and maintains the photovoltaic system, and a host customer agrees to have the system installed on their property. Homeowners simply purchase the electricity utility-style from the solar services provider for a predetermined period rather than purchasing the system itself.  This framework is referred to as the “solar services” model, and the developers who offer SPPAs are known as solar services providers.  There are several other players involved in this model. The utility company continues to provide part of the host customer’s electricity.  The equipment manufacturer provides the hardware for the system, which the installers implement and maintain.  Investors, such as US Bank, provide the capital for the equipment.  A seperate special purpose entity manages the solar electricity payments, tax benefits, depreciation, ownership and leasing between the solar services provider and investors. SPPAs enable...

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SolSolution – Solar Energy 4 Education

Public Schools across the USA typically have resource constraints, in most cases, Schools work on fixed and limited budgets can’t afford to invest in programs that can give students in the U.S. education system a chance to compete with superior overseas education. Just like every household and business in the USA, skyrocketing energy costs are forcing people and organizations to scale back their spending. Unfortunately the raising energy costs effects our most important assets also, our public school systems. SolSolution, an interesting not for profit venture helps schools take control of electric costs by providing solar power systems at no upfront cost to a school, through a power purchase agreement (PPA). A PPA is a contract between a organization and investor to install a solar power plant on the schools roof for no upfront cost in return for a lower electric rate per kWh then the school would receive from the utility company. Schools can instantly lower their electric rates and save hundreds of thousands of dollars to reinvest the savings back into their students. A great solution for the american school system! According to the SolSolution Website: “SolSolution’s innovative, nonprofit business model allows us to: • Increase the quality of education in schools by providing them with additional financial resources. • Generate clean, renewable, carbon-free electricity. • Support the solar installer industry. Many school districts spend anywhere from $1 million to $60 million per year for electricity. We enable a massive shift in the use of these funds. For underprivileged schools with limited educational resources, such a shift in funds can make a world of difference! Imagine your local school creating a new art studio, a science and engineering lab, and hiring additional teachers (or paying the great ones what they’re worth!).” I spoke to Soren one of the Directors of SolSolution today, Sorren Harrison who is very passionate about SolSoltions’s initiative said the non-profit organization has selected their first school in which are raising funds and awareness about helping Big Bear High School in California control their electric expenses through solar power. A pre-analysis and financial feasbility study has been completed and now the group is looking for donations and support from the community to get this project completed sucessfuly. If you would like to learn more about SolSolution, please visit their website, although what would really help is if you donate to this great cause...

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