did you know you can get a commercial solar system without an upfront investment of capital by the end of this video you'll know all about power purchase agreements or ppas how they work their benefits and why they make going solar easy and more accessible
welcome back everyone i'm gerald and this is going solar with pivot energy where we cover all things solar energy commercial solar solar financial incentives and community solar i know you're excited to learn more about the most affordable way to go solar so let's get right into it
Introduction to Commercial Solar PPAs
what is a ppa exactly this is a third-party ownership model and a widely adopted financial mechanism popular in solar energy adoption in fact some of the largest corporate enterprises in america use ppas to procure solar energy
with the ppa your company enters into a long term usually 15 to 25 years energy contract with a solar developer like pivot energy to purchase clean renewable energy for your business operations the developer owns and maintains the solar equipment while you pay a predetermined dollar per kilowatt rate for electricity produced by the array the intent is to swap a kilowatt hour of fossil fuel generated energy from your local utility with a kilowatt hour of clean renewable energy project costs are amortized over the life of the ppa term resulting in a zero dollar upfront investment however if a client wishes to shorten a ppa term or to buy down that ppa rate they can opt to bring cash to the table
kilowatt hours i know it feels like we're back in school we use kilowatt hours to measure energy usage and you can find out how many kilowatt hours or energy you use on your current utility bill to learn more how to break down your electricity bill check out our other video linked in the description below
Understanding Power Purchase Agreements (PPAs)
What is a PPA?
How PPAs Work
ppas allow clients to make the switch to solar energy outside the capital intensive route of system ownership and to do so in a way that provides long-term predictable energy costs in fact many markets with high costs of energy allow for ppas to have day one savings
you might have also heard of the term off-site or virtual ppas these ppas are helpful when your company has meaningful renewable energy goals that cannot be met with on-site installations alone another scenario is that your company simply doesn't have the space for an on-site solar installation with these off-site ppas solar panels are not installed on site but you still get to benefit from the solar energy produced we're posting a video about virtual ppas in a few weeks so make sure to subscribe and hit the bell so you don't miss any of our new videos
On-site vs. Off-site PPAs
ppas are one of the most popular choices for solar installation because of their many benefits
Key Benefits of Solar PPAs
the first benefit is that there aren't any upfront costs for you if you either don't want to or can't afford the cost of purchasing a solar system with cash ppas are the way to go
the second benefit is that the solar developer takes care of all the operations and maintenance of the solar system on your facility which means no work on your part ppas are third-party owned systems it behooves the asset manager to ensure system uptime and upkeep
another benefit of solar ppas is reduced utility bills electricity prices can fluctuate greatly with a ppa you pay predetermined dollar per kilowatt hour rate to use electricity produced by the solar energy system throughout the term the predetermined rate is usually lower than what you would pay for electricity directly from the utility company which is how you save money
Financial Advantages
ppa rates tend to go up by a small amount each year at a fixed rate of one or two percent however this also happens to your company's regular utility bills many times at a rate far greater than one to two percent so your business will still be saving money because your energy bill is starting at a lower price point than your normal utility bill therefore it's essential to start looking into solar energy now as energy prices will only continue to increase you also have an option to structure a ppa with no escalator make sure to check out our ppa versus cash purchase video for more information
if your business needs to meet green energy mandates you may want to hold on to something called s rex s rec stands for solar renewable energy credit s rex are your legal claim to your solar energy production and they allow you to claim the environmental impact of the solar system one s wreck equals one thousand kilowatt hours or one megawatt hour of solar energy production and they hold monetary value in a ppa the system owner like pivot energy generally retains the s-rex however your company may be interested in purchasing the srx from your solar provider to meet state regulatory requirements are to show your commitment to a greener planet
Understanding S-RECs and PPA Financial Structures
Solar Renewable Energy Credits (S-RECs)
working with the turnkey solar developer with a financial acumen and necessary market experience will ensure your goals are addressed in a ppa agreement
so how do you get started reach out to a solar developer like pivot energy ppas are complex transactions that get more intricate depending on the individual corporate needs and project structures rest assured these are industry standard contracts that's why it's so essential to partner with an experienced accredited solar developer like pivot
at pivot we work closely with our clients to help them understand every aspect of the contract the project benefits and the regulations in your area pivot energy is a turnkey solar project developer meaning that we work with our clients on all aspects of their solar project from planning to financing construction and project maintenance we're also a certified b corp dedicated to serving our community and the environment visit our website pivotenergy.net to learn more
Partnering with an Experienced Solar Developer
that's it for today thank you so much for watching and if you learned something new about ppas please give this video a thumbs up subscribe to our channel and hit the notification bell so you get notified when we post our latest videos on clean energy solutions
thanks for tuning in to going solar with pivot energy see you next time
Technical Specifications
| Feature | Detail |
|---|---|
| PPA Term | Usually 15 to 25 years |
| Upfront Investment | Zero dollars (option to bring cash to shorten term or buy down rate) |
| Developer Role | Owns and maintains the solar equipment |
| Client Role | Pays a predetermined dollar per kilowatt rate for electricity produced |
| Escalator Rate | Typically 1-2% annually (option to structure with no escalator) |
| S-REC Value | One S-REC = 1,000 kilowatt hours (or 1 megawatt hour) of solar energy production |
| Energy Measurement | Kilowatt hours (kWh) |
Frequently Asked Questions
Q: What is a PPA?
A: A PPA is a third-party ownership model and a widely adopted financial mechanism popular in solar energy adoption. Your company enters into a long term energy contract with a solar developer to purchase clean renewable energy for your business operations.
Q: Are there any upfront costs with a PPA?
A: No, project costs are amortized over the life of the PPA term, resulting in a zero dollar upfront investment. However, if a client wishes to shorten a PPA term or to buy down that PPA rate they can opt to bring cash to the table.
Q: What are S-RECs and how do they relate to PPAs?
A: S-REC stands for Solar Renewable Energy Credit. S-RECs are your legal claim to your solar energy production and they allow you to claim the environmental impact of the solar system. One S-REC equals one thousand kilowatt hours or one megawatt hour of solar energy production and they hold monetary value. In a PPA, the system owner like Pivot Energy generally retains the S-RECs, however your company may be interested in purchasing the S-RECs from your solar provider to meet state regulatory requirements or to show your commitment to a greener planet.