WHAT IS A POWER PURCHASE AGREEMENT or PPA?
A “Power Purchase Agreement” or “PPA” is a financing model for the use of renewable technologies, such as solar thermal systems. PPA’s are attractive for building owners who are interested in saving money on their utility costs and promoting the use of renewable energy, but who are NOT looking to make an upfront investment.
The PPA model offers greater flexibility in financing renewable technologies because instead of requiring a payment upfront, the costs for the system are paid back over the life of the system at a rate below the current utility rate. Once installed, the solar thermal system produces energy to heat your building’s domestic hot water and immediately starts saving you money on your utility bills.
HOW DOES A PPA WORK?
Under a PPA, Ely Beach Solar will own, operate and maintain the Solar Thermal System and will sell the heat produced by the system to the building owner. In this arrangement, Ely Beach and the building owner enter into two agreements that occur simultaneously:
- Lease Agreement- Ely Beach and the building owner will enter a long-term lease (typically 20 years) where Ely Beach leases the portion of the building owner’s roof where the solar thermal panels will be installed.
- Power Purchase Agreement- Ely Beach and the building owner enter into a long-term agreement (typically 20 years) where Ely Beach agrees to sell and the Building Owner agrees to purchase the heat produced by the solar thermal system at a lower cost that the current utility rate.
Once the agreements are executed, Ely Beach will begin designing, constructing and installing the building’s solar thermal system.
HOW MUCH WILL THE PPA MODEL COST?
Pricing for the PPA is linked to the monthly costs for heat that the building owner currently pays, but at a predetermined discount below the utility rate. Ely Beach offers two PPA pricing options:
1. No Upfront Investment and Monthly Payments- building owner will be billed once a month for the heat produced by the system. Heat from the system will be charged below the average utility rate paid by building owner over the previous year.
2. Low Upfront Investment and Low Monthly Payments- building owner will pay a low upfront investment in the Solar Thermal System. Heat from the system will be charged monthly, further below the average utility rate paid by building owner over the previous year.
WHY IS A PPA BENEFICIAL?
Entering a PPA offers many benefits, all of which require either no or a low upfront investment.
Benefits to the Building Owner
- Ely Beach Does ALL the Work- Ely Beach owns, designs, constructs, installs, monitors and maintains the system. Ely Beach will also apply for permits and finances the system. All the building owner needs to do is provide site access.
- Reduced Utility Bill- Building owners will realize savings as soon as the system is operational. A reduction from the utility price will be realized immediately and the price for heat from the solar thermal system will always remain below the utility rate.
- Reliable Source of Energy- the sun is a reliable source of energy, therefore regardless of political relations, fuel shortages etc., your building will always get the full heat output of the system.
- Promoting the Use of Renewable Energy- Installing solar thermal systems demonstrates your desire to support renewable energy technologies.
- Competitive Edge as a Market Innovator- Gain a competitive edge through reduced overhead costs and be viewed as a market innovator by those interested in your services.
Benefits to the Environment and Society
- Reduce Pollution- Solar thermal systems reduce the need to use fuels that release harmful greenhouse gases and pollute our environment.
- Reduce Reliance on Fossil Fuels- many of the fossil fuels used to heat water require alliances with politically unstable countries or encourage potentially dangerous extraction methods, solar thermal systems avoid these problems by using the sun to create energy.