Understanding SPPA

A Solar Power Purchase Agreement (PPA) is a financial agreement in which a third-party developer owns, designs, permits, finances and installs solar energy system on a customer’s property with negligible cost. The power generated is sold to the host customer by the third-party developer at a lower rate than the local utility’s retail rate. The PPAs typically range from 10 to 25 years. In this period of agreement, the third-party developer remains responsible for the operation and maintenance of the system. At the end of the term for the PPA contract, the host customer may choose to extend the PPA or buy the solar energy system from the third-party developer.
This financial agreement facilitates the host customer to receive stable and low-cost electricity. On the other hand, the third-party solar service provider acquires rewarding financial benefits, such as tax benefits and income generated from the power sale.
With this business model, the customer buys the services produced by the PV system rather than the PV system itself. This arrangement provides several advantages in addition to avoiding many of the traditional barriers to the installation of the on-site solar systems. Some of the advantages of this model include:

• Low/Negligibleow/Negligible upfront capital cost
• Mitigated risk for system performance

• Liberation from Complex system design
• Cash Flow Positive