Power Purchase Agreement – PPA
A Power Purchase Agreement is a finance option available to purchase a Solar PV System or Solar and Battery system, with no money upfront.
PPA can be used by both residential and business customers, paying a low regular rate for the power the Solar PV System installed under the PPA generates in $/kWh for a fixed period. After the period, the customer can usually take ownership of the Solar PV System or Solar and Battery system for a low token amount, in most cases $1.
With a PPA the benefit is immediate as the rate per kWh agreed upon is typically significantly lower than a retailer’s electricity rate. In cases savings can be 50% and more.
Businesses who want to go green and benefit from using renewable energy don’t need to outlay capital to purchase a depreciating asset, instead, with a PPA the business is incurring an expense for the electricity generated under the agreement. As PPA is similar to a Lease, we suggest discussing the accounting and tax benefits of using a PPA with your accountant.
The way a PPA works is that the client will engage the solar installer to install a Solar PV System or Solar and Battery system. The installer in turn arranges the finance via a third party, the financier, who effectively pays and owns the installed system for the period set out in the agreement.
A benefit using a PPA is that the financier will look after the insurance for the system and ensure it is working at it’s optimum as it is in the financiers best interest.
To find out more, get in touch with our friendly team 1300 588 580