Friday, July 2, 2010

Power Purchase Agreement

Power Purchase Agreement sounds serious, but it really is a simple, legal contract between the company that generates power and consumer of the power. In general terms the power producer is also known as the “provider” and the buyer of energy is generally referred to as a“host”. Power Purchase Agreement is also known as PPA.

A solar PPA is a contract between a specific provider of solar energy and the consumer. Generally a solar system is purchased, installed and than the energy produced from it is used to light up businesses and homes, and all the cost is borne by the consumer. But in case of a PPA, the solar system is bought, installed and subsequently maintained by the provider, and the host (consumer) just pays for the energy used. It is similar to other utilities we use, we just pay for energy we use, not the equipment used for producing it. The only difference in the Solar system energy equipment is that it is installed on the property, usually a rooftop, of the host(consumer) but is owned and maintained by the provider.

Solar panels are made up of many small solar cells that produce energy when sunlight hits them. It is very important to keep these panels clean to ensure maximum production of solar energy. If the consumer buys or leases the solar system than the total responsibility of the maintenance falls on him. But in case of PPA, the owner of the system is the provider thus the host(consumer) just enjoys the benefits of the energy produced, while the responsibility of maintaining the solar system falls totally on the provider. Thus making it hassle free and viable for the host.

The usual term of a PPA is twenty years or more, that way it is more feasible, practical and effective. The longer the PPA, the cheaper the energy is for the host (consumer) in most cases. In most PPAs, generally, there is a provision that at the end of the agreement the host can renew it(PPA) or can buy the solar system installed on their property from the provider. Also, as it is a long standing agreement, it is more practical for people who own the properties on which they want to have the solar systems installed or if they plan to occupy the rented or leased building for a long stretch of time, to go into a PPA.

Similarly, the larger the installation the more beneficial the PPA. PPAs are more feasible in the commercial sector rather then in private sector. Apartment blocks, universities, factories and other businesses are a few apt examples. Property owners who want to provide cheap energy for their tenants are also good candidates for PPAs.
It is a known fact that everyone wants to “go Green” and everyone wants to go SOLAR but most can’t just afford it. But with PPAs this problem has been overcome, now to go solar the consumers just have to sign an agreement and pay the monthly bill for the solar energy they use, the rest will be taken care of by the provider. Now, because of PPAs anybody and everybody can go SOLAR.

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