Solar PPAs (or Solar Power Purchase Agreements) are a predominant financing choice being used by solar companies
Mainly because they are easy to sell by focusing the customer’s attention on lower payments with nothing down.
But in our opinion, this is the worst option available, and we can prove it.
A Solar PPA is very similar to Solar Lease, just like leasing anything – You don’t own it. You get a lower Levelized payment, but you are leaving way too much on the table.
It’s like renting part of your property to a power company, only you’re paying the rent!
Reasons why residential owners should avoid a Solar PPA:
- You’ll get two electricity bills
- You don’t own your home solar panels
- You can’t get any incentives like the federal Solar Tax Credit
- You will get stuck in a contract typically for 25 years
- Your monthly solar payments will go up 3% a year
- Selling your home will be very difficult
- You are giving away part of your property!
When you hear people talk about solar energy being a scam, this is what they are talking about. The Solar PPA is why New Mexico’s attorney general has sued Vivint Solar.
Let’s take an in-depth look at the Solar PPA:
What are Solar PPA agreements?
A Solar PPA is the worst type of solar financing agreement. PPA stands for Power Purchase Agreement, meaning you will agree to purchase the power itself.
You will be entering into a contract with a third party (let’s call them a “Solar Financer”) that will take away almost every benefit from the solar energy system.
In return, you will have to pay the Solar Financer for the electricity the solar panels produce, whether you use it or not. Think about that!
How Does a Solar PPA Work?
You will become the host for solar panels installed on the property that you do not own. The Solar Financer will own that part of your property for the length of the agreement, which is typically 25 years.
You WILL Get Two Electricity Bills
If you go with a solar power purchase, you will get two monthly bills: One from the Solar Financer, which will charge you for every kWh generated, even if you don’t use them.
The second bill will just be your usual utility bill connection fee and any extra power consumption.
Because the Solar Financer owns the solar panels, they will receive all the other incentives, like the federal tax credit, which can range from $4,000 – $8,000.
That’s right, a Solar PPA will take up to $8,000 or more out of your pocket!
More about solar:
What is Net Zero & Why is Important to solar?
Tips to Identify The Best Solar Company
30% Solar Tax Credit Is Back! – Inflation Reduction Act
PPA Advantages and Disadvantages
Solar Power Purchase Agreements don’t provide any advantages to residential homeowners when compared to purchasing solar panels.
However, Solar PPA has better advantages for commercial solar systems:
- Commercial solar PPA can provide cost savings for business owners, as they can avoid upfront costs for purchasing and installing solar equipment. Instead, the customer pays for the energy produced by the solar system at a predetermined rate, which is often lower than the retail electricity rate.
- The PPA for commercial solar projects also offers predictable energy costs for businesses, as the rate for electricity is fixed for the duration of the agreement, typically 10 to 25 years. This can help the customer with long-term budgeting and planning.
- The Commercial Solar Power Purchase Agreement can reduce the financial risk for the business owners, as the developer is responsible for financing, installing, and maintaining the solar system. The customer can focus on their core business activities while still benefiting from solar energy.
What are the Pros and Cons of a Solar PPA?
With a PPA, it may feel like you’re going to have a stranger living in your house for the next 25 years. Only you have to pay them, and there is no way to get them to leave.
Is A Solar PPA Worth It?
No. When you commit to a Solar PPA, you are committing to a few things:
- A Second Utility Bill.
You’ll have to make monthly payments to the Solar Financer. And, just like the electric company, the rates will go up every year.
- A Blind Partner In Your Real Estate.
The Solar Financer, which doesn’t really know you, will own a part of your property. So, you want to change your roof? Gotta check with your new “partner”.
- Dropping Your Home’s Value.
The solar PPA company will have a lien on your property. If you decide to sell your home, that will be a huge problem because there will typically be a high buyout clause, which will negatively affect your home’s value.
Solar PPA Vs. Lease
A Solar PPA and a Solar Lease are very similar. In both cases, you don’t own the solar panels on your home. The main difference between a solar lease and solar PPA is how you are charged each month.
In a Solar Lease, you will pay a monthly “rent” for the use of the solar panels on your property.
With a solar PPA, you have to pay a fixed price for each kWh the solar panels generate. That “fixed price” may still go up over time, making Solar PPAs the worst value of any solar financing option.
Solar PPA Vs. Full Ownership
When you compare a Solar PPA Vs. buying solar panels, you realize just how bad a solar PPA is for homeowners.
They have become very popular among giant solar companies because PPAs are highly profitable for the PPA company and easy to sell and train new sales reps because they are only selling lower payments. Not the best return on investment for the customer.
When you get a Solar Loan, you will own your solar panels. You get all of the benefits: The tax credit, NEM, increase in your home’s value, savings over utility bills, and complete ownership of your own property.
PPAs Have No Long-Term Solar Benefits
Solar PPAs don’t have any long-term benefits. When the contract is up in 25 years, you will have a few choices on how to proceed:
- Renew the PPA Agreement for up to another 25 years
- Have the Solar Financer remove the solar panels
- Purchase the solar panels at a fair market price.
For more answers to going solar – Solar FAQ
In Summary: Solar PPA and Lease are the worst financing options!
When you purchase your solar energy system outright or through a solar loan, you get to own the solar panels and all the power they produce.
After the initial payback period of 5-10 years, your solar panels will produce free energy for as long as they last. They generally require very little maintenance and usually last longer than 30 years.
Don’t get stuck in a PPA or Lease. Invest smart – Buy solar panels from a trusted, award-winning solar installer and own your solar power for less.
Owning solar can be 1000% lower cost than the utility company and can have returns on investments exceeding 20%. Call us for a free financial benefit analysis and find out for yourself.