Many organizations today are focused on reducing electricity costs and meeting sustainability goals by adding renewable energy into their overall energy strategy.
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Embarking on a solar project can provide both environmental and financial benefits. Solar energy can help organizations offset their carbon footprint while lowering their electricity bills, diversifying energy supply, and hedging against future energy market volatility. The sustainability benefits of solar can also contribute to an organization&#;s environmental, social and corporate governance (ESG) strategy.
If you are in the process of weighing the pros and cons of solar energy for your business, it&#;s important to understand how a solar Power Purchase Agreement (PPA) works. A solar PPA is a popular option for businesses who wish to purchase and install solar panels on site can opt to enter a solar PPA. A solar PPA is a financial agreement in which a developer arranges for the design, permitting, financing, and installation of a solar energy system on a customer&#;s property with no upfront capital costs to the customer. With a PPA, an organization typically enters into a 15 to 20-year agreement with the solar developer. The customer is not responsible for the installation or maintenance of the solar system, the solar developer is responsible. The developer then sells the electricity generated by the solar facility back to you, the customer, at a rate that is less than the prevailing cost of energy.
Top 10 considerations before signing a solar PPA
A solar PPA might be the ideal option for integrating solar energy into your organization&#;s overall energy strategy. Before you sign on the dotted line, however, you&#;ll want to ensure that these critical questions are answered and clarified in your PPA agreement.
1. Is a Solar PPA a good value?
This is the obvious first question, but the answer is not a simple one. Solar PPAs can provide electricity at a lower cost than electricity rates from a utility as well as future price certainty for the duration of the PPA. But there are many ways to structure solar PPAs and great care should be taken to ensure that the savings, risks, and benefits have been thoroughly evaluated. What will you pay per kilowatt-hour (kWh)? Is it lower than electricity from the grid and, if so, for how long? What is the pricing structure over time and how much can you save over the duration of your contract? Is there an &#;escalator&#; (a contractual provision that increases or decreases the contract price according to changing market conditions)? How much of your electricity usage will be offset by solar and how much will you still need to purchase from or sell back into the grid and at what price? You&#;ll want to consider these important elements, understand the financial implications, and make sure the details are clearly spelled out in your solar PPA.
2. What are the contractual terms?
Besides price, energy production, and duration, there are several other terms that should be discussed and agreed upon before you sign a solar PPA. For example: What happens when the PPA contract ends? Who is responsible for removing the system at the end of the contract? What happens if the developer goes out of business or if the business changes hands? What happens to your PPA if your organization moves to a new location? Can your PPA be sold or change hands without your knowledge or approval? Be sure to ask pertinent questions and that the agreed-upon terms are clearly detailed in the contract.
3. What kind of risk is involved with a solar PPA?
As with any type of long-term contract, a PPA can come with risk. You&#;ll want to be sure that risk is evenly distributed between your organization (the customer) and the developer (the owner). Your organization can be prone to utility energy cost escalation and tariff restructuring, or annual price escalation of the PPA. You should also understand what happens if your electricity requirements increase over time or if the forecasted energy production is different from the actual production. What happens if the system performance degrades over time? What if the developer goes out of business or the business changes hands? It&#;s important to understand the risks involved and ensure that all details are included in the solar PPA.
4. Who is underwriting the PPA or providing the capital?
This is a big one. Just because a developer shows you a PPA, does not mean it is financed. A solar PPA is a financial agreement between you and the developer. The developer owns the photovoltaic (PV) system and needs to facilitate the financing of the distributed generation assets such as photovoltaic panels, microturbines, reciprocating engines, and fuel cells. Some developers might first seek out clients, then pursue financing. Don&#;t sign a PPA without understanding that the capital is secured and where the capital is coming from.
5. Where is the tax equity coming from?
This one is similar to #4 and also critical. Developers who invest in solar systems can benefit from federal tax incentives that reduce the amount of taxes their business would otherwise have to pay. To take advantage of these incentives, however, the developer&#;s business must have enough tax liability. If a developer does not have sufficient tax liability, they may choose to partner with a tax equity investor. The two entities can use the tax benefits as partners. Tax equity arrangements can be complex. That&#;s why it&#;s important to make sure all these elements are securely in place before signing on with a solar developer.
6. What happens if the system breaks?
Solar systems, once installed, are relatively low maintenance and the developer is responsible for maintenance and repair for the duration of the PPA. In fact, the developer is financially incentivized to keep the system in good working order. However, if the system breaks, you may need to use energy directly from the grid, likely at a higher price. Be sure that your contract clearly details the process and timeline for repairs.
7. Is there a solar performance or production guarantee?
A solar PPA should include a performance guarantee (e.g. 90-99% of estimated production). You&#;ll want to make sure that you aren&#;t billed for more than the system actually produces. The contract should have language outlining the guarantee such as: &#;The owner guarantees that during the term of the PPA the system will generate the guaranteed kilowatt-hours (Guaranteed kWh) of energy under usual weather conditions.&#; Additionally, there should be language addressing what happens if the system underperforms such as: &#;The owner will send the customer a refund check equal to the difference between the Guaranteed kWh and the cumulative Actual kWh.&#;
8. What happens at the end of a PPA term?
At the end of your solar PPA contract, there are typically three options:
- The system will be taken away at no cost to you.
- You can renegotiate and renew your contract.
- You can buy the system outright from the developer.
Your solar contract should outline end-of-term buyout provisions which typically state that you can buy the system at the greater of a specified buyout value or fair market value as determined by an independent third-party appraiser. While the end of the term may seem like a long way away, you want to make sure the buyout provisions are specified, fair, and reflect the true value of the system. No matter which end-of-term option you choose, you&#;ll want to be sure that the termination structures are fair and clearly outlined.
9. Can I trust this solar developer?
You may be fielding multiple emails and calls from solar developers offering you &#;the best deal.&#; While there&#;s no shortage of developers and &#;deals&#;, it pays to compare your options before jumping into a solar PPA. When choosing a solar developer, in addition to price and duration, you should also consider the quality of the solar equipment, the reputation of the developer, and how comfortable you are with the installer. A PPA contract is typically 15-20 years. That&#;s a long time to work with a business that you can&#;t rely on or don&#;t trust. You may benefit from interviewing several solar developers and requesting proposals from each so you can conduct a thorough comparison.
10. Should I utilize a solar energy consultant?
As you can see, choosing a solar developer can be a nuanced and complex process with myriad PPA contract structures to consider. If you aren&#;t well-versed in procuring solar energy or determining which solar developer may be right for you, an energy consultant might be your best option. Rather than seeking out multiple developers, garnering reviews and testimonials, and comparing numerous proposals, you can work with one energy consultant who will &#;sit on your side of the table&#; and advocate for you. Typically, an experienced solar developer &#;speaks the language&#; and will get to the &#;right&#; answer quickly and efficiently. Money is rarely left on the table when you utilize an experienced advisor.
The Usource team consists of experienced renewable energy advisors, energy analysts, and energy procurement specialists. When you work with us, you&#;ll leverage the deep industry knowledge and experience of our entire team. Usource is part of the NextEra Energy family of companies. NextEra Energy, Inc. is the world&#;s largest producer of wind and solar energy. As part of NextEra Energy, Usource is uniquely positioned to analyze, facilitate and execute your solar energy project to ensure that your PPA and your solar solution are a cohesive fit with your organization&#;s overall energy strategy.
In , solar accounted for 40 percent of the new electric generating capacity, which exceeds any other energy source. This means solar energy is one of the fastest-growing energy sources, and not just in America, but in the world.
Deciding to install solar in your home may be one of the best decisions you could make for your energy needs. There are so many solar installation companies out there, but there is so much more to hiring a solar contractor than just calling the first one you come across.
In this post, we&#;ll share some of the most important questions you could ask a solar contractor to ensure that they are the right fit.
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Hiring a Solar Contractor: What to Look For
When searching for solar companies, it&#;s vital for you to do thorough research. This is a significant investment on your part so avoiding mistakes from the beginning is important.
When it comes to solar installers, testimonials, and customer reviews are some of the best resources of information. A high positive serve record means a great reputation and reliability.
You want to hire a contractor with exceptional energy solutions. Look for exceptional products, great customer service, and a track record of success. Before you commit to a solar installer, it&#;s advisable to ask these questions.
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You will get efficient and thoughtful service from JM.
1. Do You Have the Right Qualifications for Solar Installation?
There are so many service providers for solar installations in the US right now that hiring the right solar contractor is not an easy feat. Some of the most important things to check out are the credentials and qualifications of the contractor. If your contractor hesitates to show you their credentials, then be wary of them.
You should ask to see their license and certificates. Hiring a solar contractor with a license means you can be assured of safe practices. You see, unlicensed contractors could leave faulty installations that will result in poor performance or create safety hazards. Licenses are issued by states to protect homeowners from malpractices.
Certifications, on the other hand, may not be a requirement, but hiring a solar contractor with one assures you of optimum quality services. Certifications give them a distinction over their competitors. The contractor should have a certificate from NABCEP or North America Board of Certified Energy Practitioners, RISE or Roof Integrated Solar Energy, or the Electronics Technicians Association.
Hiring a solar contractor with these certifications gives you confidence. They have undergone coursework, exams, and training, meaning they are qualified enough to work.
These certificates require contractors to have at least one year of experience installing solar panels. Beyond that they must re-certify after every three years to stay updated.
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2. How Long Have You Been In Business?
Despite the fact that having a license and certification ensures competency, experience is still crucial. Experience still is the best teacher. Knowing that the solar contractor you hire has done installations countless times before and developed their skills will give you peace of mind.
Solar contractors with years in experience have the right installation techniques and strategies. Education and training serve as guidance for them. Experience teaches realistic skills and techniques.
Experience also gives them a competitive advantage. They hone and enhance their skills based on how they deal with different clients and installations.
Years of experience also means your contractor will know the best installation equipment and tools. Even better, hiring a solar contractor with experience means they can use warranties as a competitive advantage.
When an installer has a warranty, you can use them to get solar equipment when they need to be changed and repair services when the need arises. Ask if they offer service warranties before you hire a contractor.
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3. Will You Subcontract?
The last thing you want to see is people you don&#;t know on the day of installation. You may talk to a contractor and verify all their credentials only for them to subcontract to other contractors whose credentials you&#;ve not checked out.
If they do intend to outsource, ensure you ask to see the licenses and credentials of the contractors to ensure that they are also qualified to make the installations for you.
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4. What Happens When the System Doesn&#;t Generate As Much Energy as Expected?
A professional solar installation contractor will recommend the best system size for your home, depending on your needs. They will check the roof and advise you on the best system. However, you need to know what will happen if the efficiency doesn&#;t meet your needs or expectations.
They may offer to add extra panels to meet those needs or reimburse you for the under-performance. You need to consider your future energy needs as well before you settle on a system, so you don&#;t have to add more panels.
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5. What Possible Problems May I Face In the Future?
You should always expect issues in the future, regardless of what you&#;re installing in your home. Asking this question might seem too straightforward, but an honest answer will determine the integrity of the contractor.
If they do share the problems you may face in the future, they should also offer solutions. If you do hire a contractor with a warranty, they may be available to help you in the future should those issues arise.
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Ask These Questions Before Hiring a Solar Contractor
These are some of the most important questions you should ask before hiring a solar contractor. Once you find the right contractor, you&#;ll be one step closer to greener living.
Are you looking for a reliable solar contractor? Then look no further. At SOLO, we're a team of dedicated contractors waiting to serve you. Contact us today for immediate solutions.
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If you are looking for more details, kindly visit Solar Integrated Solution Supplier.
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