THE PPA PARTICIPANTS
Four entities play a role in your contract agreement, either directly or indirectly. To help you understand how this method works, here we outline who they are and what they do.
Solar Services Provider (SSP):
This is the project coordinator, the company that you will hire to make your project happen. An expert in financing with strong connections to investors, the SSP knows about installation and monitoring of equipment, and completes your project on time and within budget. The SSP contracts with a system installer who works with you on system design, equipment, metering, and production monitoring and maintenance.
The provider tries to keep transaction costs to a minimum for the entire project so he can offer you a competitive electricity price and his investors a reasonable rate of return. With that goal, the solar services provider will offer your organization a “standard offer” agreement that describes the most common terms for your type of organization.
Most solar services providers are technology neutral and work with various manufacturers. The SSP will make a priority of using the right equipment for the job.
Investor and Special Purpose Entity:
The solar services provider engages financing partners. A lender will fund the construction of the solar system. The investor provides equity financing and receives the federal and state tax benefits (called “tax equity” investing). You may not work directly with the financing partners, but it is useful to understand their requirements and relationships to ensure your project has solid financial backing.
The investors and solar services provider form a special purpose entity to own the solar electricity system and allocate tax credits and other benefits and risks. The solar services provider works with stable lending and investment partners, who in turn are eager to work with host customers that have a strong credit rating.
Host customer:
As host customer, you agree to install the solar electricity system on your property, work with the solar services provider to enable efficient project installation, pay for all of the electricity the system produces at the negotiated rate, and provide access to the system for monitoring and maintenance. You may purchase the system at fair market value when or before the contract ends. In some cases this may be as soon as six years after the system was installed.
Utility:
The utility and its treatment of solar electricity is an important factor in the project, especially given that the solar equipment may, at times, produce more power than what is being used on-site. Utility policy will affect project timing and whether or not you purchase the system at the end.
Your relationship with the utility company includes interconnection agreements, net metering, incentives, peak demand and demand charges (Time-of-use Tariff or TOU).
Summary
The solar power purchase agreement is becoming a very popular option for buying solar electricity in the U.S. In this model a project developer, known as the solar services provider, brings an investor and host customer together to install a PV system on the host’s site. The PV electricity reduces the amount of electricity that must be purchased from the local utility. The utility supports the project by connecting the solar equipment to the grid and providing credit for any solar power sent back through the meter to the grid.
