Zero-Cost PPA: How Companies Can Stop Worrying About Cost and Love Solar
“We can provide your company with solar energy for no money out of pocket.”
That line never fails to receive the occasional eye roll or confused head tilt. While it may sound like the programmed line of a used-car salesman; and thereby untrustworthy on its face, it is in fact: true.
Zero-Cost PPAs, once regarded as a rare commodity, have become more and more popular as the price of solar energy has decreased and incentives have increase, especially in New Jersey and Washington D.C. According to the International Energy Agency’s World Energy Outlook 2020, photovoltaic solar energy is already the cheapest source of electricity in history!
The concept of Zero-Cost PPAs is quite simple: renewable energy developers can provide companies an opportunity to receive free energy for up to 15 years with solar energy for no money out of pocket.
How is this possible (you ask)?
Well, the best method to understand Zero-Cost PPAs is to examine its details, benefits, and differences from any other financing model.
How Do Zero-Down PPAs Work?
A PPA is a financial arrangement in which a third-party developer owns, operates, and maintains the photovoltaic (PV) system, and a host customer agrees to site the system on its roof or elsewhere on its property and purchases the system's electric output from the solar services provider for a predetermined period.
Solar energy developers, by way of company capitol or financiers, have the capability and resources to offer companies free installation of solar panels on properties (i.e., rooftops, carports, or ground mounts) and potentially 15 years of free energy. Additionally, the solar energy developers, as the owner, are responsible for the maintenance and operation of the system over the lifespan of the system.
What are the Long-Term Benefits of Zero-Cost PPAs?
Consider this – what expenses, if any, can a company guarantee the dollar amount on for the next several years?
The price of electricity, like any other commodity, will increase with time. However, recent evidence has shown that traditional energy sources are going to increase exponentially in the future. In fact, for states across the country, electricity rates are expected to rise between 4% and 6% over the next several years.
As such, free electricity for 15 years is more than valuable for companies! It provides a rare opportunity for companies on pricing, and thereby a genuine guaranteed capability to strategize for the future.
What is the Difference Between PPA and Lease?
The difference between a Zero-Cost PPA and a lease are subtle but significant. Whereas the solar lease is an equipment rental and performance agreement; the solar PPA, which is an energy contract, where the company pays for the exact kilowatt-hours (kWh) the system produced the previous month.
It is worth noting a company is required to have good credit to qualify for a PPA. So, if you’re interested in speaking to an expert to confirm your company’s status and potential strategy, please contact us today at (201) 825-2195 or aneely@coredevusa.com.