A solar power purchase agreement, or PPA, is an arrangement in which a provider owns the solar system and the homeowner pays for the electricity it produces at a rate defined in the contract. The payment can change with system production, and the rate may change over time if the agreement includes an escalator.
What the PPA rate represents
The rate is commonly expressed as a price per kilowatt-hour. Because the system may produce different amounts from month to month, the solar payment can vary. The utility connection normally remains in place for electricity the solar system does not supply and for applicable utility charges.
Production estimates are not guarantees
A proposal may include estimated annual production, but weather, shading, equipment performance and other conditions can affect actual output. Read any production guarantee carefully, including how a shortfall is measured, when it is reviewed and what remedy the agreement provides.
The rate is only one contract term
Compare the starting PPA rate with its escalation schedule, term, transfer rules, service obligations and purchase options. A homeowner should understand both the initial economics and how the agreement is expected to work years later.
What to confirm before you move forward
- ✓Find the starting price per kilowatt-hour
- ✓Calculate when and how the rate changes
- ✓Review the production estimate and any guarantee
- ✓Confirm utility charges that may remain
- ✓Read transfer and purchase provisions
What homeowners ask next
Who owns the panels under a PPA?+
The third-party provider generally owns the panels and system equipment during the agreement.
Can a PPA payment change each month?+
It can, because payment is usually connected to the amount of solar electricity produced.
Will a utility bill disappear?+
Not necessarily. The home remains connected to the utility and may still have fixed charges and charges for electricity not supplied by solar.
For current rules and consumer information, use official sources and review the exact agreement offered for your home.