SOLAR PPA BUYOUT
EVALUATING THE BENEFITS , COSTS AND RISKS OF A BUYOUT
A Power Purchase Agreement (PPA) is an arrangement where a solar developer constructs, owns and operates a solar project on a property and sells power from the project to the property owner. The arrangement generates savings for the property owner if the power purchased from the solar project is less expensive than the cost of energy that would otherwise have been bought from the utility. Most PPA agreements have buyout provisions: the ability to buyout the contract before the full term, which is typically 20+ years. Buyout provisions vary widely and are not offered before Year 7 of the contract.
WHY BUY OUT A PPA?
TO SAVE MONEY
Many early PPAs had high energy rates and annual price escalators as high as 4% or more. High escalators together with changing utility tariffs can result in PPA energy costing more than energy otherwise purchased from the electric utility.
CAPITAL EXPENDITURE TO REDUCE OPERATING COSTS
When low-cost capital is available, buying out a PPA contract and taking ownership of the solar asset can lower operational costs.
A CHANGE OF PLANS
Changes to facilities can require a solar project to be moved. Buying out a PPA is often the more economic than paying for energy while the project is offline and paying a PPA owner to move a system.
SOME PPAS ARE UNDERWATER, PARTICULARLY OLDER PPAS WITH HIGH RATES/ESCALATORS OR FOR SYSTEMS THAT HAVE BEEN OPERATING FOR SEVERAL YEARS.
If you’re a customer considering a solar PPA buyout, Sage can provide the independent expertise to help manage risk and maximize the lifetime savings of your project.
IF YOU HAVE ANY QUESTIONS ABOUT YOUR PPA, CONTACT SAGE RENEWABLES AT 415-663-9914.
We’ve provided independent energy expertise to more than 100 California public agencies to help plan, procure, implement and operate advanced energy projects.