SOLAR PPA BUYOUT
EVALUATING THE BENEFITS , COSTS AND RISKS OF A BUYOUT
A Power Purchase Agreement (PPA) enables a user of electricity to procure solar generated electricity while avoiding the initial capital cost. It is a contract between a solar developer, who builds, owns and operates the solar power system, and the user who agrees to purchase the electricity generated by the system. These agreements are long term, often 20+ years, with an annual rate escalation. They also typically have buy-out provisions allowing for buying out the developer before the full term. It is often economically attractive for the user to buyout the developer, especially for older PPA’s or those with a high rate escalator.
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.
QUESTIONS ABOUT YOUR PPA?
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