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Power Purchase Agreements

  • SOLAR PV WITHOUT UPFRONT COSTS

     
     
    What is a Power Purchase Agreement?
    WA PPA is a legal contract between the owner of a Solar PV (or other renewable energy) power-system whose often a developer and a host that is usually an owner of a building A base requirement of a PPA is a minimum of 50KW and has the right amount of roof space. Once the site is agreed a contract obligates the host site/customer to purchase electricity generated by the power system during a specified term, typically 12 to 20 years.
     
    Who are the funder of the PPA?
    The company work with a project developer by sorting out a contract to arrange financing within its connections of commercial investment banks or hedge funds. Investors receive a guaranteed return on any investment; an agreement called a PPA placed between the power purchaser and the electric utility. Investors can keep Feed in Tariff and sell power back to the building occupier. Typically AG arrange a PPA for projects in the cost range of £50,000 to £50 million. Investors are receiving a return on their investment that is guaranteed .
     
    What is in it for the customer?
    According to a PPA, the host site/customer agrees to purchase all the electricity produced by the renewable-power system. The initial electricity price in the PPA is determined based on an analysis of current billing, which might escalate from year to year based on the retail price index as opposed to double digit increases many businesses have seen over the last few years. Host site/customers may benefit from lower electricity costs along with lower increases and marketing or public-relations benefits.

    Host site/customers may benefit from lower electricity costs, a hedge against utility increases, and marketing or public-relations benefits. At the end of the initial term, the contract the project developer may remove the system or the the host site/customer may be awarded this as a bonus for taking part in the deal.
     
    Responsibilities
    The PPA-covered power system includes all equipment and materials. In the case of solar power, it includes photovoltaic arrays; DC/AC inverters; wiring; meter tools; and any other solar-related property installed, owned, operated or controlled by the project developer.

    The project developer is responsible for securing all the necessary planning permmisssion and connection permits, which vary by DNO. The project developer also installs the system components necessary to generate electricity for the host site/customer. The project developer must deliver electricity to the host on the designated commercial operation date and for the term of the PPA, as well as take on the responsibility for operation, repair and maintenance services. The host site/customer should provide site access to the system owner and, if needed, assist in obtaining any required permits. The project developer typically will make an annual visit so ensuring the system is maintained properly.

    The host site/customer is obligated to commit to pay monthly for electricity to the PPA funder for the agreed number of years though and should a new tenenat or building owner takeover the PPA may be assigned to the new occupier or building owner..
     
    If they do not pay the bill
    If the host site/customer defaults on the agreement prior to the end of the term, the project developer can stop delivery of electricity, remove the system from the site and seek payment for damages. Most importantly, the host site/customer must not take actions that disrupt the ability of the renewable-energy system to generate power.
     
    Before Installation
    There are conditions that must be met before installation commences. A host site/customer’s credit must be checked in advance to ensure its long-term ability to make payments. All available financial incentives must be secured and all site conditions must be reviewed and approved by structural and electrical engineers.

    In the case of a solar array, a solar surveyor will visit a site to determine the estimated power production; a structural roof survey will be completed; and local planning officers will be contacted and Distribution Network Operator (DNO) Companies approvals must be granted. If the roof is found to be in bad condition, the roof will need to be replaced or repaired, generally this cost is not part of the PPA and would need the host to complete repairs/replacement allows businesses or Public sector to purchase solar electricity with no upfront capital cost.
     
     
     
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