As a former realtor, general contractor and greenhouse operator, Kristi has touched nearly all aspects of homeownership, from the foundation up. Today, Kristi is a full-time investing and real estate journalist working with notable publications such as Forbes, US News and World Report and The Motley Fool.
Corinne Tynan is a highly skilled contributing editor at Forbes Home, with a wealth of knowledge and expertise in various areas such as interior design and home improvement. With over 10 years of experience in writing, editing and SEO content strategy for digital properties, such as Bed Bath & Beyond, buybuy BABY, Harmon and Macy's, Corinne brings a unique perspective and deep understanding of all things related to enhancing and beautifying homes.
As a former realtor, general contractor and greenhouse operator, Kristi has touched nearly all aspects of homeownership, from the foundation up. Today, Kristi is a full-time investing and real estate journalist working with notable publications such as Forbes, US News and World Report and The Motley Fool.
Corinne Tynan is a highly skilled contributing editor at Forbes Home, with a wealth of knowledge and expertise in various areas such as interior design and home improvement. With over 10 years of experience in writing, editing and SEO content strategy for digital properties, such as Bed Bath & Beyond, buybuy BABY, Harmon and Macy's, Corinne brings a unique perspective and deep understanding of all things related to enhancing and beautifying homes.
Contributor, Editor
Lowe is a lead editor, covering all things related to home improvement and good design. She previously worked in the decor and lifestyle spaces for digital publishers such as Hunker, First Media and Ranker and has multiple years of experience creating design and DIY content.
Lowe is a lead editor, covering all things related to home improvement and good design. She previously worked in the decor and lifestyle spaces for digital publishers such as Hunker, First Media and Ranker and has multiple years of experience creating design and DIY content.
Updated: Sep 11, 2023, 1:29pmWe earn a commission from partner links on Forbes Home. Commissions do not affect our editors' opinions or evaluations.
Sustainable options like solar arrays are becoming much more popular with homeowners as the price of fuels like propane and natural gas continue to climb. There’s a lot to consider about adding a solar system to your home, though, including how you plan on paying for it. In many areas, there are multiple financing options, including buying your system, leasing it or arranging a solar power purchase agreement (PPA) with an installer.
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Blue Raven Solar
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A solar PPA is a type of arrangement in which the homeowner allows a company to install a solar system on the property. Instead of leasing or purchasing the system, the owner only pays for the power they use. PPAs range in length, but they can be as long as the lifetime of the panels on the home.
With a solar PPA, instead of purchasing the solar panels, or agreeing to a long-term lease (often with a purchase option at the end of the lease), the homeowner doesn’t have any responsibility for the panels. They’re owned by a company that installs and maintains them.
This is where it gets a little complicated. The company will bill the homeowner for the electricity the panels generate, based on measured metering. Generally, these prices are well below the price of electricity from the homeowner’s utility use, but it’s not guaranteed. If the panels don’t produce enough electricity to cover the electrical needs, the owner will also receive a bill from their utility company.
In the case that the panels on the home are capable of producing an excess of electricity on sunny days, the owner may or may not get a credit for that to go against their utility bill. They’ll have to check their agreement to be sure.
Power prices can fluctuate regularly, which makes it hard to say exactly how much you’ll save with a solar PPA. However, most arrangements are set up so that you do save money, otherwise there would be few advantages to the recipient of the power from the solar panels.
The amount you’ll save is also going to be based on how much electricity you use, how much the panels will generate, what your agreed rate is and what other fees are involved. This is why you should consult with several different companies before choosing a PPA provider so you can find the best deal for you.
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Choosing a solar PPA can be a difficult decision, but here are some pros and cons to consider:
In a Solar Power Purchase Agreement (PPA), the solar provider is responsible for installing and maintaining solar panels on the customer’s property. The customer, in turn, commits to purchasing only the solar electricity generated by these panels at a fixed rate for a specific period of time. However, these agreements are unlike leasing or purchasing your solar system, so there are some crucial elements to consider, such as:
When considering a Solar Power Purchase Agreement (PPA), it is crucial to carefully examine the contract terms to make the most informed decision. For instance, it is recommended to begin by evaluating the contract length to ensure it aligns with your long-term energy needs and goals. Next, focus on the pricing structure, choosing between fixed rates for stable and predictable costs over time or escalating rates that may offer more significant savings in the long run.
It is also essential to carefully review the PPA’s early termination fees. Early termination fees are penalties or costs incurred if a customer terminates the PPA contract before its agreed-upon term date. These fees will compensate the renewable energy provider for the loss of revenue and other related costs. Therefore, it is vital for customers to fully comprehend the various contract terms like contract length, pricing structure and early termination fees to negotiate favorable terms.
Solar PPAs have a lot of the same problems that leases offer, including that you have a long-term agreement with a solar company that can be very difficult to terminate, should you need to. Both PPAs and leases can be huge barriers to sale if you should choose to put your house on the market because buyers don’t want to just take over whatever agreement you made with a company they don’t know.
Buying your solar panels is generally the best move if you want to benefit from solar power. They’ll improve the value of your home as well as the appeal to a potential buyer. But, of course, you’ll also be responsible for maintaining and repairing the solar system, should anything go wrong. When you buy a solar system, you also usually will have the benefit of selling excess power to the grid to help offset your power bill.
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As with any kind of contract, it’s vital that you thoroughly read and understand what you’re agreeing to with a solar PPA. Some people may well find the benefits outweigh the risks, but you need to understand how you’ll be paying for your power and what credits you will and will not be able to take advantage of.
Watch closely for elevator clauses, which are common, and allow the company to raise your per watt power price at regular intervals by a set amount, regardless of the cost of electricity from your utility.
Also pay close attention to termination clauses. You may not think you’ll need to cancel your arrangement right now, but it’s hard to predict how life might be in five or 10 years. Knowing how difficult it is to get out of a particular PPA is vital to choosing the right agreement.
THIS IS AN ADVERTISEMENT AND NOT EDITORIAL CONTENT. Please note that we do receive compensation for any products you buy or sign up to via this advertisement, and that compensation impacts the ranking and placement of any offers listed herein. We do not present information about every offer available. The information and savings numbers depicted above are for demonstration purposes only, and your results may vary.
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Before entering into a PPA, it’s crucial to consider the implications of Solar Renewable Energy Credits (SRECs). SRECs are incentives offered in some regions to promote solar energy generation, where the solar system owner can sell or trade these credits. However, in a PPA, you are not considered the owner of the solar panel system and would be unable to take advantage of SRECs.
PPAs are not the only way to receive the benefits of a solar energy system. Individuals can also explore alternative finance options, such as solar leases, loans or direct system purchases. For instance, solar leases allow customers to rent the solar system with little to no upfront costs, while solar loans offer ownership with financing over time. Direct system purchases involve buying solar panels outright, providing long-term savings without ongoing payments. Considering these various finance options allows you to discover the most suitable solution that aligns with your financial goals and energy requirements.
The impact of a PPA on property taxes can vary. For instance, if you own a solar energy system, it may increase the value of your home, thus leading to higher property taxes. However, when the solar provider owns the system under a PPA, the responsibility for property tax considerations typically falls on the provider. Therefore, it’s essential to consider local tax laws and consult with professionals to understand the specific tax implications of a solar PPA.
When considering a PPA, it’s also important to understand its potential impact on site upgrades. For instance, the solar provider will typically assess the condition and structural integrity of the site’s roof or ground space before installation. If upgrades are required to support the solar energy system, the responsibility for covering these costs must be negotiated during contract discussions. Furthermore, discussing any necessary site enhancements early in the PPA process will help ensure the solar installation goes smoothly.
For some people, a solar PPA is the right move, even if it might be less than ideal for others. If you’re interested in solar power, but don’t want to own your own solar system and don’t mind paying another company for the power that’s being generated from your roof, then a solar PPA might make sense. Just be sure that you fully understand all the terms of the contract, since they can be very difficult to modify once you’ve signed on the dotted line.
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AdvertisementTHIS IS AN ADVERTISEMENT AND NOT EDITORIAL CONTENT. Please note that we do receive compensation for any products you buy or sign up to via this advertisement, and that compensation impacts the ranking and placement of any offers listed herein. We do not present information about every offer available. The information and savings numbers depicted above are for demonstration purposes only, and your results may vary.
