A family with a baby is next to their solar panels, which they got through a Purchase Power Agreement, or PPA
Photo Credit:
Adobe Stock
Solar for cheap

What is a Purchase Power Agreement and Should I Choose One?

Siboney Winter
October 12, 2023

Are you ready to supercharge your energy game and join the solar revolution? Picture this: you can save money, reduce your carbon footprint, and say goodbye to those unpredictable utility bill hikes.

How, you ask? Well, hold onto your hats because we're about to introduce you to the future of clean energy – Purchase Power Agreements, or PPAs for short. Forget about the days of worrying about solar panel maintenance or costly installations. With PPAs, you continue to enjoy the benefits of your own power but at rates that undercut those utility giants, and with fewer surprises in your monthly bill.

How do Purchase Power Agreements work?

Imagine buying your energy from a dynamic third-party developer who not only owns but also operates and runs the entire energy system. You'll secure your share of the sun's power output for a set number of years, typically 15 to 20, depending on the contract. Think of it as your PPA provider donning a cape and transforming into your new power superhero, collecting your electric bills and acting as your trusty utility company. Ready to dive deeper into this electrifying world of Purchase Power Agreements? Buckle up – we're about to embark on a journey that's as thrilling as it is sustainable.

Electricity rates can be a bit of a rollercoaster, especially depending on which state you call home. But when it comes to PPAs, one thing is for sure – they're almost always cheaper than the lowest-tier rates offered by your traditional utility companies. While there are occasional plans without rate escalators, you may find yourself paying a slightly higher per-kilowatt rate in return. The beauty of PPAs is that they usually come with minimal upfront costs, so you won't have to worry about shelling out big bucks for down payments, permits, activations, or installations.

Think of a PPA as a golden opportunity to secure a cost-effective rate plan with a guaranteed rate and a fixed escalator rate for a set period. Imagine if you could lock in a price for gasoline for your car over a few years – it might sound like a fantasy, given how those prices fluctuate. PPAs offer you a similar advantage in the world of electricity.

Now, let's clear up the confusion around how PPAs bill you for your power. Unlike your usual energy bills, where you pay based on your usage, solar power generated through PPAs is billed based on the electricity produced, not on how much you consume. It might seem counterintuitive at first glance, but trust us – in the long run, it usually balances out nicely compared to what you'd be paying your traditional energy company. You see, you're essentially paying for the power generated, rather than the "cost" determined by the traditional system. So, while it might not technically be a lease, it does have that lease-like feel because you won't be owning the panels. It's like having all the benefits of a solar power setup without the hefty upfront investment.

Let's dive into the perks and quirks of PPAs – the superhero of solar energy!

Pro Power for PPAs:

Imagine having your very own solar setup without the headache of maintenance and monitoring. Well, with PPAs, that dream becomes a reality. The solar company that owns the panels takes on all the responsibility, so you can kiss those pesky chores goodbye. No more worrying about technical hiccups or climbing up on the roof – it's a hassle-free energy adventure!

Cons (and Curiosities) of PPAs:

Now, for the flip side of the solar coin. Because you don't own the panels with a PPA, you won't be basking in the glory of tax credits. It's a trade-off, but one that's worth considering. And here's a fun fact: keep an eye out for potential liability issues if you plan on transferring your home. Make sure the PPA won't slap a lien on your beloved abode! If you ever decide to pack your bags and move, beware of credit score requirements for the new homeowners to pick up the PPA – unless you want to buy your way out of it, that is.

Now, here's the real estate scoop – homes with PPAs aren't your run-of-the-mill listings. The process is as smooth as swapping the utility bill into a new name. But here's the kicker – it's a sweet deal for the buyer! They get to enjoy reduced electricity rates, making your home shine even brighter in the real estate market. So, whether you're a solar enthusiast or just looking to spice up your home sale, PPAs could be your ticket to an electrifying future!

Each state has the power to decide how the electric utilities are managed, hence not every state allows PPA’s. There is an updated list of states which PPA’s available here for your reference. In addition, the National Renewable Energy Laboratory has a PPA checklist for states which you can checkout as well.

Some examples of states that have PPA’s are Arizona, New Hampshire, Ohio, Rhode Island, Massachusetts, and Georgia. There are states all across the country and even out in Puerto Rico and Hawaii there are PPA’s available. California was the first state to have a megawatt scale power station and is a leader in Solar Energy. California is a trailblazer when it comes to PPA’s and sets an example of how states can create an obligation for utilities to purchase clean energy.

A mini history lesson on how PPA’s came to be is that in the 70’s the USA faced a severe energy crisis. The oil embargo presented the country with skyrocketing oil prices and depending on foreign oil and diminishing natural gas resources. This then causes a need for a new management and local energy source. During this time, the US Congress passed the Public Utility Regulatory Policies Act (PURPA) in 1978. Following that many states have decided to use PPAs or not use them due to the controversial terms and conditions of pricing energy generated instead of energy used. If your state does not allow PPA’s you can always reach out to your local government and advocate for more energy options.

In a world where clean energy and financial savings are increasingly important, choosing the right path to go solar has never been more crucial. If the idea of going solar without any upfront or out-of-pocket expenses appeals to you, especially if tax credits aren't available in your area, then a PPA might just be the perfect fit for your energy needs.

To determine if a PPA aligns with your goals, start by connecting with a reputable energy company that can provide you with an energy assessment. This will give you a clear understanding of the potential benefits and savings a PPA can offer for your specific situation. Additionally, take the time to delve into your state's relationships with PPAs. Regulations and incentives can vary significantly, so knowing what's available in your region is essential.

In the end, whether you're driven by environmental concerns, financial savings, or a combination of both, PPAs offer a straightforward and accessible route to harnessing the power of the sun. So, take the first step, explore your options, and pave the way to a cleaner, more sustainable future.

Most recent posts
Save money. save energy.

Related Articles

See all >
A smart power strip on a wooden background
Plug into green tech

Smart Power Strips 101: A Beginner's Guide

Smart power strips revolutionize home energy use, automatically cutting power to unused devices and curbing unnecessary expenses.

A million EVs were added to the grid last year, this is a picture of one
EV surge, energy plunge

How Adding a Million EVs to the Road Didn’t Break the Grid

Despite over a million new electric vehicles hitting the roads in 2023, the U.S. saw a surprising 1.1% decrease in overall electricity consumption

A man charges his EV in cold weather
Charging through the chill

Should I Be Worried About My EV in Cold Weather?

Discover how to maintain your EV in cold weather with effective strategies for charging and driving.