How to Install Solar Using a Power Purchase Agreement (PPA), a Flip or a Solar Power Equipment Lease
| Solar Power Purchase Agreement (PPA) – The solar power purchase agreement business model is a third party ownership contract between a solar power supplier or investor and a customer to supply solar electric power over a period of time at a fixed rate. The customer in a PPA only pays for the electricity they use from the suppliers solar grid. The equipment, installation and maintenance costs are paid by the solar supplier. It is common for the customer to provide the supplier with the area where the system resides, which is also the point of consumption. |
Any entity may enter into a PPA, but the power purchase agreement model is popular for large systems and entities that cannot take advantage of the generous Federal tax credits and rebates like governments, municipalities, schools, non-profits or other tax exempt organizations.
The customer benefits of the power purchase agreement are little or no monetary outlays for equipment and installation and hedging against rising electrical costs. The supplier takes the tax credits, rebates and incentives along with generating cash flow from the electricity sold.
Flip Agreement Model – In a solar Flip agreement, an investor supplies the solar power and temporarily pays most of the equipment, installation and maintenance costs. They also realize the tax credits, incentives and depreciation advantages. The customer or user provides the area for installation and contracts to pay a fixed rate over a specified period of time for the electricity used.
After the useful life of the credits and depreciation are realized by the investor, the ownership of the system is purchased (Flipped) from the investor to the customer.
Investor benefits of the Flip model include realization of the tax credits, rebates and other incentives along with the cash flow generated by the electricity sales. Customer benefits include avoiding large cash outlays for solar equipment and installation, hedging against rising electricity prices and a final purchase price that is much lower than the initial actual system cost after the ”Flip“ is completed.
Solar Power Equipment Lease Agreement – In a solar power lease agreement the cost of the solar equipment and installation is absorbed the leasing company who charges the customer a fixed monthly fee with small annual increases equal to the amount of electricity used or net metered back to the utility company. The customer supplies the mounting area and pays a fixed monthly fee for the electricity produced by the system.
The leasing company receives the tax benefits and monthly leasing fees along with any increases in monthly lease increases. The customer avoids any outlay for equipment and installation and receives its electricity at a fixed monthly rate lower than the utility company. Lease increases are usually built into the contract at a rate lower than the anticipated increases of the power supplied by the utility.
These types of agreements are complicated financial contracts which should be only evaluated and entered into with the help of an experienced attorney or tax advisor.
Contact Atlantech Solar for more information about solar power purchase and lease agreements and how we may be able to provide these services to your organization.
Contact us for more information
Privacy | Terms of Use | Sitemap | Intranet
...Supplying America’s Energy Independence™ is a trademark of Atlantech Solar Inc.
© 2009 Atlantech Solar Inc.
PO Box 263
349 Spook Rock Road, Bldg. G
Suffern, NY 10901
Phone: (845) 369-4025
