While solar is the future, not everyone can afford it which reduces the scale of adaptability. So the government and banks introduced many options for financing it. On top, to increase its adaptability, the solar companies came up with policies. One of which is called a Power purchase agreement or PPA. If you’re not yet aware of what a PPA is, here’s the explanation in brief:
PPA is a system that allows you to get a solar system without having to buy one. You can have a solar system installed on your roof without spending money from your pocket. And you’re not taking a loan either. Instead, you’re entering a contract. In which you’re agreeing to purchase solar energy from the particular solar for said period.
It works like this: You and the solar company come to an agreement. Then the company design, permit, finance, and install in your home for little to no cost. Here, you don’t own the solar system, instead, you are using the power generated by them and pay according to the usage. The rates are usually low when compared with the local utility rates. Also, the company will bear all the expenses to maintain the panels and systems. They do all the regular checks to ensure the system is running optimally.
Many owners adopt PPA due to, As
- It does not require upfront cost
- It reduces energy bills
- Has zero risk
- It removes the stress of maintenance and repairs
- It increases the property value.
The company profits by selling the extra power generated by your system. They also benefit from the Federal Investment Tax Credit (ITC) and other state incentives for solar energy.
As all this is true. But when we come to point 5. Increase in property value, it gets tricky.
The major catch of a PPA is its time period. PPA does not allow short-term agreements. The minimum length of contract they provide is around 20 to 25 years. Meaning: You essentially agree to purchase the energy from the solar company for 25 straight years. And of an increase in price every year from 1 to 5%. All this becomes a pain in the neck when one changes his mind or sells the house.
Even though it’s been told that the 25 year contract can easily be transferred to the next homeowner. But usually, it doesn’t work that way. The real estate agents get in the way telling the new owner that:
“We’re going to make the seller pay the entire system off because it’s their mistake. And we don’t want you to be punished for that”. And tell them to bargain the price or use it as a negotiating tool to decrease its value. This happened to many homeowners in the past.
Also, there is no way of getting out of PPA once entered. Some may claim there is. But the contract is by design created with no exist. This is the harsh reality of PPA and most homeowners sadly fall for it.
So if you’re planning to install solar and have the PPA as one option, then do more research and ask more questions. Are you really going to stay in the same house for the next 25 years? Considering the current recession and economic downfalls in the U.S., it is not wise and also no one can actually predict the future.
This is not a post to intimidate you or saying not to go solar. Instead, it’s the reality in which the terms of the PPA act. To avoid falling into the trap, consider more financing options and with due research take action.
