How do PPAs work?

Please click one of the links below to jump down to the role the particular party plays in a Solar PPA

Host Customer
Solar Service Provider
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Please refer to the following figure, which illustrates all of the roles involved in a Solar PPA*


*Courteousy of the Environmental Protection Agency of the United States

The energy provider operates and maintains the Photovoltaic (PV) System and the customer agrees to have the system placed on tehir roof or elsewhere on their property as well as purchase the electricity generated from the system for a predetermined period. With this method, the customer is purchasing the services produced from the system rather than the system itself. Customers are able to avoid many of the barriers that are involved in installing a traditional solar system, such as high up-front costs, performance risk as well as permit processes and complicated designs.

arrow Host Customer

This is the party that decides to have the solar panels installed onto their roof or other part of the building and typically signs a long-term contract with an energy provider to purchase the electricity that is generated. The prices for the generated electricity are either at current or slightly below current retail prices.

Solar PPA rates can be fixed but they can often contain an annual price increase of one to five percent to account for costs for monitoring, maintenance, operation and possible increase for grid-delievered electricity. SPPAs, as they are better known, usually are performance based in which the Host Customer only pays for the generated electricity.

arrow Installer

Installers design the system, identify the specific components needed for the system, and possibly may follow-up the maintenance of the PV system. Installation of a system may either be done with a third party relationship or with an in-house team of installers of the solar service provider. Installation is usually done within 3-6 months after signing a SPPA.

arrow Solar Service Provider

The Solar Service Provider serves as a project coordinator. They arrange for the design, financing, permitting and construction of the PV system. Solar service providers usually purchase the solar panels from a PV manufacturer, whom provide the warranties on the system equipment.

arrow Utility

The Utility provides an interconnection between the PV system and the electrical grid. The Utility will service the host customer during the time periods when the PV system is producing less than the site's electrical demand.

arrow Investor

Investors provides equity financing and received state and federal tax benefits for those systems that are eligble. There are some circumstances in which the solar service providera and the investor can form a Special Purpose Entity which can allow the project to function as a legal entity. The entity can receive and distribute payments to the investor from the sale of the systems kWh output.