There are several financial options when it comes to making the switch to solar power.
Each has its advantages and disadvantages because every homeowner’s situation is a little different, and there is not a one size fits all solution.
However, there’s one option that’s quickly becoming the most popular for the majority of homeowners that are not interested in paying cash or getting a loan for a solar power system.
They just want the benefits of buying cheaper power.
In other words, more and more homeowners simply want a low and predictable power bill… And they have finally found a way to do it, without having to buy their own solar system.
It’s called a Power Purchase Agreement, or PPA.
The PPA allows you to continue to purchase solar power at a rate much cheaper than a traditional utility company… without the headaches of owning, monitoring, and maintaining a solar system.
In other words, the PPA provider steps in and becomes your new power provider and collects electric bills from you, acting as your new utility company. The rates can vary but are typically much cheaper than your traditional utility companies.
Many times, if your bill is above $200 on average, a PPA can cut your current power bill in HALF!
It’s not much different than changing your mobile phone service from Sprint to Verizon. It’s merely a new agreement.
In most cases, if your goal is simply to have a much lower power bill payment and you’re not worried about owning the solar system yourself, a PPA is the way to go.
There is also NO upfront costs. Like ZERO, really.
That means services such as permitting, installation, activation down payments, etc… It’s all included in your new monthly solar power payment with a PPA.
So the first time you ever take your wallet out is to pay that first solar power bill for the month.
The PPA, in a sense, not only becomes a cheaper rate plan, but it comes with a guaranteed rate for a fixed amount of time.
The typical PPA term is 20-25 years, which is a fantastic deal considering you are locking in a predictable low rate for power.
It would be similar to the dream we’ve all wished for at one point:
Fixed pricing on gasoline… With no more surprise price hikes!
What if you were able to lock in a guaranteed price per gallon of gas for your car for a set amount of years where that price cannot change?
That would put a smile on your face.
Now, I dare you to ask your power company if they will lock in a rate for 25 years? (Yeah, I agree, I think you’d be wasting your time too!)
There are few points to clear up with a PPA.
One way that a PPA can get a little confusing is how customers get billed for their power.
The most popular PPA financial payment plans are fixed payments monthly, no matter what time of the day or how much power you’re using.
How is this possible if you’re using power differently as the seasons change?
ANSWER: Because your new PPA bill is based on the power produced over a year. Then they average it out over 12 months to give a simple, flat monthly rate.
It may seem counterintuitive at first, but when looked at over 12 months, you’ll see that it averages out quite nicely.
This gives you peace of mind because you can set it on auto-pay and not worry about your bill suddenly spiking in the summer.
Plus, it’s significantly less than what you would have paid to your traditional expensive power company.
Another way a PPA confuses people initially is it sounds just like a lease.
However, it technically is not a lease, because you don’t actually lease the panels, you are only purchasing the power. (Hence the name, Power Purchase Agreement)
The huge benefit here is that the solar power company is also responsible for monitoring, maintaining, and measuring the performance of the system.
Something to note is how tax credits work with a PPA.
Because you don’t have ownership, the tax credits are assumed by the PPA provider, and the tax savings are already built into your lower price.
What about if you plan on moving in the near future?
One area of concern that comes up often for homeowners is the fact that they are planning on moving in the near future. After all, studies show that Americans move an average, every 5-6 years.
This can initially can worry someone about their ability to transfer the PPA into the new homeowner’s name in the event of selling their home.
The good news here is that most PPA providers handle this process for you, guaranteeing the transfer, no matter what the new homeowner’s credit is like.
Home sales with PPA’s attached are relatively commonplace and typically as simple as changing the utility into a new name.
Furthermore, it should be seen as a benefit to the buyer, as they are now moving into a home with much lower electricity rates.
In short, if you want a simple way to switch to solar, without any out of pocket expenses, and you’re not likely to qualify for the full benefit of tax credits…
A Power Purchase Agreement is probably the best fit for you to make the switch to solar.
Here’s the best way to know if the PPA plan would save you the most money:
Take this free quiz, which will instantly tell you if your home qualifies for a PPA with zero up-front costs.