This article examines one of
the best choices for businesses when financing a solar energy project.
Many
industries are discovering the benefits of installing solar power systems to
save money on energy while offering protection to our fragile environment. Solar
power has benefitted schools, government and municipal clients, corporations,
water districts, housing developments and commercial real estate endeavors,
utilities and more. Since switching to a solar powered energy represents a
large capital outlay for most businesses, it is important to choose a financing
vehicle that allows your business to maximize incentives and rebates while
protecting resources and managing risk. Power Purchase Agreements (PPAs) and
integrated financing represents one of the best ways to do this.
What is a Power Purchase
Agreement?
Technically,
a Power Purchase Agreement (PPA) is a contract that defines terms of sale of
electricity between a buyer and a seller.
These can last anywhere from five to 20 years and they are subject to
regulation as the state and federal level depending on the project site and the
nature of the PPA. In the case of solar
power, the provider of the PPA absorbs the costs associated with the project,
such as design, construction, O&M and more.
Customers can watch their utility bills fall immediately since they are
purchasing clean energy as a substitute for on-the-grid power. The provider
receives any rebates and tax incentives associated with the production of clean
energy, but these savings are passed on to the customer in the form of lowered
bills.
Why is an Integrated PPA the
Best Choice?
An
integrated PPA occurs when the PPA provider and installer are one and the same.
In a standard PPA, the provider is looking to increase return on investment,
but the installer is also interested in lowering the costs of design, supply
and project build costs. If the
installer and the provider are the same, their interests are joined to provide
the highest quality project that will produce an appropriate return on
investment.
What benefits can an integrated
PPA offer your business?
Besides
the obvious energy savings, an integrated PPA offers commercial businesses
significant savings over traditional financing options. For one thing, they will not experience any
increase in energy rates over the life of the project, despite predicted hikes
in power costs due to increasing global growth and environmental regulation. As
an investment, it is a win-win: if the project does not perform according to
predictions, the onus falls upon the PPA provider to absorb the cost of
failure. There are no operation or maintenance costs as these are paid for by
the PPA provider and not having to finance the cost of a megawatt solar power
project up front allows the business owner to use his capital for other
investments. Finally, making the switch
to clean energy provides a business with a plethora of marketing tools that can
help generate positive PR for his business.
ARTICLE BIO:
Borrego
Solar is a commercial solar power installer in the United States. Please visit
their website at www.borregosolar.com
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