Solar Financing
Financing a major energy project can be complex, with a wide range of incentives, grants, and third-party financing options to consider. Sage works with clients to evaluate the options that best fit the client’s needs and can facilitate the arrangements through our network.
Solar PPA Buyout
EVALUATING THE BENEFITS, COSTS, AND RISKS OF A BUYOUT
A Power Purchase Agreement (PPA) enables a user of electricity to procure solar-generated electricity while avoiding the initial capital cost. It is a contract between a solar developer, who builds, owns, and operates the solar power system, and the user who agrees to purchase the electricity generated by the system. These agreements are long-term, often 20+ years, with an annual rate escalation. They also typically have buy-out provisions allowing for buying out the developer before the full term. It is often economically attractive for the user to buy out the developer, especially for older PPAs or those with a high rate escalator.
WHY BUY OUT A PPA?
Save Money on Financing
Many early PPAs had high energy rates and annual price escalators as high as 4% or more. High escalators together with changing utility tariffs can result in PPA energy costing more than energy otherwise purchased from the electric utility.
Reduce Operating Costs
When low-cost capital is available, buying out a PPA contract and taking ownership of the solar asset can lower operational costs.
Plans Can Change
Changes to facilities can require a solar project to be moved. Buying out a PPA is often more economic than paying for energy while the project is offline and paying the owner to move the system.
SOME PPAS ARE UNDERWATER— PARTICULARLY OLDER PPAS WITH HIGH RATES/ESCALATORS OR SYSTEMS THAT HAVE BEEN OPERATING FOR SEVERAL YEARS.
If you’re a customer considering a solar PPA buyout, Sage can provide the independent expertise
to help manage risk and maximize the lifetime savings of your project.
Questions about your PPA?
We’ve provided independent energy expertise to more than 100 California public agencies
to help plan, procure, implement and operate advanced energy projects.