Power Purchase Agreement

Definition: Renewable system belonging to a third-party is installed on a customer’s property at little or no up-front cost to the property owner. Property owner is in an agreement to buy all the power generated at a fixed rate whether it is actually used or not. This is typically lower than the local utility rate. Structure: Fee model is based on power, not equipment to generate it. Transfer: A PPA may be transferred to a homebuyer with approval from the system owner. If a buyer will not adopt a PPA, then the seller is required to pay the remaining contract amount in full and the system would be removed. If being transferred, see Fannie Mae guidelines for more info: portion of the purchase towards equipment must be included in the buyers DTI calculation. Real or Personal Property: Renewable system is typically considered personal property. All tax credits as well as maintenance responsibilities, etc. belong to the third-party owner. Terms: The customer agrees to purchase all energy produced by the system. At the end of the PPA contract term (usually between 10-25 years), property owners can extend the contract and even buy the solar energy system from the developer based on terms in the contract.Additional info on SEIA.org.