How Power Purchase Agreements are changing the way we think about solar

May 3, 2021
Solar Advice
3 min read

With South African businesses feeling the worldwide pressure to reduce their carbon emissions and attain their sustainability goals, the demand for solar energy continues to soar especially with power purchase agreements (PPAs) being a hot topic of discussion.

A solar PPA is a great alternative to owning a solar system. It is the best solution for businesses wanting to adopt solar without having to pay any upfront Capex where the benefits of performance guarantees, insurance, maintenance and the operation of the system are taken care of.

What is a solar PPA?

A PPA is a simple agreement that is signed between the business owner and the solar services provider, it includes the installation of a solar system at no cost and removes the challenges of having to insure, maintain, monitor, operate and clean the system for years to come. You pay for the energy you use, just as you would pay Eskom or your local municipality, however, the solar tariff (kWh rate) billed is cheaper than the national grid, providing a significant amount of energy savings each month and over the lifetime of the agreement.

Commercial and Industrial businesses

As PPAs become an increasingly popular choice for Commercial and Industrial businesses in South Africa, property owners must be asking the right questions and understanding the major differences when comparing solar proposals. According to SolarAfrica’s Sales Director Michael Zorich, one of the major concerns is that customers aren’t educated enough when it comes to understanding and comparing the finer details of solar energy contracts. “For instance, the term ‘No Take, No Pay’ means that you only pay for the energy you consume. Therefore, it is important that your solar system is sized based on how much energy your business consumes and not how much energy the system can produce,” says Zorich.

Sized based on energy production

When a solar system has been sized based on energy production, the number of ‘non-operational’ business days such as weekends and annual December shut down periods are not taken into consideration which means you don’t end up using all the energy the system has produced, resulting in lower savings and money in your pocket. It is one thing to propose monthly savings but to be able to deliver those savings consistently based on-site consumption is where the ‘rubber hits the road’. “We conduct a full technical review and log data to determine each property’s consumption ensuring our solar systems are accurately designed to provide the highest customer savings. At the end of the day, it’s not always about having the cheapest solar tariff but rather who carries the consumption risk, says Zorich.

Length of PPA

Whilst the typical length of a PPA is around 20 years, business owners still have the option to purchase the solar system from year five onwards, providing the choice of ownership at any time during the remaining 15 year period of the agreement. Many exit options are available should a business owner wish to end the agreement sooner due to the selling of the building. Flexible clauses including the option to cede the agreement to the new owner or to transfer the solar system to the new premises form part of most PPAs.

Insurance and maintenance

The possibility of a fire or hail and lightning storm is often overlooked until the solar panels are broken and the system is out of operation. Therefore, a PPA allows business owners to have the peace of mind that the solar system on their roof is always monitored and insured accordingly so that any damage caused to the solar system is fully covered.

Capex-free

“Capex-free solar has changed the renewable energy landscape and the way businesses are approaching their corporate sustainability initiatives. With zero cost on a company’s bottom line and the over-arching goal of being a more sustainable organisation, a PPA is a stress-free solution that provides long-term savings with the biggest advantage being reduced electricity costs from day one, “concludes Zorich.

Planning your organisation’s green energy road map is easier than it seems. Fill in our green energy goals questionnaire to identify the right alternative energy solution for your business.