Energy Projects & PPAs
A Power Purchase Agreement (PPA) is an excellent option for companies or non-profit organizations looking to pay a controlled rate for power over a 20- or 25-year period. The PPA electric rate is often significantly discounted compared to the utility rate for the same amount of energy. The client, also known as the offtaker or host, is only charged for the power they use, as long as they meet the predetermined minimum. The PPA is particularly beneficial for organizations that do not qualify for the investment tax credit, such as non-profit groups, because the lender shares the tax credit and depreciation savings by offering a lower electricity rate.
PPA Benefits Include:
- Lower costs with a structured PPA compared to utility rates
- Gain the tax credit and depreciation benefits which otherwise may not be available
- 100% ownership when last payment is made
- For-profit companies keep the tax credit, depreciation and other benefits when financing a solar or energy project
- Fixed monthly payments
- Requests up to $250,000 can be approved with minimal paperwork
- Requests over $250,000 requires a 2- or 3-year financial package
If a non-profit organization doesn’t have a Power Purchase Agreement (PPA), they cannot benefit from the tax credit (ITC and depreciation), unless a Provider (a Special Purpose Entity) establishes and maintains the solar system, and provides power solely to the user as a service. In this scenario, the SPE takes the tax incentives and applies them to the project to make the energy system more cost-effective. This is an excellent long-term option compared to a loan program.