Erik describes PPA’s.
This is my 8th video interview with Erik Bowman (I said Mark in the video – oops) with his new company of IES (Integral Energy Systems) of out of Golden Colorado.
SolarDave: What is going on with the PPA Power Purchase Agreements lately?
Erik Bowman:
[transcription coming soon ...]
Dave,
Cranking out the videos lately, eh?
Couple of questions:
1) SunRun is calling its third-party financing program in Colorado “solar leasing” http://blog.sunrunhome.com/.
It’s a bit fuzzy to me if there is a clear difference between solar leasing and SPPAs — or if they are just two different terminologies referring to the same thing. I need to clarify this for myself, and it might be helpful for a future interviewee of yours to do the same. Just a thought.
2)It would be really interesting to have a solar company CEO, consultant, talk about the following: What’s a smarter and better financial path — solar leasing/SPPAs, or buying a system outright?
Here I go again, answering my own questions.
Here’s a link to a SolarPowerRocks.com page — http://www.solarpowerrocks.com/affordable-solar/whats-diff-lease-vs-ppa/ — that establishes the differences between a Power Purchase Agreement and a solar lease.
Tor, aka, “SolarFred” claims at the end of the piece that “in the long term using a home equity loan or an energy efficiency mortgage to buy your panels” is a better financial bet than an SPPA or solar lease.
SolarFred is definitely legit and a good source of info, but I’m not sure I’d take his as the “final word” on whether buying — and financing a system through an gov. energy efficiency loan — is always better than a SPPA or solar lease.
Personally, between the SPPA — you buy the buyer your system generates from 3rd part, and the solar lease — you pay a rental/lease fee to the 3rd party company, but you don’t technically buy the power being generated off your roof — my first reaction as that an SPPA, at the very least, seems more satisfying.
The primary difference between a PPA and a lease is whether the periodic (monthly) payment is related to the kW hour production of the PV system or if it is a true lease payment. The lease payments are not variable based on production but may have escalators. Functionally they are very similar. They are a means for a lease/finance co. to leverage the tax and rebate benefits and thereby pass on lower costs to the consumer to go solar. The question of whether a purchase or lease/PPA is better is very specific to the needs of the client. If spreading payments out or having a low or $0 downpayment is important then a lease is appropriate. If the client has a need for depreciation/tax credits and wants a stronger IRR, then the purchase may make more sense. A non-profit for example, can not leverage the tax benefits so a 3rd party ownership model makes dramatically more sense. Also, one very big benefit of a lease model or PPA is the vested interest the lease company has to ensure the system is producing energy and therefor typically maintains the system for the duration of the lease or PPA.
Erik Bowman, GM
Integral Energy Systems
http://www.iessolar.net
ebowman@iessolar.net