Open Access (PPA Base Model)

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Open Access (PPA Base Model)

A Power Purchase Agreement (PPA) is a financial arrangement where a third-party developer installs, owns, and operates an energy system on a customer's property. The customer agrees to purchase the electricity generated by this system at a predetermined rate for a specified period. This setup allows the customer to benefit from stable and often reduced energy costs without the need for upfront capital investment, while the system owner can capitalize on tax incentives and income from selling electricity.

How Does a PPA Work?

  • Installation and Ownership: The third-party developer installs and owns the energy system, such as solar panels or combined heat and power (CHP) systems, on the customer's property.
  • Electricity Purchase: The customer purchases the electricity generated by the system at an agreed-upon rate. This rate is usually lower than the local utility rates.
  • Term and Maintenance: The agreement typically spans 10-25 years, during which the system owner maintains and operates the equipment.
  • Financial Benefits: The system owner benefits from tax credits and revenue from selling the electricity, while the customer enjoys lower energy bills and stable rates.

Why Consider a PPA?

  • Reducing Energy Costs: You aim to lower your energy expenses without making a significant capital investment.
  • Hedging Against Price Increases: You want to shield your organization from fluctuating energy prices.
  • Improving Resiliency: You seek to enhance the reliability and resilience of your energy supply.
  • Third-Party Ownership: You prefer a third party to handle the installation, maintenance, and ownership of the energy system.
  • Tax Incentives: You are unable to directly benefit from renewable energy tax incentives but still wish to support green energy.
  • Local Regulations: You operate in a state or jurisdiction that permits third-party ownership of energy generation equipment.

Benefits of a PPA:

  • No Upfront Costs: Avoid the initial investment for purchasing and installing energy systems.
  • Stable Energy Rates: Lock in energy prices and protect against market volatility.
  • Operational Efficiency: Focus on your core business while a third party manages the energy system.
  • Environmental Impact: Support renewable energy projects and contribute to sustainability goals.
  • Tax Benefits: Allow the third party to utilize tax incentives and benefits that you may not be eligible for.

A PPA is a flexible and attractive option for organizations looking to optimize their energy use while minimizing financial risks and capital outlay.

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