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How PPAs Work
In a PPA, you sign a contract with a developer agreeing to buy the power generated by solar panels on your roof or elsewhere on your property. The developer buys and installs the equipment and sells you the power at a fixed rate specified in the contract. The developer uses the money you pay him for the power and money from subsidies for solar energy to pay for the solar power system and make a profit.
Solar System Operation
After the developer installs the solar panels and related equipment, you continue to pay for power from your utility company the same as before, but the bills will be less because some of your electricity will come from the solar panels. You pay the developer for that part of your energy use. The rate you pay the developer may be higher or lower than the utility rate at first but, over the life of the contract, typically 20 years, the rate you pay for utility electricity will probably be more than you pay the developer.
PPA Benefits
The biggest benefit of a PPA is that the developer pays for the initial cost of the installation and applies for the subsidies. You only have to sign the agreement and pay for the solar power. You know the rate you will pay for power over the life of the agreement, and you don't have to worry about repairs, maintenance or equipment failure. At the same time, you are reducing your use of fossil fuels and supporting your local economy with work from the installation of your system.
Disadvantages
The PPA contract can be complicated and hard to evaluate. If you sign up to pay an electricity rate that is too high, you may lose money. You have to keep track of and pay for two sources of electricity instead of just one, and selling your property is more complicated because the PPA has to be transferred. After the solar panels are installed, you may be restricted from making changes in your building that affect the solar panels, and your municipal taxes may go up if your home is worth more because of the solar system.