Path-Q Solar
How should a PPA be evaluated when electricity use may fall substantially?
Answer
Evaluate what the PPA charges for—commonly system production delivered or exported rather than the customer's electricity consumption—and identify any minimum, contracted, or termination-related obligations. A substantial fall in consumption can reduce the value of the solar energy without reducing PPA payments unless output is curtailed or the contract expressly ties charges to consumption.
Key points
- Compare expected future consumption with the system's production and the PPA's billing method.
- Identify whether charges are based on system production, delivered energy, customer consumption, minimum purchases, or another formula, and review shortfall charges, excess-production treatment, and term length.
- Model changes caused by efficiency upgrades, occupancy changes, electrification, business closure, or sale.
- Assess whether the contract can be resized, assigned, bought out, or terminated.
What it depends on
- PPA price and billing formula
- Minimum purchase and production provisions
- Expected future load and occupancy
- Transfer, buyout, and termination terms
Risks and trade-offs
- Under many pay-per-kilowatt-hour PPAs, payments follow system production delivered or exported and may not fall when the customer's electricity use falls.
- Unused production may have little value if export compensation is limited.
- A long PPA can conflict with planned moves, efficiency projects, or changes in business operations.
Information you may need
- Full PPA and payment schedule
- Historical and projected electricity consumption
- Production and export assumptions
- Buyout, assignment, and early-termination provisions
Your next step
What to do next
Model the PPA under current use, substantially lower use, and vacancy or sale scenarios before accepting the proposed term.
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