Path-Q Solar
What financial risk does a small business face if a solar PPA restricts changing the site's electricity supplier?
Answer
The business may lose the ability to switch suppliers when prices, service quality, contract terms, or operating needs change, potentially paying more or bearing exit costs. Review the PPA's supplier, term, pricing, escalation, termination, and change-in-law provisions before signing.
Key points
- Determine whether the restriction covers only electricity supplied by the solar provider or all site supply arrangements.
- Compare PPA pricing and escalators with plausible alternative supply costs without assuming future prices.
- Check rights to change supplier after relocation, sale, closure, tariff changes, or service failure.
- Identify termination payments, minimum purchases, take-or-pay obligations, and dispute remedies.
What it depends on
- PPA price and escalation structure
- Contract term and exit provisions
- Site load and future operating plans
- Availability and rules of alternative electricity suppliers
Risks and trade-offs
- Contractual inflexibility can create opportunity cost if better supply terms become available.
- Early termination or under-consumption may create substantial charges.
- A PPA may still provide price predictability or reduce upfront capital requirements.
Information you may need
- Complete PPA and supply provisions
- Historical and forecast electricity consumption
- Alternative supply options and assumptions
- Relocation, closure, and change-of-control terms
Your next step
What to do next
Have the contract reviewed for supplier lock-in and model total cost under price, volume, relocation, and early-termination scenarios.
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Some details may depend on your location, installer, utility, incentives, regulations, or specific property.
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