Path-Q Solar
When might a power purchase agreement cost more than buying solar?
Answer
A power purchase agreement may cost more when its per-unit energy price, escalation rate, minimum charges, or long contract duration cause total payments to exceed the cost of owning a comparable system. The result depends on actual production, self-consumption, utility prices, and the purchase alternative.
Key points
- Calculate total PPA payments using expected and downside production, not only the first-year rate.
- Review annual price escalators, minimum production or payment provisions, and contract length.
- Compare the PPA with the net cash or financed cost of purchasing the same expected output.
- Consider whether the provider retains incentives, residual value, and operational control.
What it depends on
- PPA starting rate and escalation formula
- Contract term and minimum payment provisions
- Expected system production and degradation
- Utility bill and export assumptions
- Cash or loan purchase price
Risks and trade-offs
- Escalation can make later PPA energy more expensive even if the initial rate appears attractive.
- A PPA may create transfer or buyout obligations when the property is sold.
- Comparing a PPA price with the retail rate alone can omit fixed charges and ownership costs.
Information you may need
- Complete PPA agreement and payment schedule
- Production guarantee and degradation assumptions
- Purchase alternative and financing terms
- Transfer, buyout, maintenance, and roof-work provisions
Your next step
What to do next
Build a year-by-year comparison of PPA payments versus owned-system costs under low, expected, and high production scenarios.
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