By: Pivot Energy
October 13 2021
Updated 6/29/23
In today's rapidly evolving business landscape, sustainability has become more than just a buzzword – it's a strategic imperative. As a business executive or sustainability officer, you recognize the importance of transitioning away from fossil fuels to renewable energy sources, but the upfront costs associated with solar projects may seem daunting. Enter Power Purchase Agreements (PPAs), a game-changing financing option that allows companies to achieve energy cost savings without needing to purchase any solar equipment. In this blog, we'll explain why solar PPAs are a compelling option for businesses seeking to reduce their carbon footprint while maximizing financial savings.
A Power Purchase agreement, known as a PPA for short, is a financial agreement between a commercial client and a solar developer, whereby the solar developer builds and maintains a solar array on the company’s property, and then sells the power generated by the array directly to the same property owner at a fixed kilowatt-hour (kWh) rate that is typically lower than the local utility’s retail rate.
One of the most compelling aspects of a solar PPA is that it eliminates the need for businesses to make any upfront capital investments. The solar developer covers all costs associated with designing, procuring, installing, and maintaining the solar PV system. Empowering the company to immediately benefit from clean renewable energy without bearing the financial burden of equipment and installation expenses.
PPAs typically last anywhere from 15 to 25 years. During that time, the project costs are amortized over the contract term and repaid via your monthly consumption of solar energy. At the end of a PPA contract term, the host has three options: extend the PPA term, remove the system at no cost, or directly purchase the energy system from the developer at fair market value.
In sum, the perks of going solar with a PPA are plentiful:
Companies with high operational costs.
The energy expenditure of buildings is increasing due to rising electricity costs, which is a big problem for the bottom line of energy-intensive companies. Solar PPAs are a great way for these businesses to hedge against rising electricity costs and maximize profits.
Companies with ambitious sustainability goals.
Climate change is becoming a top priority for more and more consumers, and businesses are feeling the pressure to implement meaningful sustainability measures across their business operations. Solar is an impactful way for these environmentally-focused businesses to advance their sustainability goals, and PPAs help them avoid the upfront costs.
The University of Denver is an example of an institution that fits into both of the above categories: it has significant environmental commitments and high operational costs. Pivot Energy worked with DU to install solar panels on 18 rooftops across the campus, financed through a PPA. The total portfolio of the project is greater than 2.25 megawatts (MW).
Most importantly, these projects allowed DU to surpass its goal of producing 5% of the university’s electricity onsite through renewable energy, accounting for 7-8% of DU’s energy consumption. Each year, more than 2,197 metric tons of carbon dioxide will be offset by the system.
Furthermore, DU chose to retain 100% ownership of the Renewable Energy Credits (RECs) produced by this solar portfolio over the life of the system. Owning the RECs, allows DU to claim legal ownership of the environmental, social, and other non-power benefits – reducing the campus carbon footprint by approximately 3.5 to 4%.
It’s always a great time to consider how a solar PPA can benefit your business. As a sustainability professional, feel free to leverage the above example to explain to your company’s directors and/or board members how PPAs can help lower future operational costs, while simultaneously raising your company’s sustainability profile.
This means that as a sustainability professional in the company, the immediate cost benefits of financing with a PPA will be a much easier sell to company directors and/or board members. At the very least, you can highlight the fact that installing solar energy frees up space for other important line items in your company’s operations budget, such as lighting, essential repairs, or landscaping.
Pivot Energy has helped many companies with large-scale commercial properties install solar panels on their roof or elsewhere on their properties. We have a team of professionals ready to support you with any questions and help you understand whether a PPA is right for you. To learn more, contact us today!
Pivot Energy
Together, solar and storage offer the unique ability to lower both demand and energy portions of a customer’s electricity bill.
