Commercial Solar Power Purchase Agreements (PPAs)

Commercial Solar Power Purchase Agreements (PPAs)
3 min read

The solar power industry is growing at a rapid pace, with many businesses now exploring options to reduce overhead and save money through the use of renewable energy. With a variety of federal and state incentives, tax credits and new technologies, commercial solar systems are becoming an increasingly attractive option for business owners to offset a significant portion — or even all — of their electricity bills.

A commercial solar system typically consists of multiple rows of photovoltaic (PV) solar panels that convert sunlight into direct current (DC) electricity. The electricity flows to an inverter, which then converts the DC electricity into alternating current (AC) electricity. The AC electricity is then distributed throughout the building to power lights, machinery and other electrical devices. In the case that a solar PV system produces more electricity than is needed, the excess electricity can be sent back to the utility grid through a device called a net meter.

One of the most popular ways for businesses to invest in a commercial solar system is through purchasing the system outright, either from a private or public solar provider. This approach requires a sizable upfront investment, but offers long-term financial benefits and a high ROI.

However, purchasing a commercial solar system can be an intimidating proposition for many companies, especially in today’s challenging economic climate. As a result, an alternative to buying a commercial solar system outright is through a power purchase agreement (PPA). A PPA offers a similar economic benefit, allowing businesses to enjoy the benefits of a commercial solar installation without making the initial capital investment.

In a PPA, the solar provider will own and operate the system at the property location. The property owner will then purchase the electricity generated by the solar panel system on a per-kilowatt-hour basis at a fixed price that is often lower than typical utility rates. In some cases, the electricity produced by a commercial solar system may qualify for property tax exemptions, which further lowers the overall cost of the system for the business owner.

A commercial solar system can offer a range of benefits for business owners, facility managers, tenants, investors, financers and installers alike. For the business owner, these benefits include reduced operating costs through utility bill savings, increased operating income and cash flow, a competitive edge in the marketplace and more.

In addition to the financial rewards, a commercial solar system can also help businesses make a powerful statement about their commitment to sustainability. By reducing greenhouse gas emissions, businesses can gain marketability, increase brand awareness and become a leader in the green economy. This can also help attract and retain employees in an era when employee retention is increasingly important.

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