With the approval of the new Royal Decree of photovoltaic self consumption, have emerge great advantages such as the simplicity in the procedures, the cost of the photovoltaic installations, have allowed the emergence of bilateral agreements or PPAs, (Power Purchase Agreement) between a buyer and a seller in the long term. We explain everything to you in this article.
What is a Solar PPA?
Solar PPA (Power Purchase Agreement) is a agreement of purchase of energy in which there is a seller who sells energy and a buyer who consumes it during a determined time and with a profitable price for both parts. For the buyer, the price of energy is much cheaper that the usual market and for the seller gets the necessary financing to develop the photovoltaic project.
How does a solar PPA work?
A investor design, installed and connect the energy solar installation to self consumption on the consumer`s property, the investor assumes the installation costs. The consumer only pays for the solar production, he consumes at an agreed rate lower than the market for a period between 15 and 20 years. The financial risk or the project is assumed by the investor.
What are the benefits of a solar PPA?
• The buyer only pay for the solar energy consumed without any financial risk for the photovoltaic installation.
• The buyer does not make any capital investment for the installation.• Energy saving, the rate is lower that offered by the market.
• The price set in the solar PPA is maintained for the duration of the agreement.
• High profitability, the initial IRR is infinite since is no initial investment and the IRR after the purchase is lower in relation to the time that conserves decades of potential of production of solar energy.
• It avoids maintenance costs, the investor takes care of maintenance and photovoltaic monitoring.
• Commitment to the environment by using clean and renewable energy.
What are the advantages of an Energy Purchase Agreement for an investor?
• Get the necessary financing to start the photovoltaic project.
• Set long term relationships with end customers.
• Invest in new assets with the assurance of long term revenue.
• Starts the investment under criteria of profitability and risk.
• Alternative investment in renewable assets.
Who can benefit from solar PPA?
Hospitals, airports, water districts, shopping malls, public train stations, bus stations, among others, who want to use photovoltaic solar energy with a a zero capital investment and have an infrastructure to locate the solar production facility.
Risk of a solar PPA agreement.
In the long term, we can see an increase in the production of renewable energy from various sources causing a drop in the Price of electricity, this will also be offset by increased demand, since lower prices will encourage electricity consumption