Solar Power Purchase Agreements

From P2P Foundation
Jump to: navigation, search


By David Roberts:

"A power purchase agreement (PPA) works similarly to a lease — both fall under the rubric “solar as a service,” under which a customer contracts to buy power from solar installations owned and run by third parties — but typically at a larger scale. (Here’s a primer on solar PPAs.) For example, the military is in the process of signing PPAs with SolarCity to cover 120,000 military residences with solar panels that are expected to eventually generate some 6,400 megawatt hours of electricity a year.

It’s a great model, one the military very much favors, but some states make it difficult or impossible. A Department of Energy white paper [PDF] on the subject notes that …

… many states, including North Carolina, have legislative barriers which impede the Army’s ability to utilize all of its available authorities by effectively eliminating the ability of rate payers in the state to enter into power purchase agreements with third party developers/operators of distributed generation. Typically, these legislative barriers take the form of definitions which define any entity which sells electricity as a public utility and places such an entity under the jurisdiction of the state’s Public Utilities Commission or Public Service Commission. …

Other barriers such as state laws and rules on interconnection procedures, net metering laws, the ability of electric utilities to charge onerous standby charges and limits on the ability to wheel power over private wires must also be addressed in order to remove uncertainty from the marketplace. [emphasis mine]


PPAs are not new, but they’ve generally involved utilities and large amounts of power. It’s only recently, in the late 2000s, that third-party (non-utility) PPAs became popular in solar markets. Though they’ve gotten more common, the fact that the amounts of power involved are typically much smaller and the number of parties greater means that much work remains to standardize them.

One nifty innovation, or at least new market, for solar PPAs involves a bunch of separate businesses and/or nonprofits leasing their rooftop space to a single solar developer (or a utility), which then treats the distributed panels as a single “virtual power plant.” (Here’s some research on the development and future of virtual power plants.) This market can draw in owners of large buildings or facilities who may not want to bother with owning solar panels, but will be attracted to a low-risk, predictable (if modest) flow of revenue." (

More Information