Power Purchase Agreement (PPA) And Breaking Down Solar Loans All In One

In the case of a solar PPA, you accept to pay the solar company a per kilowatt-hour rate for the electricity generated by the solar panels. The price is usually lower than what the local utility charges for electricity.

Power Purchase Agreement (PPA)

A Power Purchase Agreement is a type of Third-Party Ownership (TPO) funding model where there is a two-party contract. The homeowner does not own the system but instead, the power is purchased at a set rate from the solar company that owns the solar panel system. 

A lot of companies have a PPA product choice that will allow you to purchase solar energy at a low, expected rate without having to worry about the maintenance or performance of your solar panels.

At the end of the PPA contract, the homeowner can stretch out the contract or purchase the solar system from the solar company.

Solar Loan Definition

Similar to a home improvement loan, the homeowner borrows money from a lender, either a bank or a solar company, and then repay it back with interests into monthly installments. These help homeowners go solar for $0 down while bankrolling the whole system.

Breaking Down Solar Loan

Solar panel loans have a similar structure to other loan types:

The interest rate affects the total payment of the loan over its lifetime
Shorter loan terms will have a higher monthly fee but a lower overall expense. One aspect of a solar investment that is very different from other home improvement loans is the fact that you are financing an asset that can generate significate financial value. A solar system creates value through the electricity it produces as well as the solar incentives, tax credits, and rebates that you can redeem. 

How Solar Loan Differs from Other Solar Financing Solutions

In both cases, Solar as a Service and Power Purchase Agreements (PPAs), the solar provider both funds and is the rightful owner of the solar system. These financing clarifications are referred to as Third-Party Owned. The third-party owners are responsible for maintenance, monitoring, and repairs. 

WIth a solar loan, the homeowner owns the solar system fully by the end of the loan's term when fully paid off. Depending on what company you go solar with, they can still provide maintenance, monitoring, and repairs on your system with a solar loan as the financing option. 

Want to save and be guided by experts who do the research and know the answers? Go to HahaSmart.com and try our price checker tool. How much solar power you need and how much you can save on your energy bills each month.