The power purchase agreement is the most popular solar financing solution for businesses which allows US companies to lower electricity costs, repurpose resources to their core operation and plan for the future.
When I look back over the past five years it amazes me how quickly the largest and most profitable companies made a decision to go solar. Most people assumed it was because they were in a strong financial position, however the way they are going solar has nothing to do with cash on hand and everything to do with saving money on day one. The solar financing solution called a power purchase agreement or a PPA has been the vehicle to make it happen. I recently read an article from the Solar Energy Industries Association that highlighted the most iconic and well respected companies in the United States and it provided a valuable article on this. We recently provided a free webinar on why businesses are rushing to go solar and one of the biggest reasons is because electricity costs are a top operating expense for most companies. We also highlighted the trend that shows how renewables like solar is the only energy source that is falling in price while receiving the smallest federal subsidies. Solar is now competing with the grid which highly dependent on fossil fuels. This means that the initial upfront investment that most businesses expect is removed from the innovative solar financing solutions that are working. When I say “working” I mean reducing electricity costs on day one and saving more and more each day by stabilizing rates for 20 and even 25 years. Let me say it easier, the price of solar is lower than the current rate a business is paying. The reality is that when a business can figure out a way to reduce price volatility from any of its budgets it is in the CFO’s best interest to typically due so especially if it is long term. That’s where the PPA is viewed as the financing solution to allow solar to make sense as it’s now positioned to hedge against rising electricity costs. Solar is pretty simple in the manner it generates electricity, but the financing is complicated and that is why businesses are going with a PPA because the solar financing companies are able to monetize tax credits, apply for rebates and incentives while the smart companies focus on their core competency which is typically not procuring and managing the installation and operations of a solar array. If you would like to see if solar is right for you then click here.