Solar PPA Basics — Part 1
If you’ve spent some time biking or driving across Vermont, you’re probably accustomed to seeing rooftop solar panels, backyards with solar trackers or ground mounted arrays, soaking in the sun. What you might not know, however, is where all that electricity generated by solar goes. You might think, “Well, it must be going to the nearest building or home, right?” Not exactly. This is where a discussion of Power Purchase Agreement’s is needed.
The name speaks for itself. A solar Power Purchase Agreement (“PPA”) is an agreement between an owner of a solar array and someone who needs or wants solar energy to sell that energy at a specified price and time period. Net metering rules in Vermont allow for renewable electricity to be sold to anyone within a given utility’s service territory. This means it’s possible for a GMP customer in Brattleboro to buy solar electricity from a solar orchard (our term for a field of multiple solar trackers) located in Charlotte, through the use of “solar net metering credits.” The excess solar electricity produced in Charlotte is sent to the grid, and this excess energy is monetized by GMP as a credit to apply to the person in Brattleboro’s bill.
Let’s call the Brattleboro resident Chris. Chris works in downtown Brattleboro, and rents an apartment right alongside Main Street. She uses around 3,000 kWh per year of electricity and understands the importance of sourcing her energy from solar, but lacks the space/land currently to install her own solar tracker. After hearing about AllEarth’s PPA program, Chris signs a PPA for around 3,000 kWh of solar energy per year. Each month, she pays AllEarth for ~250 kWh of solar, and receives solar net metering credits on her electric bill from GMP.
While Chris pays for approximately 250 kWh of solar energy per month, the actual amount she receives monthly will vary depending on weather. Our solar trackers follow the sun, daily and seasonally. Solar production is highest between late spring (April) and early fall (October), peaking typically around July/August, and lowest through the fall/winter months. While Chris pays for the same amount of solar each month, during the summer months she will likely receive higher than 250 kWh of energy, and less than 250 kWh during the winter.
Now, what happens during an especially sunny summer month where Chris uses 250 kWh, but actually receives 350 kWh in solar net metering credits? The 100 kWh that’s leftover is called “excess net metering credits.” While Chris can’t get cash for these, they remain on her bill as a monetary credit (100 kWh x the solar rate) in her net metering credits “Bank” to be applied to any future energy usage not covered by her monthly solar allocation.
Although Chris’ PPA will likely cover most of her energy needs, she’ll still pay GMP for any energy not covered by solar in a given month (ex: higher than usual electricity usage, lower solar production) and for any fees and customer charges that cannot be covered by excess net metering credits under the state’s net metering rules.
From Chris’ story, you may think that solar PPAs are only for people without land to host the solar array. While it’s common for us to create agreements where the recipients of the solar energy are different from the land hosts, many of our PPA customers have agreements with us for 100% of the solar generated by solar trackers and ground mounts on their property. Let’s say Chris buys a new home outside of downtown Brattleboro and would like to have a solar tracker or two to completely meet her energy needs. One way to do this is to sign a new PPA with us with the plan to purchase the array in 5 years after the PPA starts. Chris receives 100% of the energy from the solar tracker(s) and pays us monthly for the generation at a flatlined rate, set at the then current net metering rate, for 5-year periods. After the first 5 years, Chris has the option to purchase the solar array for around 50% of the original price.
Does Chris save anything with her PPA? The short answer is yes, given enough time, as we use the current net metering rate and adjustors (solar rate), as established by the Public Utility Commission (“PUC”) as the starting rate and keep it fixed for 5 years. As this rate increases Chris’ rate stays the same, and she saves the difference on solar. There is, however, more to the economics of a solar PPA. We will elaborate this in part 2 (“The Economics of Solar PPA”).
If you’re interested in learning more about our PPAs or want to explore options for you, reach out to us at sales@allearthrenewables.com, or call us at 802.872.9600 or sign up to go solar on our form below!