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Guaranteed
Savings
If we gave you the choice of buying energy derived from foreign oils with drastic
effects on the environment or buying clean renewable energy produced from an
on-site photovoltaic system which would you choose? The first question that you
would probably ask is “which is cheaper?” What if we told
you they were the same price…?
A power purchasing agreement, or PPA, allows
a customer to use clean renewable energy at no net
cost. The basic idea behind a PPA is that
you, the consumer, will be purchasing the energy produced
from the photovoltaic system from our third party financer
at a price level which is equal to, or less, than what
you are currently paying the utility. It is
the perfect solution for a company that wants to go
green but can’t afford the initial negative cash
flow. There are currently two different ways
to structure a PPA, the predictable pricing method
and the guaranteed savings method. |
Predictable Pricing
The predictable pricing
method presents the greatest potential for savings. In
a predictable pricing arrangement you are given one price
for the energy produced by the system with a fixed rate
of escalation. The
way you generate your savings is simple. While
the local utility continues to raise their prices every
year by 6% or often times even more, you will be locked
in at a lower fixed rate of escalation.
“But what
if utility prices do not increase as much as expected?” The
average annual increase in utility costs here in San
Diego over the last 20 years is 6%. SDG&E’s
energy portfolio shows that about 50% of its energy comes
from the combustion of natural gas. SDG&E’s
prices will continue to rise even more than in past years
as the demand for natural gas continues to increase worldwide.
Guaranteed savings
Customers often like
the guaranteed savings method because it presents no risk. Depending on the cost of the
system and the local rebates associated with the system,
our third party financer will set a price level for your
energy that will vary with the price of energy from SDG&E. For
Example, your rates may be fixed at a level 2% less than
the rates from SDG&E. If SDG&E raises their
prices, your prices will also increase but will remain
2% less than SDG&E’s rates. This method
is very popular when installing multi-million dollar
systems for large companies that want to use green energy
with a guaranteed zero cost.
Lease Terms and Buyouts
PPA’s usually have a lease term between 20-25
years. During this term our third party financer
maintains ownership of the system while they sell you
the energy. A PPA contract has options for you
to buy the system out at different points throughout
the lease term, or at the end of the lease term, at the
fair market value of the system.
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