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~ Solar Project Financing ~
- A solar power purchase agreement (PPA) is a financial agreement where a developer arranges for the design, permitting, financing and installation of a solar energy system on a customer’s property at little to no cost.
- The developer sells the power generated to the host customer at a fixed rate that is typically lower than the local utility’s retail rate.
- This lower electricity price serves to offset the customer’s purchase of electricity from the grid while the developer receives the income from these sales of electricity as well as any tax credits and other incentives generated from the system.
- PPAs typically range from 10 to 25 years and the developer remains responsible for the operation and maintenance of the system for the duration of the agreement.
- At the end of the PPA contract term, a customer may be able to extend the PPA, have the developer remove the system or choose to buy the solar energy system from the developer.
~ Solar Project Financing- PPA Options ~
Open Access
Open Access enables large power consumers with more than 1 MW connected load to buy relatively cheaper power directly from power producers (open market).
• While, conventional consumers do not have choice except the AREA DISCOM for electricity supply & have no control over the rate.
• The electricity act 2003, enabled consumers with more than 1 MW of sanctioned load to buy electricity directly from power producers, pay some duties and taxes and reduce cost of power.
• The electricity act 2003, enabled consumers with more than 1 MW of sanctioned load to buy electricity directly from power producers, pay some duties and taxes and reduce cost of power.
Group Captive
In the ‘Group-Captive’ model, a solar project is developed for the collective usage of a group of corporate buyers.
Adviral will set up a SPV (Special Purpose Vehicle) for the group captive model, where the group of buyers will hold 26% equity; Together, all buyers collectively will need to consume at least 51% of the power – a PPA is drawn up to ensure clarity on electricity tariffs for 15-25 years.
~ Solar Project Financing- Benefits of PPAs to Solar Customers ~
No or low upfront capital costs
The developer handles the upfront costs of sizing, procuring and installing the solar PV system. Without any upfront investment, the host customer is able to adopt solar and begin saving money as soon as the system becomes operational.
Reduced energy costs
Solar PPAs provide a fixed, predictable cost of electricity for the duration of the agreement and are structured in one of two ways. Under the fixed escalator plan, the price the customer pays rises at a predetermined rate, typically between 2% – 5%.
Limited risk
The developer is responsible for system performance and operating risk.
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