PPA: The Key To Financing Your Photovoltaic Self-Consumption Project

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Date: April 12

To guarantee the return on investment in a photovoltaic self-consumption project, it is essential to carry out an exhaustive analysis to determine the most convenient form of financing. In this sense, companies that have solar panels can dump the surplus into the network, opt for simplified compensation to obtain a discount on their bills, or sign a PPA with an electricity company.

What does PPA mean?

The acronym PPA refers to “Power Purchase Agreement”, which are long-term contracts, for a period of 8 to 12 years on average, in which 100% renewable energy is produced or sold. exclusively. PPAs are increasingly common in the photovoltaic sector and are used in all segments, such as in large plants or “utility scale”, where they are signed between producers and buyers who can be an electric company or a private company. In this way, the electricity supply with 100% green energy is ensured, and both the buyer and the seller can benefit from the agreements.

There are several PPA agreement models that can be adapted to the needs of each consumer. In general, they are classified according to the point of origin of the energy, according to the point of delivery and according to its form. The PPA On Site is the most demanded model for self-consumption in companies, and is characterized by the power supply that comes from a photovoltaic system installed at the point of consumption, such as the roof of a factory. In this way, energy generation and demand are connected by an internal electrical network, which allows the consumer to take advantage of more energy from their solar panels than from the conventional electricity network. In addition, the electricity company that carries out the installation sells the electricity to the customer at a more competitive price than the market price. Once the term of the signed agreement is over, the electricity will be free for the client, since the installation will become their property.

The PPA On Site is a financing mechanism that is used to help the client to invest in solar energy at no cost, since the company that develops the project takes charge of all the initial investment. This economic amount is offset by paying the electricity to the company during the duration of the PPA.

5 benefits of PPAs

1.- Zero initial investment
As mentioned, on-site PPAs are signed by companies that are in charge of the complete development of the project, which allows the consumer not to have to pay anything for the installation. This benefit is especially relevant for companies with high consumption, for which a self-consumption solar project would have a high economic impact.

The electricity company is responsible for the total cost of the installation, which allows companies to bet on self-consumption with less risk.

2.- Greater economic savings
The on-site PPA guarantees savings compared to the cost of conventional electricity from the grid, since it does not depend on its tolls and has practically no losses due to the proximity between the point of generation and the point of consumption. The electrical connection is internal.

During the years that the contract lasts, the company ensures a competitive price for the electricity produced by the project and, after its completion, it will not pay anything for it, since the installation will become its property.

3.- 100% renewable energy
Betting on renewable energy is always a wise decision. In addition to economic savings and support for carbon neutrality, the company’s brand image will benefit greatly.

Likewise, companies can take advantage of the Next Generation program and EU regulations that benefit companies that join the energy transition.

4.- Property
At the end of the contract, the client can purchase the self-consumption installation so that it becomes his property, which results in greater savings on the electricity bill from that moment on. On the other hand, you can also continue with the PPA if you agree with the electric company.

5.- Revaluation
Solar energy is a commitment both present and future. Solar panels have a useful life of close to 40 years, which means that a photovoltaic project increases the total economic value of the company’s facilities in the long term.

This benefit is relevant for the future, since self-consumption facilities can last several decades and increase the value of factories, warehouses, centers, offices and/or any type of location in which they are located, regardless of their activity or business.

Source: Andina Energy

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