The benefits of true solar ownership are hard to overlook – especially in a market like the United Kingdom where the government offers such enticing green incentives.
This is why countless homeowners buy their photovoltaic (PV) systems using cash. If you don’t have the money on hand, taking out a solar loan still allows you to transform your PV installation into an income-generation machine.
This shareable infographic outlines all of the earnings and savings you can expect from a 4kW solar installation.
However, what if you don’t want to go into debt or pay for a new system out-of-pocket?
In the UK, you can still go solar – and you can do so at little to no cost.
Let’s explore how this works.
How Do Solar PPAs Work in the UK?
Short for power purchase agreement, a PPA is a special leasing contract you sign with a 3rd party, with most contracts lasting anywhere from 10 to 20 years.
That 3rd party (the “Seller”) agrees to install a brand-new solar installation on your property at a deeply discounted rate. Sometimes the cost is £0, but in most cases, you can expect to pay anywhere from £500 to £2,000.
Once the system is installed, you (as the “Buyer”) only pay for the clean electricity that your “rented” panels generate. The exact rate is determined in advance, but PPAs are structured so that the price per kilowatt-hour is less than what the utility company currently charges you.
So right away, you enjoy instant savings.
Instead of buying all of your electricity from the grid, you can now power your home or business using cheaper and cleaner solar electricity. Because your property is still connected to the utility network, you always have a dependable source of backup power.
Most PPA contracts also include an escalation clause to help keep pace with inflation. Even still, PPA payments will almost always remain cheaper than grid electricity prices.
Once your solar PPA contract is up, you can do one of 3 things:
- Buy the PV system outright at fair market value.
- Renew your lease and keep the solar savings going.
- Have the system removed at no additional cost.
Why Are Solar PPAs Worth Considering?
One of the reasons why this financing approach is so attractive is because you receive a brand-new PV installation for free (or almost free). Once installed, those rented panels help to reduce your utility bill and carbon footprint.
In other words, you enjoy substantial financial and environmental savings with very few upfront costs.
Moreover, the Seller handles all of the logistics entirely on your behalf.
In addition to installing the panels, the system owner also takes care of maintenance, repair, and monitoring. Remember that it is in the Seller’s best interest to make sure those panels operate at full capacity. If something goes wrong, he or she doesn’t get paid.
Lastly, solar PPAs allow you to control how much money you spend every month. This is because you only pay for the clean electricity that you consume on-site. All unused solar power gets sold to the utility company.
Are solar PPAs for everyone?
The Disadvantages of Solar Power Purchase Agreements
Before signing a PPA, there are some things you need to remember.
For starters, these financing arrangements are most popular in the commercial solar sector. Only recently have they become more widespread among homeowners. As such, finding PPA Sellers who specialize in residential solar is a bit more challenging – at least in the UK.
The next hurdle involves qualifying for a solar power purchase agreement. This process usually includes credit checks and a careful review of your financial history.
In addition, solar PPAs are binding contracts. If you ever plan on selling your home before the agreement is up, you either have to:
- Buy out the remaining portion of the contract (usually at fair market value)
- Find a homebuyer who is both willing and capable of taking over the PPA
However, the biggest downside of PPAs is that none of the solar incentives come directly to you. Because you don’t own the system you can’t enrol in the UK’s feed-in tariff program. This means that:
- There is no payback period with solar PPAs
- There is no earning potential or profit
- There is no solar return on investment (ROI)
When you sign up PPA, you’re essentially agreeing to buy electricity from a cheaper and cleaner source. This is great for the environment and terrific for your savings, but you’ll never actually make money if you don’t own your system outright.
Is a Solar PPA the Right Option for You?
Power purchase agreements offer a lot of terrific advantages – especially for homeowners who don’t want to spend money up front. However, there’s an even cheaper way to install PV panels. With solar leases, you receive a brand-new installation for free (as in free beer).
Plus there are 2 additional ways you can go solar and really save. Be sure to read our comprehensive guide on all the different financing choices out there – plus the pros and cons of each approach.
As always, if you’d like to begin exploring your PV installation options today, request a free solar quote by clickin here.