June 7, 2018
Solar energy for farming and agricultural businesses is a great way to power your processing equipment, tools, lights, HVAC and other electricity needs. Solar adds value to agriculture by offsetting or even eliminating electricity costs. These days, turning a portion of your land or rooftops into your own solar power plant is more affordable than ever. And with a power purchase agreement, you can install solar with no upfront costs.
How to Go Solar with No Money Down: the Power Purchase Agreement
The upfront costs of a solar system can be high because you are essentially prepaying for energy decades in advance. System ownership also requires you to pay for insurance, operations, and maintenance over the life of the system to optimize production. A solar power purchase agreement (PPA) enables you to go solar without all of these upfront costs, and locks in a low electricity rate for years to come.
A PPA is a contract between your business and an energy provider. With a PPA, you "host" the solar system on your land or facility and pay only for the clean energy the system generates, at a price lower than what you're paying for electricity today.
When you go solar with a PPA, the energy provider has the obligation to cover all the upfront and ongoing costs including insurance, operations, and maintenance of the system. The energy provider has the incentive to make sure the system is performing optimally since you only pay for energy produced. This means you should have the most savings without any of the risk.
When you purchase your electricity from your utility, you never know when or how the rates will change over the years. With a PPA, you save money on day one and can feel comforted that you have some shelter from rising utility costs or uncertainty of future tariffs.
How much can agricultural businesses save with a PPA?
The amount you’ll save with a PPA depends on how you currently use electricity and how suitable your site is for solar generation. At CalCom, we work to optimize your savings by understanding your current energy usage, utility tariffs, and site-specific conditions at no cost to you. Some companies save 10 percent with a small rooftop system, while others may eliminate their entire electricity bill with a larger ground-mount system. Regardless of the size of your system, you’ll have the same predictable cost of electricity for the life of the PPA, even if your utility’s electricity rates increase.
How long does a PPA last?
Most PPAs today have terms of 15 to 20 years. The advantage to a long-term PPA is that while energy rates continue to escalate at an average of 3% per year, your rate will stay the same – providing more savings over time. During the contract life, you may also be able to purchase the system at defined timelines that make the most sense for you and your business.
What happens when the PPA term is over?
At the end of your PPA term, you can choose to do one of a few things: renew the PPA for another term, purchase the system at a discounted cost or simply have us remove the system. One of the advantages of renewal or purchasing the system is that you better understand the technology after years of hosting the system. Institutional investors take advantage of the incentives and tax credits which significantly lowers the price to you. If you choose to remove the system, removal has no long-term residual impact on the soil, allowing for near immediate return to agriculture.
PPAs are a great alternative to owning a solar system that allows you to immediately reduce your energy costs, optimize your energy production and avoid risk of ownership. It does require a good partnership for the life of the system. We at CalCom value our customers and appreciate your partnership. If PPAs look like a good alternative to you, please contact us or read our financing brief.