Solar Power Purchase Agreements (SPPA)

Article contributed by CentiMark In evaluating the feasibility and value of solar roofing/photovoltaics (a method of generating electrical power by

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Article contributed by CentiMark

In evaluating the feasibility and value of solar roofing/photovoltaics (a method of generating electrical power by converting solar radiation into direct current electricity), a corporation might be interested in the option of installing solor panels on its building for no up-front investment.

A Solar Power Purchase Agreement (SPPA) is a financial arrangement in which a third-party developer owns, operates and maintains the photovoltaic system, and a host customer agrees to site the system on its roof or elsewhere on its property and purchases the system’s electric output from the solar services provider for a predetermined period. This financial arrangement allows the host customer to receive stable, and sometimes lower cost electricity, while the solar services provider or another party acquires valuable financial benefits such as tax credits and income generated from the sale of electricity to the host customer. 

With this business model, the host customer buys the services produced by the photovoltaic system rather than the photovoltaic system itself. This framework is referred to as the “solar services” model, and the developers who offer SPPAs are known as solar services providers. SPPA arrangements enable the host customer to avoid many of the traditional barriers to adoption for organizations looking to install solar systems: high up-front capital costs, system performance risk and complex design and permitting processes. In addition, SPPA arrangements can be cash flow positive for the host customer from the day the system is commissioned.  In the United States, the Solar Power Purchase Agreement depends heavily on the existence of the solar investment tax credit, which was extended for eight years under the Emergency Economic Stabilization Act of 2008.  Typically SPPA agreements are seen on buildings with a 40,000 sf roof area, but smaller installations do occur, especially in areas of the country with higher energy output (New Mexico, Arizona, California, etc.) 

For further detail, click on the image below to see it at full-size on the EPA website.

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Nicole Shedden: Marketing Strategist at Corporate United
As a marketing strategist for Corporate United, Nicole's goal is to get the word out about group purchasing organizations – CU in particular. Since GPOs free up time, money and resources for indirect procurement teams, she focuses most of her blogging on those three elements. Nicole has been marketing to a procurement audience for nearly a decade; prior to that, she worked in sales and marketing consulting.

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