Top 5 Reasons To Not Sign A PPA

Swarnav S Pujari

Founder at TouchLight Innovations

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PPAs or Power Purchase Agreements are a popular offering from leading solar providers that promises to reduce your monthly out of pocket expense for electricity in exchange for a 15 to 25 year guarantee to purchase electricity from them.

Right off the bat there are several great promises:

    • No upfront cost
    • Reduced electricity bill
    • Get solar panels maintained for the life of the system

Lets dig into what you as a homeowner or property owner need to look out for.

1. A PPA is a mortgage for your solar panels

Yes, its a mortgage like loan that you get for your home but designed for getting you solar panels. Why is this a bad idea? A home can appreciate in value and in turn help you pay off the loan or make money on that investment. Your solar panels have no way of increasing in value.

Just like you wouldn’t sign a 20 year lease agreement for a car that you can’t change out for 20 years and pay a price per mile you drove a 20 year lease for your solar panels is not worth it, and especially so because the panels begin to quickly lose performance after year 25. 

2. Expensive to break out of contract

Try breaking out of a solar PPA that you signed and you will see that the cost to break is equal to the full value of what you would have paid over 20 years.

An Example Termination Section in a Solar PPA

3. You spend up to 5x of the cost of the system

If you really wanted to get some form of financing for your solar system, just get a home improvement loan or a standard loan from your bank to purchase the system. It will enable you far more options in the long run. Why would you want to pay a ridiculous interest rate that is going to result in you paying 5x of what the system would have cost to buy outright.

4. Locked out of altering your system for at least 15 years

Let’s assume you got lucky and signed a 15 year PPA. Unlike a typical lease agreement, as people sign for their car, you can’t upgrade or change your panels out or modify them as your energy needs change. This is extremely valuable as technology from manufacturers may get better and more importantly as your buildings energy usage changes [adding Electric Vehicles] there may be ways to utilize slightly newer and higher efficiency panels to build a larger solar system to keep your energy costs low.

5. Challenge to sell house during term

It is very difficult to transfer your home to a new owner as well as the PPA. Because of the way these loans are structured many new people who are buying your home will ask you to continue to pay the PPA payments as they don’t want to deal with the credit and loan transfer process.

This clause among others can be tough to accept for a long term loan on solar panels

If you’re interested here is a good read on title transfer issues when selling a property with a solar PPA attached to it.

Conclusion

In summary you should always consult with a lawyer or deeply evaluate the terms provided by these solar PPA providers. Tesla Solarcity, Vivint and Sunrun are some the most popular PPA providers and tend to have very tightly drafted contracts that make it difficult to break out of. Understand your options and protect yourself in the process.

If you would like help in evaluating your options feel free to reach out to our technical sales team to run you through the best options for you.

*We do not provide financial advice and the above are blanket suggestions for you to explore with the advice of your accountant, banker or financial adviser.

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