A solar PPA is an agreement in which a San Diego homeowner allows a company to install a solar system on their property. Instead of leasing or purchasing the system, the owner only pays for the power they use. PPAs range in length, but they can be as long as the lifetime of the panels on the home. Most PPAs generally have a set term of 15 or 20 years. Once the term expires, the system is removed. PPA's are common in San Diego and are often set up by builders during new construction. For example the Avante neighborhood in Del Sur has a neighborhood wide PPA.
How does a PPA work?
With a solar PPA, instead of purchasing the solar panels, or agreeing to a long-term lease (often with a purchase option at the end of the lease), the homeowner doesn’t have any responsibility for the panels. They’re owned by a company that installs and maintains them.
This is where it gets a little complicated. The company will bill the homeowner for the electricity the panels generate, based on measured metering. Generally, these prices are well below the price of electricity from the utility company, but it’s not guaranteed. If the panels don’t produce enough electricity to cover the electrical needs, the owner will also receive a bill from their utility company.
In the case that the panels on the home are capable of producing an excess of electricity on sunny days, the owner may or may not get a credit for that to go against their utility bill. They’ll have to check their agreement to be sure.
How much can you save with a PPA?
Power prices can fluctuate regularly, which makes it hard to say exactly how much you’ll save with a solar PPA. However, most arrangements are set up so that you do save money, otherwise there would be few advantages to the recipient of the power from the solar panels.
The amount you’ll save is also going to be based on how much electricity you use, how much the panels will generate, what your agreed rate is and what other fees are involved. This is why you should consult with several different companies before choosing a PPA provider so you can find the best deal for you.
Can I sell my home if it has a PPA?
If the solar panels on your San Diego home were purchased on a PPA, you have a couple of options when it comes to selling your home. You’ll need to work with the solar company to understand the terms of your PPA when it comes to selling the home, but generally your options consist of transferring the PPA to the new owners or purchasing the remaining portion of your agreement.
Transferring a PPA to Homebuyers
Because PPAs are long-term agreements, many third-party developers will include terms that allow the agreement to be transferred to the new homeowners in the case of selling the home. Your realtor can help potential buyers understand the benefits and terms of your PPA agreement. Most PPAs have specific transfer requirements which may require the buyer to qualify based on credit or mortgage approval.
Purchase the Remaining Portion of the Agreement
You also have the option of purchasing the remaining portion of your PPA agreement so that you can fully own the panels. Depending on the terms of your PPA, you may even be able to get a prepayment discount for buying out the contract early. When you purchase your PPA agreement you become the full owner of the solar panel system, which means that you can add it to the price of your home. We can help you decide if this is the best option for the sale of your home.
Buying a home with a PPA
Ask questions! You should ask to see the sellers monthly electric bill to give you a good idea of how much money you can expect to save each month with solar panels and calculate how much a home with solar would be worth to you.
Fortunately most Solar PPA’s are transferable. A copy of the PPA must be provided to your lender. For purchase transactions, the PPA needs to be transferred to the borrower with a fully-signed Transfer Agreement from the Solar Company. Your escrow company will handle this for you.
We hope you found this guide helpful. If you have further questions please reach out. We are happy to help.
Disclaimer: this guide is for educational purposes only and does not constitute legal advice