What a PPA, or power purchase agreement, is
The contract that gets you solar energy without putting up capital
In short
Solar energy on your property, without buying the panels.
Others fund, install and maintain the plant. You pay only for the energy you use, at a price you sign from day one.
- No capital of your own
- No maintenance to deal with
- No change of electricity retailer
What changes for you, and what doesn't
Tap “With a PPA” and see which part of your energy changes source and price.
One source and one payment, at whatever price the tariff sets.
Your monthly use
You pay
Your electricity retailer
The company that sends you your power bill.
Follows the monthly tariff: if it goes up, your bill goes up with it.
Illustration. How much the plant covers depends on the size worked out from your consumption; usually it's the larger part.
The words, in plain terms
Eight terms you'll see in the diagram below and in any power purchase agreement.
PPA
Short for power purchase agreement. You agree to buy a plant's energy for a number of years, at a price set up front.
kWh
Kilowatt-hour: the unit your energy use is measured in. Under a PPA you pay for each kWh, not for the panels.
Special purpose vehicle (SPV)
The company set up for the project. It owns the plant and sells you its energy.
Funder
Whoever puts up the money to build the plant, through the SPV.
EPC
The company that does the build: it designs the plant, buys the equipment and installs it.
Network operator
The company that owns the power lines in your area. It approves the connection and measures what flows in and out.
Electricity retailer
The company that sells you grid energy and sends you the bill. With a PPA you keep the same one.
Surplus energy
Energy the plant produces that you don't get to use. It goes to the grid and is settled on your bill.
How it works, from signing to the end
Four moments. Tap each one and see what moves: energy in yellow, money in green.
Moment 1 of 4
It's sized to your real consumption
Your bills from the last 12 months and the space available set the size of the plant. It's not a standard size: it's the one that matches what you use.
- Who puts up the capital
- No one yet.
- Who owns the plant
- It doesn't exist yet.
- What you pay
- Your usual tariff, unchanged.
You sign just one commitment
Six parties have to deliver for a PPA to work. Here's what falls to each one, and what it means for you.
Your part
Buy the plant's energy for the full term.
That's what makes the project fundable: without a signed buyer, no one puts up the capital.
Everyone else's part
Special purpose vehicle (SPV)
Fund, build, operate and maintain the plant.
For you: You pay per kWh delivered, not for having the plant there. If it produces less, you pay less.
EPC
Do the build to the design and on the agreed schedule.
For you: Construction overruns and delays aren't yours: your price per kWh is already set.
Funder
Pay out the money for construction.
For you: Ask whether that money is already committed (“financial close”). Without it, the build doesn't start.
Network operator
Approve and maintain the connection point.
For you: It's what moves the schedule most, and whoever builds the plant doesn't control it.
Electricity retailer
Settle the surplus energy that goes to the grid.
For you: It shows up on your bill, under Resolución CREG 174 de 2021 (CREG Resolution 174 of 2021).
What the contract puts in writing
Five things you need to see clearly before you sign.
- 1Price per kWh
- Fixed or indexedFor the whole term. It's what decides whether the contract works for you.
- 2Term
- 10 to 20 yearsDepending on the system's size and your consumption.
- 3Who operates it
- The SPVMaintenance, availability and performance, for the life of the contract.
- 4Surplus energy
- CREG 174 of 2021The rule used to settle what you deliver to the grid.
- 5At the end
- The plant passes to youThe system becomes the property of the energy buyer.
Is it for you?
It's designed for businesses, residential complexes and properties with high consumption.
It fits if…
- Your consumption is high and fairly steady through the year.
- You'll stay at the same site for a decade or more.
- You have a roof, yard or land available, or a nearby property that could work.
- You'd rather not tie up capital or look after an asset for 25 years.
Better not, if…
- You'll only be at the site for two or three years.
- You rent and don't get a say on work on the roof.
- Your consumption is low or very irregular: there'd be little to replace.
- You need the full savings from year one: at first, the gap against the grid is still narrow.
Not sure whether your case fits?
Tell us how you use energy and we'll tell you whether a PPA makes sense. No strings attached.
The solar projects we are structuring
Solar Subway La Pintada is a power purchase agreement that's already signed: the buyer committed before construction started.
Project in Structuring
Project in StructuringLearn more about the business model and how you can take part
We'll answer your questions on a call.
This conversation is informational, about how the project is structured. It is not financial, legal or tax advice, nor a public offering of securities. Every participation carries risk.