Power Purchase Agreement

DefinitionA renewable system belonging to a third-party is installed on a customer’s property at little or no up-front cost to the property owner. The property owner is in an agreement to buy all the power generated at a fixed rate, whether it is actually used or not. This is typically lower than the local utility rate. The fee model is based on power, not the equipment to generate it. The Power Purchase Agreement (PPA) may be transferred to a home buyer with approval from the system owner. If a buyer will not adopt a PPA, then the seller is required to pay the remaining contract amount in full, and the system would be removed. If transferred, see the Fannie Mae guidelines for more information. A portion of the purchase towards equipment must be included in the buyer's debt-to-income calculation. A renewable system is typically considered personal property. All tax credits and maintenance responsibilities belong to the third-party owner. The customer agrees to purchase all energy produced by the system. At the end of the PPA contract term (usually between 10-25 years), property owners can extend the contract and even buy the solar energy system from the developer based on terms in the contract. More info: https://www.seia.org/.