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If your daughter bought the system for $31,000 and it lasted for 20 years, the simple annual cost of that purchase would be $1550 per year to produce 18,234 kWhs of electricity per year. That is $0.085 per kWh and similar to what i calculated my cost per kWh. It is better than the $0.115 per kWh for the PPA. It does not take into account your daughters cost of funds so if it is high, that would tip the scales in favor of keeping the PPA. With the PPA comes warranty coverage and one would want to know if that was the same if the option price was paid.
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The following is worth the reading time spent:
In the likely event that a buyer is borrowing from an institutional lender, at a minimum they will require that the recorded documentation relating to the "lease and financing" be subordinate to their deed of trust securing their loan. The easiest way to do this is to purchase the attached equipment from the leaseholder.Comment
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That is an important issue. The PPA that my daughter assumed in California, was a Uniform Commercial Code filing and did show up on on the preliminary title report, However if I remember correctly it may have had a no defeat clause that effectively subordinated it to the lien of a first mortgage. Their lender, title company or both, did review the PPA. My daughter and her husband put down at least a 30 percent down payment and that may have also given the lender some comfort.9 kW solar, 42kWh LFP storage. EV owner since 2012Comment
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The OP's daughter is considering buying property with a Power Purchase Agreement, not a lease.The following is worth the reading time spent:
In the likely event that a buyer is borrowing from an institutional lender, at a minimum they will require that the recorded documentation relating to the "lease and financing" be subordinate to their deed of trust securing their loan. The easiest way to do this is to purchase the attached equipment from the leaseholder.
The two are not the same thing.
With a lease you "rent" the equipment for a fixed amount.
With a PPA you buy the power produced by the equipment the owner of the equipment puts on your roof at a fixed price per kWh.Comment
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While the terms may be different, unless I'm missing something the result is that personal property is attached to real property under California's definition of those terms (the transition term referring to this change in status is the personal property becomes a fixture). The challenge is what sort of lien or encumbrance results? Can the purchaser of the home who is not a party to the contract demand after closing that the stuff be removed from the roof and the electrical provider (equipment owner) has no choice but to do so?Comment
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Forgive me if the following questions are too tangential:
1) How old is the roof?
2) In a PPA, what happens if the new homeowner electric usage habits are much lower than existing homeowner and uses less than contract agreement 18234 kWh per year?
3) Does the homeowner still pay the power company a monthly base fee just to have an account? (I pay $12 per month regardless).
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Are you sure this is a Power Purchase Agreement? I was under the understanding that a PPA guarantees a price per kWh up to the guaranteed amount of electricity. If you use less than the guaranteed amount you only pay for the amount you use at the agreed upon price per kWh. If my understanding is right, there should not be a fixed monthly payment unless you use more electricity than the guaranteed amount. If you do use more, you pay the electric company for the excess.
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1.) My guess would be the age of the roof is unknown at this time. If the roof needs work/replacement, that's on the property owner unless the leak or other problem(s) develop from adding the array. Then, the equipment owner is responsible. The rub is in determining the cause of the problem.
2.) For residential PPA's involving PV systems in the U.S., usually nothing.
In the usual/common PPA, the agreement is that the homeowner agrees to buy all the power the array produces for what's usually a fixed price per kWh. In most agreements, there are no other charges to the user unless they're something like local taxes, etc.
That 18,234 kWh/yr. is no more than an estimate of annual system output. That number and the array size in STC kW was probably based on annual usage or something close to that amount. And/Or, some PPA's will quote a guaranteed annual output with a bunch of exceptions that contribute to the 40 or so pages of boiler plate and make the guaranteed annual output so low the customer will probably trip over it.
3.) Again, in the U.S. for residential PPA's involving PV systems, the terms of the agreement between the homeowner and the POCO are unaffected by any PPA agreement between the homeowner and a 3d party energy provider.
See Wikipedia for some details and particulars on 2 & 3 above.Comment
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Looks like the OP may have a lot of the old confusion about the difference between a PPA and a lease.
Sunrun does both.
Ron C: Which is it ?Last edited by J.P.M.; 06-09-2022, 07:30 PM.Comment
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I think the term solar lease and PPA are used interchangeably. I have seen various terms. You are correct that there is also a NEM agreement for any excess but most recent PPAs (or leases) have you pay based on the output of the system. The point of the thread is that his daughter is buying a house with one of those on the roof and encumbering the title in such a way that she will have to decide to assume it or possibly walk away from the deal.9 kW solar, 42kWh LFP storage. EV owner since 2012Comment
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The terms may be used interchangeably, and they are similar in that both agreements put equipment on property with that equipment not owned by the homeowner, and the homeowner has no upfront costs. But otherwise they are fundamentally different.
As you write, PPA's have the user paying the system owner a variable amount based on system output, while the lease has a predictable payment schedule that's independent of system output.
That difference can be important for the potential buyer and why it's important for the potential buyer to get, read and understand the agreement that was made before buying into it.
One example of several I could conjure up: Suppose the new owner (the buyer) accepts the agreement and the new owner's annual usage is relatively low, say, 10,000 kWh/yr. If the deal is a PPA with the usual terms - great ! $0.115/kWh*10000 kWh/yr ~ $1,150/yr.
If it's a lease, the annual bill will (maybe) $174.74/month*12 months = $2094.40/yr.
If it's a PPA with the usual terms, even though it's with Sunrun, it might be worth it. If it's a lease, under the scenario I've generated, maybe not, or at least it's a lot more costly.
If it was me, regardless of what I thought about the good/bad points of leasing/PPA's oe for that matter PV in general, I'd still badmouth the system to the current owner as an albatross for the next 23 years in ways I've already described and use that as a strong negotiating point (or go through the same B.S. as a seller if selling the property before the lease expires).
BTW, do we have any idea at this time where the property is located or what local electricity rates are like at this time ?
Maybe there's something wrong with my logic, but I'd suspect the local electricity rates would seem to have some bearing on the decision making process here.Comment
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