PPA v. Lease - Northern California - PG&E

[4BandE]

Long time reader here.

I went with a prepaid Sunpower lease last year and pretty happy with it. I've been getting pretty good production with the E20/327 panels, especially with the sunny winter and spring.

My neighbor is looking into solar and was thinking PPA.

Is a PPA much different than a lease where I'm at (Northern Califoriia/PG&E)?

My understanding is that the PPA is based on a specific amount of guaranteed power at a specific price. What if the system makes more than the specficied (guaranteed amount) in the year? Doesn't it just come off your regular PG&E bill? Does going to "Time of Use - E6" help?

What are the drawbacks of a PPA vs a lease in terms of production? I would think one drawback may be the quality of the panels/equipment on a PPA since the owner just wants to make sure it provides what is required in the contract. Efficiency is not important.

Thanks in advance!

[KRenn]

Long time reader here.

I went with a prepaid Sunpower lease last year and pretty happy with it. I've been getting pretty good production with the E20/327 panels, especially with the sunny winter and spring.

My neighbor is looking into solar and was thinking PPA.

Is a PPA much different than a lease where I'm at (Northern Califoriia/PG&E)?

My understanding is that the PPA is based on a specific amount of guaranteed power at a specific price. What if the system makes more than the specficied (guaranteed amount) in the year? Doesn't it just come off your regular PG&E bill? Does going to "Time of Use - E6" help?

What are the drawbacks of a PPA vs a lease in terms of production? I would think one drawback may be the quality of the panels/equipment on a PPA since the owner just wants to make sure it provides what is required in the contract. Efficiency is not important.

Thanks in advance!

PPA-Purchase the power at a contractually set price, per kilowatt hour, regardless of what the output is, you'll be paying for it.


Lease-You pay to lease the equipment, if the system overproduces, you don't get charged for any additional power.



I would get quotes for both and then compare the numbers and pricing and see which one ends up making the most sense for your neighbor.

[SoCalsolar]

The devil is in the details

The basic difference is as described by KRenn. Then the details specific to each individual lease or PPA come into play. A prepaid PPA is like a gift card for power at a specific rate. You pay for every kWhr the system produces and when the contracted amount of power has been produced the agreement ends. Most project a 20 year period of time but could end early if the system overproduces annually. A monthly PPA is a fixed term of time with a specified price per kWhr. You pay for every kWhr produced by the system over a specified amount of time. There is usually a true up and the end of each yearly cycle. The true up is an additional payment to the 12 monthly payments. This happens when the system produces more kWhrs than the agreement specifies. The additional payment is made by the customer for the extra production at the agreed upon price per kWhr. This is where system design, accuracy concerning shade, and technical skill come into play. This is where many price shoppers get burned. They get the lowest cost which I applaud but with that lowest cost often times comes a compromise. There is this thought that well I'm in a lease/PPA and if anything goes wrong even if the installer is not around the financial company will bail me out. The quality of the equipment doesn't matter because I'm safe in the arms of the finance company. Anyone entering into a lease/PPA ought to read it entirely first. The language is engineered to protect the finance company and expose the installer and the customer. If your installer bumps up the sun hours in your micro climate (if any pages are missing from a proposal throw it away and get a new installer. I've seen this repeatedly from one SoCal installer.) or cuts corners on your roof or shade study, you are on the hook not the finance company. My general observation is that a lease is more favorable towards the homeowner than a PPA. But they vary widely so read and understand what you are signing or you will end up in one of the looming class action suits. A watt is not a watt quality matters in the panels/equipment, the installation, and the agreement even in a PPA or Lease.

[Hyacinth]

I thought about the PPA from Solarcity but there's also a set percentage (i believe 3%) annually in which the monthly agreement can increase.

[KRenn]

I thought about the PPA from Solarcity but there's also a set percentage (i believe 3%) annually in which the monthly agreement can increase.

Most monthly leases have escalators nowadays, I wouldn't sign on to those for anything. I've seen quite a few proposals that people have sent me from various providers and inevitably, almost every single one assumes a much higher increase in the cost of electricity than what might be deemed realistic, meaning that based on the meager savings I've seen in those proposals, it's entirely feasible that the homeowner will end up underwater, with an albatross of a monthly lease payment around their necks that a new home purchaser will want no part of. If you do look at a monthly solar lease, insist on seeing what the numbers look like without ANY escalator and proceed with caution. Ask particularly what the assumptions are in regards to future utility rate increases and how they justify them....FOR YOUR AREA......utilizing recent data, not USAToday articles from 10 years ago when the price of natural gas was 4 times higher.

[SoCalsolar]

I agree escalators are bad news

I agree escalators are bad news. Read the below article for worse news it's from 12 days ago.

http://www.utsandiego.com/news/2013/may/10/tp-sdge-rate-increase-approved-bills-to-go-up-11/

[KRenn]

I agree escalators are bad news. Read the below article for worse news it's from 12 days ago.

http://www.utsandiego.com/news/2013/...s-to-go-up-11/

Your link goes to show how wacky some of these solar company projections are. Yes, 12% rate increase is bad...but its 12% over a period of 4 years....basically averaging out to about 3% per year...meanwhile you have companies projecting 5 or 6% annual rate increases and this is another example that simply doesn't bear that out.

The average escalator is usually around 2.99% annually or higher, so basically, with this rate increase, a homeowner with such an escalator is managing to just tread water...and this is from one of the priciest area's for electricity in the country, in other places utility rates are either remaining flat or even decreasing.

[SoCalsolar]

SDG&E rates are increasing on average 11-12% this year. Read below for details.

SDG&E rates are increasing on average 11-12% this year. Read below for details.

The article is not well written or as straight forward as it could be. But neither are my posts good thing this isn't a newspaper. All projections are averages based on the mythical 500kWhrs a month. That's a typical tier 1 and 2 baseline. Average cost per kWhr is about 16.5 cents for tiers 1 & 2. Tier 3 is about 500-700 kWhrs for most regions in SDG&E and it is 27.3 cents Tier 4 is every kWhr above tier 3 and cost 29.3 cents. The 7% increase for 2012 is based off of the mythical 500kWhrs. You ought to be able to see what the increase for folks who use more power than 500 kWhrs a month will be. Their increase will be much greater due to the tiered structure. This is the incentive for folks who average more than 700kWhrs a month to go solar. It's cheaper. I know 3 heads just exploded on this board my apologies for saying that the cost for the end user for solar is less than traditional generation methods. So these rate increases are for 4 years. Yes. One year that was just approved is 2012 and it is retroactive so the good folks in SD will be hit with two years of increases at once for about 11-12% average increase to their electric bills. Followed by 2 additional years of increases tied to the CPI (consumer price index) plus .75%. CPI for SD is up 1.5% over the last 12 months add in .75% and you get 2.25%. So if inflation stays the same or drops perhaps the annual 5% increases won't continue. We have some investor types on this board perhaps they have some thoughts on the future of inflation? These big IOus are crafty and good at making money. They more closely resemble the Casinos in Vegas than your home town utilities. Some of you still don't listen or are skeptical but when dealing with electrical rates in CA you must first throw out all logic and reason grab some Kleenex and then read the rate case.

Here is the rate case another best seller for sure. On the first page there is a synopsis or read the whole thing it does help me sleep at night when all I can do is toss and turn.

http://www.dra.ca.gov/general.aspx?id=2106

[teslasolar]

Hi, this is my first post to this forum.

I'm considering signing a pre-paid PPA with SolarCity; however, there is a clause in the contract that raises a red flag for me. In the Guarantee Production section, SolarCity will pay 9.7 cent for every kWh that is not met and this is the fixed for the entire 20 years. Shouldn't there be some sort of inflation adjusted rate, instead of a fixed 9.7 cents? Surely, the value of 9.7 cents 20 years down the road won't be the same as 9.7 cents today.

Just curious to hear people's opinion on this - should I be concerned?

Thanks!

[Ian S]

Hi, this is my first post to this forum.

I'm considering signing a pre-paid PPA with SolarCity; however, there is a clause in the contract that raises a red flag for me. In the Guarantee Production section, SolarCity will pay 9.7 cent for every kWh that is not met and this is the fixed for the entire 20 years. Shouldn't there be some sort of inflation adjusted rate, instead of a fixed 9.7 cents? Surely, the value of 9.7 cents 20 years down the road won't be the same as 9.7 cents today.

Just curious to hear people's opinion on this - should I be concerned?

Thanks!

Their guaranteed production is so conservative that you're unlikely ever to collect on it. I wouldn't worry about it.

[russ]

It is also highly unlikely that Solar City will be around to back up the warranty.