Key aspects for a PPA business model for rooftop solar system
More recently, solar PPAs have been observed in the market for SHSs, where developers take care of design, permitting, financing, installation and operation of an SHS at the customer’s rooftop or nearby plot, at little or even no cost for the customer. The developer then sells the solar PV electricity to the customer, usually at a rate per kWh lower than the utility’s retail electricity rate. Such a reduced electricity rate helps the customer to offset its electricity purchases from the grid, hence lowering total electricity costs. The developer receives the income from electricity sales as well as any other incentives such as tax credits, etc., as far as applicable.
| Key aspects for a PPA business case | Description |
| Spatially related consumption or utility PPA | Decide whether a PPA based on spatially related consumption or a utility PPA should be in place. |
| Local electricity sales price | Check whether the solar PV electricity LCOE can compete with the local electricity sales price. |
| Off-taker | Check with off-taker willingness to accept total generated solar PV electricity. If only partially accepted, check alternative support schemes, check willingness of local utility to accept the residual solar PV electricity generation. |
| Regulatory aspects | End-users should be free to choose their electricity supplier. |
| Security of supply | End-users should be able to still have an electricity supply contract in place for residual grid electricity supply. |
| Credit risk | In case of spatially related consumption with end- user as off-taker there is a latent credit risk. Minimum credit rating could be requested. |
| Price risk | If the PPA price is directly linked to the electricity sales price, such electricity sales price could suddenly drop and negatively impact the project’s cash flow. Certain floor and roof prices could be introduced in the PPA. |
| PPA term | Typically, 20 years. |
| Options for SHS use beyond PPA expiration | Extend the PPA term. Developer to remove the SHS. Customer to purchase the SHS from developer with a certain residual value. |