A CAPEX free agreement where your business receives all the benefits of owning a solar system without the expense or hassle of operating and maintaining one.
Key to any business project is the financial pros and cons; whether the project will be a net positive or negative for the business. Purchasing a solar energy system is no different; you must weigh the financial costs and benefits of the venture.
A Power Purchase Agreement’s (PPA) primary benefit is that it doesn’t need capital outlay. Your business will benefit from energy savings without risking its available capital.
Solar electricity generation is a sustainable, cheap and reliable power source. When you decide to go solar, you will need to weigh your options; here’s what you can expect.
You will find several financial options to fund your solar energy project within the solar industry. Although they may vary according to the service provider, there are essentially three types of finance options you may come across.
If you have the cash, you can buy an entire solar energy system in a single payment.
A solar energy system is an asset that can last for decades, so buying one in cash will go on your balance sheet. It’s a straightforward transaction where you will have complete ownership of and responsibility for the solar energy system.
The main advantage of buying cash is that you will have purchased your future energy needs today, so you won’t have to worry about inflation. The major downside of a cash purchase is that the customer and service provider often overlook the maintenance costs over the solar system’s lifetime. So you may find yourself stranded when the system needs repairs, replacement, or checkups, which can become prohibitively expensive in the long run.
Own the system from day one
Pay off the system quicker and benefit from free electricity for the remaining life of the system
Reduce your carbon emissions and reach your green energy targets
Spread the cost of your asset over 3 years or claim 100% of the Capex costs in the first year of using your system
Avoid long-term agreements if your business only has a limited contracting period or resource expectancy
We provide product & workmanship warranties for the first 12 months
Maintenance options are available: Enquire about our maintenance options which includes the buyback of your system should you wish to convert to PPA.
A bank or solar energy provider may finance a loan purchase. The customer only has to pay a deposit and periodic payments.
A loan purchase provides the same benefits as a cash purchase with the added advantage of being easier on a business’ cash flow. It also comes with the same disadvantages of a cash purchase, along with having a negative effect on your credit rating and potentially losing assets the business lists as security.
A PPA is an agreement between a solar service provider and the customer. The solar service provider will install the solar energy system on the customer’s property, and the customer will only pay for the electricity they use from the system.
You don’t pay for the solar module, the panel mounting, the monitoring system, or maintenance. You pay a predetermined electricity rate that is up to 30 per cent cheaper than standard rates. The solar energy system belongs to the solar service provider, not the customer. So it doesn’t reflect on your balance sheet.
A PPA is a contract to sell the power a solar service provider (electricity generator) produces to the customer (off-taker). The solar service provider will own, install, and maintain the solar energy system on the customer’s property.
The solar service provider will be responsible for all the costs of purchasing, installing, and maintaining the entire system. The customer will only pay for the electricity they use from the solar energy system at a predetermined tariff.
As a contract, a PPA will set the commercial terms for selling and purchasing solar-generated electricity between the parties. A PPA will have the following basic features:
The PPA relationship is unique in that the customer doesn’t own the solar energy system, but they reap the full benefits of the electricity it generates. The solar service provider will purchase, possess, and maintain the solar panels, batteries, inverters, and performance monitoring systems. The customer will only pay for the electricity that it consumes, and at a rate that can be 50% cheaper than the market.
That means your business gets green, cheap electricity without having to worry about buying equipment or maintaining it.
A solar PPA is an efficient and effective green energy source. When your business chooses to use a solar PPA solution, you will:
PPA is suitable for large-scale projects that need to reduce their electricity costs over the long term.
Buying a solar solution in cash for a large project can easily run into millions of Rands. That’s money out of your coffers before you even get a kilowatt of power.
Solar loan agreements may be easier on your bank account, but they have a direct impact on your credit rating. So any finance you need after the solar project will come at higher interest or principal, meaning you won’t be able to take on larger projects easily later on. To secure the loan, you will also need to use assets as security and potentially meet restrictive financial terms.
Something that businesses and some solar service providers underestimate is the long-term costs of maintenance and repairs. Consumers want to spend as little money as possible, and providers want their solution to seem cost-effective. Once the sale is complete, the customer may be stuck with a maintenance and repair bill that increases every year.
The cost centres that are easy to overlook on a solar project include:
With PPA, you only pay for the solar electricity you use, not a penny more.
Your part in the deal is to use and pay for the electricity that the solar system generates. The solar service provider will take care of the rest. Since the solar provider only gets paid from the solar electricity that your business uses, it’s in their best interest to keep the solar system working efficiently.
A solar energy system is a sophisticated project. You don’t want a fly-by-night or mafikizolo company handling a project that will be responsible for your power for the next few decades.
Partner with a company that has a track record of service delivery.
SolarAfrica takes the time to understand your energy usage and build a system that will suit your unique needs. A system that is too big will be a waste, and a system that is too small will not give you the power you need.
The products and services at SolarAfrica come with guarantees. A guarantee is only as good as the company that issues it; we at SolarAfrica have been around for years and will be here in the future to meet your guarantees.
Here at SolarAfrica, we value the solution over a sale. We will give you a solution that will have the impact you need, we don’t compromise the quality of our work.
Planning your organisation’s green energy road map is easier than it seems. Fill in our green energy goals questionnaire to identify the right alternative energy solution for your business.
Get in touch with our solar experts today and let’s green your business together.
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