What is a PPA?
A power purchase agreement (PPA) is a legal contract between the LLC (the owner of the system that generates electricity), and the school, (the power purchaser). Contractual terms may last anywhere between 5 and 20 years, during which time the school buys energy from the investor at an established price, generally equal to or below the rate charged by the local utility. The PPA defines all of the commercial terms for the sale of electricity between the two parties, including when the project will begin commercial operation, schedule for delivery of electricity, penalties for under delivery, payment terms, and termination. Once the PPA contract period expires (typically after 15 to 20 years), the investor will either sell the system to the school at a reduced price, or donate the system.