96 Energy Project Financing: Resources and Strategies for SuccessPPA kWh Price Inflation
In order to reduce the starting kWh price as much as possible, the
PPA agreement will have a set kWh price inflation per year. For virtually
all PPA agreements, the contracted inflation rate is lower than the histori-
cal electricity inflation of the local utility. This allows a host customer to
forecast what their power prices will be in 10-20 years and will likely lead
to significant savings over time.
Figure 5-3An Example of PPA Financing
The following example is from a 1 MW Southern California project.
While the numbers below are not representative for all PPAs, they still can
be used to show what is possible with a PPA.
Criteria for a Low Cost PPA
Stable Host
Not all solar systems or hosts are viewed equally by a PPA provider.
The key evaluation criterion for a PPA provider is stability. Ideally, they
want the host customer to have been in business for at least five years
with strong credit. They also want the business to own its building; how-
ever, some PPA providers will still enter an agreement with a long term
lease in place.