Sales 2 - What is a PPA?

What is a Prepaid PPA?

Watch this video or read the lesson below.

First: How does a Monthly PPA Work?

A monthly PPA works just like the utility.

The customer is charged for every kWh their system produces, but PPA rate is better than the utility rate.

The customer doesn’t pay for the system, they just pay for the power it produces over time. 

Monthly PPA Example:

System Size:   10kW

Monthly Production:   1200 kWh

PPA Rate:   $0.20/kWh

Annual Escalator:  2.99%

PPA Term:   25 years

Payments (year-1):  $240

Don’t overlook the escalator.

The 2.99% annual escalator plays a huge role in the long-term cost of this system. The $0.20/kWh price will more than double over the course of 25 years.

Monthly Payment (year 25): $486

As long as the PPA payment stays below the utility bill this option makes sense…

But this actually isn’t much of a win for the customer. You can do much better with an HDM Prepaid PPA.

Now What’s a Prepaid PPA?

A Prepaid PPA is when a solar provider offers to sell the customer 20 years of power production all at once.

Here’s how it works:

Financer estimates 20 years of production

Assigns a price per kWh

Charges one amount, all at once

We'll use an HDM 20% payout example

Customers can finance your prepaid amount with cash or a loan:

Prepaid PPA example with a loan:

10kW system turn-key price:   $45,000

HDM will fund 20%:   $9,000

Customer to finance 80%:   $36,000

Rate:   5.99%

30% Dealer Fee:  $10,800

Term:   25 years

Payments:  $231

The customer pays $231/mo. This payment is fixed. *

*If the customer decides to NOT take ownership after year-six, an administrative fee with an annual escalator of 2.9%  would increase this system’s total cost to $298/mo. by year 25.

HDM Option: The Payments are Flat:

A typical loan doesn’t have an escalator. The payments are flat* for the life of the loan. 

This example uses the same utility inflation as the last one, but savings don’t depend on it.

The HDM deal is unlikely to outpace the utility. 

*There is a 2.9% escalator on the HDM administration fee that the customer pays annually if they decide not elect to purchase the system after six years.

Levelized Energy Costs?

There’s more to a good solar deal than  squeaking below an increasing utility bill. 

With a Prepaid PPA/solar-loan option, you may sell the value of levelized energy costs.

HDM makes that possible.

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