PPA Models

The primary input variables that drive a Power Purchase Model (PPA) include but are not limited to the following:

Capital Expenditure and Installation Costs:

• Price of the solar modules, inverters, wiring and mounting equipment
• Installation charges from the primary installer/integrator (will include mechanical and electrical costs)

Government, State and Other Incentives:

• Federal Investment Tax Credit (FITC); currently 30% and due within first 12 months of project completion
• Solar Performance Based Incentive (PBI) or Expected Performance Based Buydown (EPBB) paid at project completion or over a 1-5 year period
• Renewable Energy Credits (RECs) expected from the solar array

Environmental:

• Insolation/Array Production Hours; average annual sunlight/hours on a site wihch will determine the production capabilities of the solar array
• Output loss rate assumptions; adjustments to the production numbers to account for degradation of the solar plant over its useful life

Pricing:

• Power Purchase Agreement (PPA): amount due from the customer under the fixed or variable priced contract that is payable to the owner
• Utility pricing: amount paid by the local utility under net metering for the excess power produced by the solar array

Financial:

• Depending upon the PPA structure, the implied bank borrowing rate or Internal Rate of Return (IRR) required by the bank or equity investor
• Asset depreciation rate at which core solar assets are depreciated for tax accounting