Solar Power Purchase Agreements: Tips and Tricks Part 1

Solar power panels on residential rooftops are an increasingly common sight these days. But the legal mechanics behind the development and delivery of solar power to consumers can be complex.

There are several alternative financing mechanisms used to develop and deliver solar power to consumers. One method used to accomplish this is a PPA, or Power Purchasing Agreement, which takes advantage of federal tax incentives to lower electricity costs.

PPA’s require creation of a separate taxable entity. The PPA is the agreement under which a government agency purchases electricity generated by the taxable entity. The taxable entity, or system owner, is often an investor (backed by financial institutions) who provides capital in return for the tax benefits available and revenue from electricity sales.

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