Does Your State Allow Power Purchase Agreements? Find Out Here

So you want to go solar. With home energy prices going up pretty much across the board, the money you can save seems like a no-brainer.

But if you can't afford to buy and install solar panels, you could enter a power purchase agreement. A PPA allows you to reap some of the benefits of solar -- like lower energy prices -- but comes with its own set of pros and cons. But, because the energy policy around PPAs is determined and handled at the state level, they aren't available in every state.

Let's look closer at what exactly is a power purchase agreement, and which states have them available for homeowners.

What is a power purchase agreement?

In a power purchase agreement, you sign up to have a third-party developer install, own and operate an energy system on your property. As the homeowner and customer, you buy the system's electric output for a set period, usually over a 15- to 20-year contract.

The major benefit of a PPA is that you get a steady, low-cost source of energy without footing any of the upfront costs for a solar system. Downsides include not being able to take advantage of any tax credits. Plus, you would save more on electricity over the time span of a PPA if you bought your home solar system instead.

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PPAs by state

Not all states allow power purchase agreements. That's because each state has the power to decide how it manages its electric utilities. This means all states are a little bit different, Alison Bates, assistant professor in environmental studies at Colby College, told CNET.

"Because of the way our utilities are structured in the US, there's variation in how they're regulated," she said.

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The number of states that allow PPAs is a moving target, as lawsuits and legislation change regulation. Even in states that allow PPAs, there may be restrictions that limit who's allowed to install them or what size they can be. It's a good idea to confirm for yourself whether PPAs are allowed in your area.

What if my state doesn't allow PPAs?

If your state doesn't allow for PPAs, you could reach out to your state government and advocate for more solar energy options. You can write a letter to your state energy office or organization stating why homeowners residing in your state could benefit from having the option of buying renewable energy through a PPA.

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In some states, leasing solar panels may be an option where PPAs are not. Leases are very similar to PPAs, but differ in what you pay for. Instead of paying a set rate for the power solar panels generate, you pay a set fee for the solar panels.

If neither are an option, you can look into community solar, where you subscribe to an offsite solar farm, or start saving to buy solar panels.

Pros and cons of PPAs

Here are some of the pluses and minuses of PPAs.

Pros 

• Don't have the upfront costs of a home solar system
• The third-party developer will handle installation and maintenance of the system
• Price of power is typically less expensive than the standard rate through your local utility provider
• Prices are locked in at a predetermined rate, which makes the costs of energy predictable and steady

Cons 

• Prices of energy from your PPA increase 1% to 5% each year, which means you could end up paying more in energy in the long run 
• Need to sign up for a 15- to 20-year contract
• Renewable energy tax credits go to the installer, not you
• Owner of the system (the installer) retains the renewable energy certificates
• Won't boost your home's value

Is a PPA worth it?

While a PPA doesn't require you to foot the bill on upfront costs of installing, running, or maintaining a solar system in your home, whether or not it's worth it depends on your situation.

"Look at your goals for your energy system," Bates said. "If you really want to manage and control what's happening in your home, you might prefer to own your own system. If you're trying to immediately lower your utility bills and you don't have the upfront cash, then a PPA might be a better choice." 

Solar PPA frequently asked questions