5 key considerations in a C&I solar PPA
There has been significant interest of C&I businesses to opt for a rooftop solar PPA with the RESCO companies offering them various PPA terms. Though solar power has already attained grid parity, it is important to the business owners to clear understand the termsheet of a solar PPA. There are over 20 critical sections of a solar PPA, however in this section we are discussing some 5 key sections which business owners needs to consider before signing the PPA with a solar rooftop developer.
- PPA Tenure: PPA tenure in solar roofotp projects ranges from 10 years to 25 years. If the PPA tenure is longer the offered tariff shall be lower and will save upfront savings to the business owners. However it is important to understand that how long you may want to remain in tie up with the developer. You may want to go for an ownership transfer after a while. Hence you should consider an option of shortclosing of PPA tenure or a shorter period PPA ranging from 10 yr to 20 yr period.
- Offtaker creditibility: THe offtaker is generally the building owner in case of a solar roofotp PPA. Some time the Distribution company is roped in to a tri parti agreement to further inhance the bankability of the solar PPA. In case of payment failure by the off taker, the Discom will help in securing the payments , else the power supply from grid can be discontinued. Hence offtake creditworthyness is a must while securing the PPA with a rooftop business owner.
- Deemed generation: Ensure to check this clause of deement generation. It is a take or pay contract, where the generated electricity has to be absorbed by the rooftop owner/offtaker. In case of lack of demand of electricity the power supply shall be curtailed and the equavalant generation shall be considered as a deemed generation. This clause should be clearely explain to the PPA off taker and the methodology of estimating the deemed generation should be clearely established with the off taker while signing the PPA
- Payment default: Payment default is a major clause which makes the PPA bankable. The off taker has to provide a corporate guarantee of the payments. Also the payment security should be backed with a revolving letter of credit of at least two months to ensure the timely payments from the client. In case of the PPA default due to non payment, there is also a provision of necessary transferring the asset ownership to the offtaker at a pre established price.
- Transfer of ownership: The PPA is a longterm PPA of 25 years and during this period the building may be solad to another owner and the transfer of building should be part of solar asset along with the building. The building owner should also keep a provision of early exit from the PPA in case of transfer of ownerhsip.Similarly the solar developer can also exit the PPA with transferring the assets to yet another investment company. While finalising the PPA it is important to keep the exit clause propoer to ensure a safe operation of the solar asset.
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