Commercial/Industrial Solar PV & PPA Finance Agreements

The commercial and industrial solar photovoltaic (PV) market is rapidly evolving, with an increasing focus on subsidy-free developments and alternative financing models. One model that has gained significant traction in recent years is the Power Purchase Agreement (PPA) — offering a convenient solution for businesses looking to embrace renewable energy, reduce their carbon footprint, and secure long-term, stable electricity pricing.

A PPA is a contract between a renewable energy generator (in this case, a solar PV system owner) and an energy buyer (the commercial or industrial consumer). The generator agrees to supply the buyer with electricity at a pre-determined price for a set period, typically ranging from 10 to 25 years. This arrangement provides the generator with a predictable revenue stream, while the buyer benefits from clean energy at a competitive and stable price.

There are three PPA models which dominate the commercial and industrial solar PV space:

On-site/Behind-the-meter PPA (Private Wire PPA)

Here, the solar PV system is installed directly on the customer's property, delivering power without relying on the grid. This model allows the customer to avoid certain utility charges and potentially own the system at no cost after the PPA term. However, site suitability and complex legal and regulatory issues can pose challenges.

Sleeved/Retail PPA

In this model, a solar farm sells power to a utility company, which then "sleeves" it to the customer as part of their regular retail electricity service. The customer benefits from fixed, long-term pricing and can easily claim renewable energy use, but may face sleeving fees and limited flexibility.

Virtual/Synthetic PPA

This model involves a financial agreement where no physical power delivery occurs. The solar farm and customer agree on a "strike price," and settle differences between this price and the wholesale market price. This model suits large energy buyers and can provide a hedge against price volatility, but also exposes the customer to wholesale market risks.

Choosing the right PPA model for your business depends on various factors, including energy consumption, location, sustainability targets, and risk appetite. Navigating the complexities of these agreements requires a deep understanding of the energy market, regulatory landscape, and project finance — so working with an experienced partner like JLM is recommended.

As subsidy-free solar PV becomes the norm in the UK, PPAs are emerging as a key tool for C&I customers to achieve their renewable energy goals and for developers to secure bankable revenue streams. With major corporations like Google and Apple already embracing PPAs, the market is poised for significant growth in the coming years.

JLM has access to a large investment fund, which can be used to finance PPA agreements — providing a turnkey solution for clients wanting to install solar and other renewable measures without any capital expenditure. To learn more about C&I solar PV and PPA finance agreements, and to explore how your business could benefit, get in touch with one of our team.

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