What are the benefits of a PPA for photovoltaic self-consumption?
A PPA (Power Purchase Agreement) is a long-term energy purchase contract. During the duration of the contract (typically between 5 and 20 years), the buyer acquires energy at a pre-negotiated price that can be either fixed or subject to market variations. These agreements play a significant role in financing generation facilities.
There is a specific type of PPA for photovoltaic self-consumption installations.
In this case, the promoting company takes care of the design, permits, installation, and maintenance of the system on the customer's property and, in exchange, sells them the energy directly at a lower price than the market price.
The benefits for the promoting company are:
- ✅ Guaranteed profitability (IRR) for self-consumption
- ✅ Incentives and tax reductions
- ✅ Additional profitability from surpluses
The benefits for the customer are:
- ✅ Always positive cash flow with no upfront payments
- ✅ Competitive and predictable long-term energy prices
- ✅ Renewable energy source
- ✅ No execution or plant performance risk
- ✅ Acquires ownership of the installation after the contract ends
👀 As can be seen in the figure, Spain is the European country with the highest installed capacity with PPAs and also the country that places the most bets on photovoltaic technology.
🧮 To properly calculate a PPA, important factors such as the target IRR, cash flows (on a monthly basis), the impact of tax payments/receipts such as VAT or IE, and operating costs must be taken into account.
