Commercial Solar PPAs, Explained for Real Estate Owners

What a PPA is

A third party (the PPA provider) owns the solar system, installs it on your roof, and sells the electricity to you or your tenants at a contracted rate. The owner does not buy the equipment, and the agreement runs for a long, fixed term set in the contract.

The four terms that matter

1. $/kWh rate. Compare it with what the property pays the utility today, on the same tariff basis, including demand and fixed charges.
2. Escalator. How the rate rises each year. The higher it is, the faster any discount against the utility rate erodes, so model it against realistic utility rate paths.
3. Buyout options. Look for fair-market-value buyout points during the term. They are your optionality.
4. Roof warranty coordination. The PPA provider must indemnify roof damage caused by their equipment and coordinate with any active roof warranty.

Red flags

• No production guarantee.
• Escalators tied to CPI without a cap.
• Assignment clauses that let the PPA provider sell your contract to any third party without your consent.
• No end-of-term removal obligation.

Alternatives

If your entity can actually use the federal credit the project qualifies for, owner-funded solar with a loan often produces better long-run economics than a third-party structure. Tax-exempt and public entities may use elective pay where they own the qualifying asset and meet the requirements; third-party ownership follows a different structure.

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