What is a Solar PPA and Solar Leasing?
A Solar Power Purchase Agreement (PPA) is a contractual arrangement that allows businesses and building owners in Singapore to benefit from solar energy without the need for upfront capital costs or the hassle of owning and maintaining solar panels. Under a Solar PPA, a solar developer installs and operates a solar energy system on-site, generating electricity from the sun. The solar energy generated is then sold to the customer at a pre-agreed price per kilowatt-hour (kWh).
One of the key advantages of a Solar PPA is that it enables businesses to utilise solar energy without having to pay any upfront investment costs. The solar developer fully finances the installation and operation of the solar system, taking on the ownership of the renewable energy certificates (RECs) generated from the project. The customer benefits from the renewable energy and can make a positive contribution towards a greener future without the financial burden.
Solar Leasing: Solar leasing, also referred to as “solar leasing,” is a similar concept to a Solar PPA. It allows companies in Singapore to lease rooftop space to a solar developer who installs and operates a solar PV system on the premises. In return for leasing the rooftop, the building owner receives financial compensation or a reduction in their electricity bills.
The primary difference between a Solar PPA and solar leasing lies in the ownership of the RECs. In a solar leasing arrangement, the solar developer maintains ownership of the RECs generated by the system. However, the building owner can still benefit from the renewable energy generated on-site and contribute to reducing their carbon footprint.
Both Solar PPAs and solar leasing play a crucial role in promoting renewable energy adoption in Singapore. They offer businesses and building owners the opportunity to utilise solar energy and support the country’s transition towards a greener and more sustainable energy landscape. By leveraging the abundant sunlight and limited rooftop space in Singapore, solar installations through PPAs and leasing arrangements contribute to meeting energy demands, reducing carbon emissions, and ensuring a reliable and competitive electricity supply.
It’s important for businesses and building owners to carefully consider the terms and conditions of Solar PPAs or solar leasing agreements, including minimum generation commitments, contract duration, and material contract risks. Seeking a legal perspective and understanding internationally recognized REC standards can help ensure a fair and beneficial arrangement for all parties involved.
How does the Solar Power Purchase Agreement work?
In Singapore, the Solar Power Purchase Agreement (PPA) offers businesses and building owners an attractive option to harness the benefits of solar energy without the need for upfront investment costs or the complexities of owning and maintaining solar panels. Let’s take a closer look at how the Solar PPA works in Singapore:
- Agreement Setup: Under a Solar PPA, a solar developer enters into a contractual agreement with the customer, who owns the premises or building. The solar developer takes on the responsibility of designing, installing, and operating a solar PV system on-site. This system generates electricity from the sun’s energy, converting it into usable power.
- Energy Generation and Consumption: Once the solar PV system is operational, it starts generating renewable energy. The energy generated by the solar panels is consumed on-site, directly offsetting the building owner’s electricity demand. By utilizing solar energy, businesses can reduce their dependence on grid-supplied electricity, contributing to cost savings and a greener energy profile.
- Ownership of Renewable Energy Certificates (RECs): In Singapore, renewable energy generation is tracked and certified through Renewable Energy Certificates (RECs). The solar developer maintains ownership of the RECs generated by the solar system. RECs represent the environmental attributes of renewable energy and can be traded in the market.
- Purchase of Solar Energy: Under the Solar PPA, the building owner purchases the solar energy generated by the system from the solar developer at an agreed-upon price per kilowatt-hour (kWh). The pricing structure is typically set to be competitive with or lower than the prevailing grid electricity tariff rate.
- Financial Arrangement: The solar developer fully finances the installation, operation, and maintenance of the solar PV system. The building owner benefits from utilizing solar energy without the need to invest upfront capital costs. The solar developer recoups its investment through the revenue generated from the sale of solar energy over the agreed contract period.
- Tradable RECs: As the solar developer maintains ownership of the RECs, they can be sold in the market. This allows the solar developer to monetize the environmental benefits of the renewable energy generated by the system. Tradable RECs provide an additional revenue stream for the solar developer, enhancing the financial viability of the Solar PPA arrangement.
The Solar Power Purchase Agreement presents a win-win solution for businesses and building owners in Singapore. It enables them to benefit from solar energy without incurring upfront costs or the complexities of system ownership. By partnering with a solar developer, companies can make a positive contribution towards a greener future, reduce their carbon footprint, and ensure a reliable and competitive electricity supply.
What are the Benefits of a Solar PPA?
Solar Power Purchase Agreements (PPAs) offer numerous benefits for businesses and building owners in Singapore. Here are some key advantages of opting for a Solar PPA:
- Cost Savings: One of the primary benefits of a Solar PPA is the potential for significant cost savings. By utilizing solar energy, companies can reduce their reliance on grid-supplied electricity, which helps lower their energy expenses over the long term. Solar PPAs often offer competitive electricity pricing, allowing businesses to enjoy immediate savings without the upfront costs of installing and maintaining solar panels.
- Environmental Sustainability: Solar PPAs contribute to a greener and more sustainable energy profile. Solar energy is a clean and renewable source of power, reducing greenhouse gas emissions and dependence on fossil fuels. By adopting solar energy, companies can demonstrate their commitment to environmental responsibility and contribute to Singapore’s sustainability goals.
- No Upfront Investment: With a Solar PPA, building owners can access solar energy without the need for upfront capital investment. The solar developer fully finances the installation, operation, and maintenance of the solar PV system. This allows businesses to benefit from solar energy without bearing the costs and risks associated with system ownership, making it a financially attractive option.
- Scalability and Flexibility: Solar PPAs offer scalability and flexibility to meet the energy demands of businesses of all sizes. Whether a company requires a small rooftop solar installation or a larger system to meet its energy requirements, solar developers can customize the solar PV system accordingly. This adaptability enables businesses to effectively manage their energy consumption and reduce their reliance on the grid.
- Simplified Operation and Maintenance: Under a Solar PPA, the solar developer is responsible for operating and maintaining the solar PV system throughout the agreement’s duration. This relieves building owners of the burden of system maintenance and ensures optimal performance. Solar developers have the expertise to monitor and address any potential issues, ensuring a reliable and efficient solar energy supply.
- Tradable Renewable Energy Certificates (RECs): Solar PPAs allow solar developers to maintain ownership of the Renewable Energy Certificates (RECs) generated by the system. RECs represent the environmental attributes of renewable energy and can be traded in the market. This additional revenue stream for solar developers enhances the financial viability of the Solar PPA arrangement.
By leveraging the benefits of a Solar Power Purchase Agreement, businesses in Singapore can reduce costs, demonstrate environmental stewardship, and contribute to the nation’s transition towards a greener energy future. Solar PPAs provide a win-win solution, enabling companies to utilize solar energy without upfront investment and supporting Singapore’s commitment to sustainable development.
PPAs In Practice
Singapore’s leading solar developer, Sunseap Group, has recently inked a groundbreaking virtual power purchase agreement (VPPA) with Facebook. This landmark deal marks another significant step towards achieving Singapore’s renewable energy targets and reinforces the country’s commitment to a greener and more sustainable future.
Under the VPPA, Sunseap will generate electricity from its solar photovoltaic (PV) systems located on various rooftops across Singapore. The energy generated by these solar installations will be sold to Facebook through a long-term contract. By purchasing renewable energy from Sunseap, Facebook will offset its carbon emissions and support the development of clean energy projects in the region.
One of the key advantages of a VPPA is that it enables corporate offtakers like Facebook to procure renewable energy without having to own or operate the physical solar infrastructure. Sunseap, as the solar developer, fully finances the installation, operation, and maintenance of the solar PV systems, taking on the associated costs and risks. This allows Facebook to benefit from solar energy and contribute to Singapore’s sustainability goals without the upfront investment or complexities of developing its renewable energy sources.
Through this agreement, Facebook will receive a specified percentage of the renewable energy certificates (RECs) generated from the solar PV systems. RECs represent the environmental attributes of renewable energy and are internationally recognized as proof of clean energy consumption. The ownership of the RECs allows Facebook to demonstrate its commitment to sustainability and achieve its renewable energy targets.
The Sunseap-Facebook VPPA contributes to Singapore’s efforts in balancing its energy demands with renewable generation. Singapore, with its limited rooftop space, leverages the excess of rooftop real estate to install solar panels and increase its solar energy capacity. The collaboration between Sunseap and Facebook further demonstrates the potential for large corporations to support the growth of renewable energy sources in urban environments.