July 2017

solar leases provide the benefits of solar energy without upfront costs

How long is a solar lease or PPA?

With no upfront costs, solar leases are an attractive option to industrial and commercial property owners. Solar leases, also known as Power Purchase Agreements (PPAs), allow a business to make use of the benefits of solar power (such as reduced electricity costs, lower carbon emissions and fixed tariff increases below Eskom average increases) without a large capital outlay.

How does a solar lease or PPA work?

Solar leases work differently to purchasing a solar system outright. A solar lease will still involve a bespoke solar system being installed, but instead of this belonging to a the property owner,  the owner will “rent” the system through buying electricity from the system at a fixed tariff, for a number of years. This means that the financier will own the system and charge the building owner only for the energy that is generated from the system until the lease term is over. After the end of the PPA or solar lease agreement, ownership of the system will typically transfer to the property owner.

Usually, the solar lease or PPA tariff has a fixed rental escalation, which means that the property owner is shielded from the variability of Eskom tariff increases and allows owners to accurately predict and budget for energy costs into the future. The tariff also covers all annual operating expenditure including operations and maintenance, management of the asset and insurance.

How long is a PPA or solar lease agreement?

No two building owners are the same and each agreement needs to be entered into with the client’s specific circumstances in mind. As a general rule of thumb, the longer the lease agreement term, the cheaper the initial tariff will be. In our experience, there are generally two broad types of lease terms that suit property owners – those with a longer view, and those with a shorter view.

  • Longer term, more immediate savings

Some property owners do not want the risk of abrupt tariff increases and would like to experience the benefits of a solar system immediately, without upfront costs. Generally, these clients are happy to sign a 20 year PPA or solar lease agreement, to ensure a lower tariff upfront  and to enjoy the benefits of solar power immediately. And even after 20 years the system will still provide energy for many years to come. For example current solar panels are guaranteed by manufacturers to perform at a minimum of 80% of their rated capacity after 25 years of operation.  

  • Shorter term for system ownership

Other property owners would like to own the system sooner, and as such prefer a shorter (10 – 15 year) lease term. The shorter term would result in a higher initial tariff than a 20 year lease but the system is paid off quicker resulting in more years of free energy on the back end of the lease.  

What about exiting the lease?

Many property owners are cautious of signing a 20 year lease as they do not have certainty that their building will still be in their ownership after such a long period of time. As such, they should check that their agreement provides flexibility for such instances. For example,  some agreements may state that after 5 years the client may elect to purchase the system outright. In the case of the client selling their premises, the agreement should contain provision to either move the system to their new premises, to buy the system, or to get the new building owner to assume the lease.  

In conclusion: solar lease or PPA terms vary, depending on the type of system and client’s needs

Solar systems are a fantastic way for property owners to save money on operating costs whilst reducing their carbon emissions. Although several property owners decide to own their solar systems, many do not have the capital funds available. In these instances, a solar lease or PPA is a great way to still enjoy the savings that a solar system provides through paying a predictable, low energy tariff for several years to come.

Contact us if you would like to know more about a solar lease for your building or property, or use our solar calculator to work out your projected savings.

SOLA and Atterbury Property Developments partnership to see 20 MW solar capacity built

SOLA Future Energy and Atterbury partnership to see 20 MW solar capacity built over next few years

SOLA Future Energy and Atterbury Property Developments have partnered to provide high quality solar energy and electrical storage solutions to the Atterbury portfolio of properties. The parties entered an agreement in May 2017, which will guide the installation of 20MW of solar PV systems on properties which Atterbury have developed.

James Ehlers, Managing Director of the Atterbury Property Developments, stated, “We as Atterbury realised that we needed solar-smart solutions, as this will become a vital part of property industry going forward.  We have taken a decision to partner with specialists in the industry. After extensive consultation with role players in the industry, SOLA were our partners of choice and we look forward to working with a leader in the field of solar technology.”

With over 12.5 MW of solar capacity under operation across several large rooftop PV systems, SOLA Future Energy is well positioned to carry out the work for Atterbury. SOLA will provide the design and engineering services for the full 20MW, ensuring that the solar solutions to all of these developments are optimised. They will also manage the installation during the project development phase, and will assist Atterbury with the ongoing operation and maintenance of the systems.

Dom Wills, CEO of SOLA Future Energy, commented, “We are excited to work with a progressive partner such as Atterbury who share our vision in decentralised energy.  Solar PV presents an excellent opportunity to reduce operating costs over the long term, increasing property value and competitiveness.  Working on a bulk portfolio also allows us to best advise on the overall solar strategy for the group.” After a solar system is installed, it generally pays itself off within five years, providing the property with at least 20 further years of free energy.

The cost reductions of solar technology have made investment in solar systems an essential consideration for property owners in achieving cost efficiency and enhancing yields. Many companies are realising that solar can provide much cheaper energy per kilowatt hour than the energy provided by the centralised grid.

The agreement currently covers all Atterbury projects in South Africa as well as selected projects in Africa and abroad.