When considering the possibility of generating power onsite with solar power or natural gas generators, many customers are choosing to take advantage of energy buy back agreements.
Read on to find out how these agreements work, and what options might be available for your commercial or residential application.
Connecting to the Grid
The energy utility grid (or “the grid) has to provide the energy supply for everyone in the service area, even if you live in an area with a deregulated energy market (where consumers can choose the brand of the energy supply).
The grid has to provide the infrastructure for the maximum energy used at any time.
This requirement, which helps an area avoid energy brownout or blackout conditions, leads to high energy peak demand charges–the variable rate charge based on the maximum usage of a commercial consumer at any point during the month.
One of the ways that a utility grid can have more available energy, without the expense of building additional power stations, is through energy buy back agreements and interconnection agreements with energy consumers.
An interconnection agreement with the utility still allows you to purchase energy, but also allows the flow of your surplus energy back to the energy grid.
Interconnection with the utility is regulated differently in different states, but the essential similarity is that when you have an interconnection agreement, you can sell surplus energy to the utility.
You can also still purchase needed energy from the utility.
Solar Power Purchase Agreements
In addition to an energy buy back agreement, a term to understand is a power purchase agreement (PPA).
A PPA means that an energy provider will handle all aspects of a project installation–design, permitting, financing, installing and servicing–at little to no cost to the customer.
Then, with those onsite solar panels or other power generation installation, the customer also saves money every month on their utility bill.
So why would an energy provider agree to do such a thing at their own expense?
Under the terms of a PPA, the solar provider will typically receive the income of the electricity sales back to the grid, as well as any tax incentives or other incentives generated by the solar power system.
You get a lower monthly energy bill, they get the utility rewards and income.
Choose Your Own Solar Adventure
Given the options, there are several ways to go about a solar installation, including:
- Pay for the equipment, installation and service, but retain tax incentives and other incentives, as well as selling your power back to the utility to generate a power income. This option is very popular for smaller installs, such as for residential application.
- Enter into a PPA with an energy provider, and purchase your reduced energy needs from the installer, who will cover the expenses (but also retain the incentives). This option essentially makes you a host site for the energy provider for a contract term length (anywhere from 10 to 25 years). At the end of the term, you have the option to extend the contract, buyout the equipment, or have the installer remove the equipment. This option is very popular, particularly for commercial applications.
- Lease through a third-party financing company, the way that one might lease an automobile. You have little-to-no upfront costs, just like a PPA. This is a popular option in both residential and commercial applications.
Any of these options result in lower utility expenses on a residential or commercial energy bill.
At Energy Professionals we operate at as independent energy brokers, where our sole mission is to save you money. We work with hundreds of utilities and energy solution providers across the country.
We are the experts in understanding your needs, as well as experts in the opportunities and incentives available in your sector of the energy market.
We will help you understand the contract terms with zero surprises. If there are any out-of-pocket expenses, you will know the exact point of return on your investment.
Our only mission is to save you money on your utility bill.
Contact us to find out how.
This articles was originally posted at: https://www.energyprofessionals.com/energy-news/what-is-an-energy-buy-back-agreement/ on