Key Factors to Evaluate Before Signing a Solar PPA Agreement in Singapore
How to Evaluate a Solar PPA in Singapore
Key Takeaways
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Understand the financials – Evaluate pricing structures—fixed, escalating, or grid-tied—to anticipate long-term savings under a Solar PPA Agreement.
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Know your responsibilities – Clarify contract length, renewal options, and maintenance ownership to avoid surprises and ensure smooth operation.
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Plan for flexibility and performance – Check performance guarantees, minimum output, and exit clauses to safeguard energy output and adapt to future property changes.
Introduction
Thinking about switching to solar energy but not sure of the requirements? A Solar PPA Agreement, or power purchase agreement, allows you to enjoy renewable electricity generated from solar panels without owning or installing the system yourself. Instead, a solar solution provider handles the setup, operation, and maintenance, and you pay only for the energy you use. But before you sign on the dotted line, it’s crucial to first understand the details to make the most of your investment.
Here’s a quick guide to the key factors you should evaluate.
1. Understand the Pricing Structure
One of the first things to examine in a PPA agreement is the pricing structure. How are rates calculated, how are you charged (e.g. based on gross production or something else) and what costs can you expect over time? Some agreements offer fixed rates, meaning you pay the same price per kilowatt-hour throughout the contract. Others may escalate annually, while some are pegged to prevailing grid rates.
Under a Solar PPA model, your business pays for the solar energy generated on-site usually at an affordable solar rate that is lower than standard grid electricity. When your premises consume more energy than the solar system provides, the additional electricity is automatically supplied by the SP Power Grid at the contracted rate. Conversely, when your solar panels generate excess energy, this surplus can be exported back to the grid, and you may receive export payments in return.
This two-way flow of energy and cost, shown in Flo Energy’s PPA model ensures your operations always have a steady power supply while maximising savings from renewable generation.
Knowing whether your electricity bills will remain predictable or potentially fluctuate can help you budget effectively. Comparing these rates to traditional electricity plans can also give you a clear sense of potential savings.
2. Contract Duration and Renewal Terms
Most Solar PPA Agreements in Singapore run between 15 to 25 years. While this ensures long-term access to solar energy, it’s important to understand what happens when the contract ends. Can you renew the agreement? Are there conditions for extension? Understanding these terms prevents surprises and ensures you can continue benefiting from renewable electricity without disruption.
3. Ownership and Maintenance Responsibilities
A common question is, “Who owns the system?” In a Solar PPA agreement, the solar provider typically owns, operates, and maintains the panels. This means you aren’t responsible for repair costs or system upgrades, and liability for technical issues usually lies with the provider. However, you should clarify access rights for maintenance and any restrictions that may affect your property. This knowledge ensures a smooth partnership and avoids unexpected obligations.
4. Performance Guarantees and Minimum Output
The efficiency of your solar panel is central to its value. Look for performance guarantees or minimum output commitments in your Solar PPA. Providers often promise a specific energy yield, and it’s critical to understand the recourse if these targets aren’t met. This could include compensation, system upgrades, or other remedies. Being clear on these details protects your investment and ensures the solar energy system performs as expected over time.
5. Exit Options and Site Considerations
Life happens, and your property situation may change. Whether you’re selling, leasing, or redeveloping your site, consider how a Solar PPA affects your flexibility. Some agreements allow for transfer or early termination under certain conditions, while others may impose obligations that persist until the contract ends. Reviewing these clauses in advance avoids potential complications down the line.
In Conclusion..
A Solar PPA offers a practical and cost-effective way to harness the benefits of solar energy while avoiding upfront costs and operational hassles. By understanding pricing structures, contract terms, maintenance responsibilities, and exit options, you can make informed decisions that maximise your savings and energy efficiency. Beyond cost savings, adopting solar through a PPA can also help your property earn credits towards BCA GreenMark Certification, aligning sustainability with long-term value.
Ready to explore hassle-free solar solutions?
Flo Solar Solutions makes it easy. From panel procurement and financing to installation and ongoing maintenance, Flo handles everything so you can enjoy renewable electricity effortlessly.