In a PPA, the project developer pays to install the solar and, in exchange, the host facility’s owner agrees to buy the solar energy for the next 15 to 20 years. Companies like SunEdison and SolarCity are successfully using this brilliant approach to line up residential customers and large facility customers. The problem is virtually no one offers PPAs to the millions of small-to-medium size businesses in America. Why? Transaction costs. They eat up all the savings on small systems.

Making solar PPAs available to small businesses requires understanding what currently drives these transaction costs, and then developing a new deal structure geared specifically to avoid those costs. When a business like a car dealership, small hotel, or 100-person office wants solar, they are typically looking for a 10kW to 20kW system. Right now, most PPA providers will not touch a commercial project under 40kW. The reason is the transaction cost for a 10kW PPA is the same as for a 100kW system. Often the costs are so high that they cannot beat utility prices on systems under 40kW.

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Small Business Solar PPA: The Solution to Transaction Costs