What is a Power Purchase Agreement?

What is a Power Purchase Agreement?

A power purchase agreement (PPA) is a financing contract between a consumer and a solar panel system installation company. Through this agreement, the developer manages the design, financing, and installation of a solar panel system on the property of the customer at almost no cost. People in Pakistan who want to own a solar panel system at little investment can also benefit from this agreement. This blog discusses more power purchase agreements in detail.

What is a Power Purchase Agreement?

Through a power purchase agreement (PPA), the developer provides the solar power generated through the system to the host customer at a decided rate. This rate is lower than the rates of local utility providers. Using the power provided, customers can benefit from a low-cost electricity supply and free themselves from the traditional grid.

The developer, on the other hand, gets the income by selling the electricity, together with other incentives offered by the solar panel system. The agreement lasts from 10 to 25 years, depending upon the parties. The developer throughout the agreement is responsible for operating and maintaining the solar system. Towards the end of the contract, the customer can either extend the contract or decide to buy the solar system from the developer.

Benefits of Power Purchase Agreement for Customers

  • Reduced capital costs

As part of the agreement, the developer is responsible for handling the cost of procuring, installing, and maintaining the solar energy system. In this way, the host customer does not have to spend on the solar system and benefits from the electricity produced.

  • Increase in the property value

A solar system can increase the overall value of the property on which it is installed. In this way, customers can invest in their homes at a very limited cost.

  • Lower energy costs

Since the agreement specifies that the host customer will receive electricity for a fixed period of time, customers can free themselves from the national grid and benefit from affordable, as well as clean, sources of energy.

  • There is limited risk

Since the developer is responsible for operating and maintaining the solar system, customers don’t have to worry about system performance.

  • Ability to own a solar system

People often complain that they cannot get a solar panel system because they are too expensive. However, power purchase agreements offer a great financing solution. Reduced electricity bills because of solar panels mean customers can save extra money over the years.

Eventually, at the end of the solar power purchase agreement, they can use the saved money for buying the solar system from the developer. In this way, they can also become comfortable with using a solar panel system over the years and continue to benefit from solar power.


A power purchase agreement can truly make a difference. Even in Pakistan, people who are looking forward to benefiting from solar energy systems but cannot get a solar panel system because of its overhead cost can sign a power purchase agreement and reap all the advantages of the solar energy systems.


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