The Two Types of Solar PPA: Behind-the-Meter and Front-of-Meter

13th June 20

  • Share:

A solar PPA or Power Purchase Agreement can be an attractive option for companies who plan to install solar panels. Instead of purchasing a solar array directly, a company can sign a contract with a provider who installs and operates the system. In this case, the client pays for the electricity delivered and not for the installation itself. The solar PPA sets the kilowatt-hour price below the local tariff, offering immediate savings.

A solar PPA or Power Purchase Agreement can be an attractive option for companies who plan to install solar panels. Instead of purchasing a solar array directly, a company can sign a contract with a provider who installs and operates the system. In this case, the client pays for the electricity delivered and not for the installation itself. The solar PPA sets the kilowatt-hour price below the local tariff, offering immediate savings.

Another advantage of signing a solar PPA is transferring risk to the provider. Normally, the user would be responsible for financing and operating the system. This also includes routine maintenance, and replacing components that reach the end of their service life. Solar panels from top providers normally have a service life of 25 years or more. However, the same cannot be said of other components such as inverters, which are rated for around 10 years.

  • In a solar PPA, the client’s responsibility is paying for the electricity delivered, while following instructions to avoid damaging the installation.
  • The solar power provider is responsible for keeping the system in operation during the entire term of the contract. If any component must be replaced, the cost is already covered in the PPA electricity price.

Depending on how electricity is delivered from the solar power system to the point of use, a PPA can be described as “behind-the-meter” or “front-of-meter”. However, the basic principle stays the same – the client pays for the electricity delivered, while the solar provider owns and operates the installation.

Behind-the-Meter Solar PPA

When a solar PPA is behind-the-meter (BTM), the client facility and the solar installation are connected directly. In other words, the electricity output can reach the client without using power lines and electric meters owned by the local energy company. Surplus electricity from the PV system may be exported to the grid, but the installation is still considered BTM because electricity can reach the client directly.

A behind-the-meter solar PPA normally has less paperwork, since the project does not use infrastructure owned by local energy companies. However, the company signing the PPA must have enough space for the solar array. Normally, this is not an issue for large commercial and industrial users with ample rooftops. Companies with abundant land also have the option of a ground-mounted solar installation, assuming there are no other plans for that site.

The main limitation of solar PPAs is their space requirement, and they are not a viable option for clients without a suitable area. For example, behind-the-meter PPAs are not viable for high-rise buildings with a small roof area with respect to their total floor area.

Front-of-Meter Solar PPA

A front-of-meter (FTM) solar PPA delivers electricity through power lines owned by the local energy company. This option provides more flexibility, since the solar array and the client facility can be located in different sites. The electricity output can be injected at the generation site, and consumed at the point of use. A transmission fee is paid to the local energy company, for use of their infrastructure.

While a front-of-meter PPA provides more flexibility, it also involves more paperwork to get the transmission permit. Compared with a behind-the-meter PPA with similar site conditions, the FTM option will generally have a higher kWh price. Even if both installations have the same electricity cost, a transmission cost is added to the FTM system.

In spite of the additional cost, a front-of-meter PPA is attractive for clients who lack enough space for a large solar array. There are also buildings with a roof design that is unsuitable for solar panels, such as the Sydney Opera House. If a solar PPA offers savings even after adding the transmission fee, it remains a viable option to reduce electricity costs.

Behind-the-meter and front-of-meter PPAs are not mutually exclusive, and a corporation can benefit from both. BTM solar power can be used where space allows, while FTM systems are used for other sites. A company can also benefit from both options in the same facility: using the available space for a behind-the-meter PPA, and expanding solar capacity with a front-of-meter contract.

General Advantages of a Solar PPA

Regardless of the solar PPA type used by a company, BTM or FTM, there are common benefits that apply in both cases. First of all, there is an opportunity cost of not having to pay for a solar power system upfront. The client can reinvest that capital in other projects, such as building expansions and energy efficiency measures.

A solar PPA also brings expertise to the project. When clients own their solar power systems, they are responsible for operation and maintenance. This means they must hire new personnel or a contractor with the required skills, or they can train their technical staff. On the other hand, Solar Bay will assume this responsibility when a client signs a solar PPA.

Australia has excellent conditions for solar power: abundant sunshine makes solar panels more productive, and there are government incentives at the federal and state level. Also, the electricity output of solar panels displaces expensive kilowatt-hours from the local grid, and there is an abundance of PPA and financing options in Australia.

In The News

  • How Food Manufacturers Can Benefit From An Onsite PPA
    Find out more
  • How Corporations With Access to Land Can Benefit From Single Axis Tracking Solar PPAs
    Find out more
  • Choosing Between a Solar Array Expansion and Adding Batteries
    Find out more
  • How Solar Power Can Make Heating and Transportation Greener
    Find out more
  • Why Using Solar Power Is a Smart Marketing Move for Companies
    Find out more
  • Australia Can Reach 100% Renewable Power by the 2030s, According to ANU Research Team
    Find out more
  • How Can High-Rise Buildings Benefit from Solar Power?
    Find out more
  • How Solar Power Watts Are Different From Fossil Fuel Watts
    Find out more
  • The Benefits of a Power Purchase Agreement vs Purchasing a Solar System
    Find out more
  • Why Solar Power Makes Sense Even When Oil and Gas Prices Drop
    Find out more
  • How Australian Solar Incentives Changed Between 2019 and 2020
    Find out more
  • Why Australia Is Ideal for Solar Power in Homes and Businesses
    Find out more
  • The Two Types of Solar PPA: Behind-the-Meter and Front-of-Meter
    Find out more
  • Understanding How Solar Power Is Measured
    Find out more
  • Australian Energy Statistics Show a Favorable Outlook for Solar Power
    Find out more
  • The Success of the Solar PPA Business Model: Lessons for Other Industries
    Find out more
  • When Does It Make Sense to Combine Solar Panels and Batteries?
    Find out more
  • Solar Power Cash Flow: Comparing Different Purchase Options
    Find out more
  • Overview of the Australian Energy Council Solar Report for 2Q 2020
    Find out more
  • Solar Power Benefits for Companies in Western Australia
    Find out more
  • How Business Parks Can Benefit from Solar Microgrids
    Find out more
  • Australia-ASEAN Power Link: Exporting Solar Energy to Singapore
    Find out more
  • How Much Does Electricity Cost with a Solar and Battery Microgrid?
    Find out more
  • How Much Space Do Solar Panels Need?
    Find out more
  • Which Technologies Can Achieve Synergy with Solar Power?
    Find out more
  • Benefits of Solar Power in the Mining Industry
    Find out more
  • How Australian Solar Incentives Change by Region
    Find out more
  • Australia Among the Top 10 Solar Power Countries
    Find out more
  • Tesla Battery Day: Good News for Solar Power
    Find out more
  • Solar Power: Comparing Payback Periods With and Without Batteries
    Find out more
  • How Much Emissions Does a Solar Power System Prevent?
    Find out more
  • Benefits of Solar Power in Embedded Networks
    Find out more
  • Installing Solar Panels: The Importance of Site Conditions
    Find out more
  • Understanding the Ownership Cost of Solar Power
    Find out more
  • IEA World Energy Outlook 2020: Solar Power Is the New King
    Find out more
  • Are Solar Feed-in Tariffs and Net Metering the Same?
    Find out more
  • South Australia Used 100% Solar Power for the First Time in October 2020
    Find out more