PPAs or power purchase agreements are essentially a long term contract for energy now being offered to residential homeowners and businesses. The contract provides the basis for financing the installation of solar or other renewable energy generators by allowing the manufacturer to dip into a financing pool to make installations.

“There were approximately 10,000 homeowners with solar power last year in California, and most say that there will be a 30-to-40 percent growth rate in the state this year,” says Nat Kreamer, CEO of Sun Run, a Silicon Valley start-up that offers power purchase agreements to finance most of the cost of installing a system.

Jon Guice, head of research at green energy consultancy AltaTerra, in Palo Alto, is bullish on PPAs in particular. “PPAs can drive the residential solar market because it makes the acquisition financially acceptable; it could change the whole solar value chain,” he reckons. “Last year half of all the commercial solar installs in the United States were PPAs, and this year that number is running between 60-to-80 percent,” he notes.

The proposal banks on the expected increase in energy prices to further encourage the signing of these PPAs by consumers hoping to reduce their energy bills. In Oregon, since 1997, electric rates have risen by 33% and PGE has an application into the PUC for an additional 9% increase.