If you find yourself torn between choosing a Solar Direct Purchase or a Solar Power Purchase Agreement (PPA), this article is tailor-made for you. Solar energy has emerged as a potent solution for businesses aiming to slash energy costs and minimize their carbon footprint.
When it comes to adopting solar, the two primary routes are Solar Direct Purchase and Solar PPA. So, which path suits you best? Let's delve into five crucial aspects to include on your comparison checklist.
1. Upfront Cost
Opting for a Solar Direct Purchase? Brace yourself for a significant upfront investment to cover the installation of the entire solar system.
In Singapore, solar vendors offer turnkey solutions with prices ranging from approximately S$1,100 to S$1,300 per kilowatt peak (kWp), depending on the solar system capacity. On the flip side, a Solar PPA won't demand any upfront capital from you.
2. Saving Money
Should you choose Solar Direct Purchase, you will become the proud owner of the entire solar system, relishing 100% of the electricity savings it generates. Here's a quick calculation to illustrate:
Scenario without a Solar System:-
The average electricity tariff in Singapore for 2023 ranges from S$0.30/kWh to S$0.35/kWh. Your monthly electricity bill paying to your energy retailer or SP is calculated based on the Current Electricity Tariff (S$/kWh) x Electricity Consumption (kWh).
Scenario with a Solar Direct Purchase:-
Suppose you are paying S$12,000 to the energy retailer or SP, but after solar, you get free energy from the sun!
Setting aside all maintenance and financing costs involved, the return for the upfront capital model is only around 4 years!
Now, let's shift to the Solar PPA side. Your savings will be subject to a PPA tariff. If you secure a 50% discount on your current electricity tariff, here's what you can expect:
Scenario with a Solar PPA:-
As there is no upfront cost involved, the return is immediate for the Solar PPA model.
3. Warranty Coverage
In a Solar Direct Purchase, there are typically two kinds of warranties: the warranty of materials, provided by the manufacturer, and the service warranty, offered by the service provider.
Managing system warranties involves selecting the right suppliers for both materials and service providers, along with defining the scope of the work provided. Below are the typical warranty periods for each component:
Solar Panel:
25 years Performance Warranty
12 years Product Warranty
Inverter:
5 years Product Warranty
Mounting Structure:
10 years Product Warranty
Cables & Connectors:
1-2 years Product Warranty
Remote Monitoring Device:
1 year Product Warranty
Solar Installation on Roof:
1-2 years Workmanship Warranty
In the Solar PPA model, the vendor will be responsible for all warranties, encompassing both product and service-related aspects.
Since the Solar PPA vendor owns the solar system, they typically streamline the warranty claim process by having a backup unit on standby. In case of any breakdown of components, the vendor can replace them with a backup unit, ensuring continuous generation.
4. Operation & Maintenance
In the case of a Solar Direct Purchase, the responsibility for covering maintenance costs falls on you. Given the higher return on cost savings, it is advisable to allocate around 5% of the initial system price annually for ongoing Operations and Maintenance (O&M) services.
This figure excludes replacement costs for parts that may fall out of warranty. Ideally, you should consider retaining the initial service provider who delivered the project for ongoing maintenance.
Choosing a provider intimately familiar with the system's procurement, design, and installation ensures a lower risk of liabilities. Seeking a third-party for maintenance, not involved in the initial stages, may lead to higher O&M costs due to their reluctance to assume liability for others' work.
On the other hand, Solar PPA provides hassle-free maintenance throughout the contract period at no cost. This comprehensive service includes daily performance monitoring, annual inspections, panel cleaning, inverter replacement, spare part management, warranty claims, and 1-1 replacements.
5. Solar Energy Generation
Beyond safety considerations, solar energy generation stands as a pivotal metric for assessing the effectiveness of a solar system implementation.
Several efforts are crucial to maintaining a consistently high-performing solar system, including daily remote monitoring of performance and status, preventative maintenance, swift corrective measures, efficient component backups, panel cleaning, and more.
For the Solar Direct Purchase model, achieving this level of performance is possible when the client designates a responsible individual and provides necessary training and education to them, and appoints a reliable service provider.
In the Solar PPA model, while occurrences are rare in the market, some Solar PPA vendor, such as Saxon Renewables, offer a yield guarantee for clients. This guarantee ensures compensation if the promised energy output is not achieved, as specified by a formula. For example:
In this scenario, the client is entitled to a compensation, such as S$3,000, if the solar system experiences a decrease in generation and fails to meet the guaranteed energy output.
This provision eliminates client concerns about system downtime, as the Solar PPA vendor is obligated to provide compensation for any decrease in generation.
Choose the Best Solar Plan
In conclusion, both Solar Direct Purchase and the Solar PPA model offer distinct benefits, catering to different client needs based on their expectations.
For clients with the financial capacity to invest and possess internal resources and expertise to manage the solar system, the Direct Purchase option proves more lucrative due to its higher monetary return.
On the other hand, if you prefer a hassle-free approach, avoiding future operational complexities, and opt for a risk-free method by paying long-term operational expenses instead of a substantial upfront capital, the Solar PPA model is the perfect fit.
So, which one is the best for you? Contact Saxon Renewables for further advice on making the right choice.
Which option will you choose? The path to solar energy is clear and bright, and it's up to you to harness its full potential for your business.
Saxon Renewables
With a presence in seven countries (Singapore, Malaysia, Indonesia, Thailand, Vietnam, Philippines, and Taiwan), Saxon Renewables is well-positioned to enable local businesses to achieve their ‘net zero emissions’ goal by 2050.
Our solar power purchase agreement (PPA) model makes solar energy accessible and affordable for commercial and industrial organizations.
Business owners can benefit from our hassle-free service, which includes tailored designed to suit your rooftop, operational and maintenance services, all parts warranty, insurance, and a guaranteed minimum of electricity generation.
With no upfront investment required, business owners can start saving on electricity costs as soon as the solar system is activated.
We welcome you to contact us for more information and assistance on your solar power purchase agreement.
