The Client enters into a long-term contract (typically referred to as the PPA) to purchase 100% of the Electricity generated by the system.
A power purchase agreement is a contract between two parties, one who generates electricity for the purpose of sale (the seller) and one who is looking to purchase electricity (the buyer). The PPA defines all of the commercial terms for the sale of electricity between the two parties, including when the project will begin commercial operation, schedule for delivery of electricity, penalties for under delivery, payment terms, and termination. A well-structured PPA allows you to reduce electricity costs immediately and realize increased savings over time as grid electricity prices rise. Once the PPA contract period expires (typically after 15 – 20 years), you can purchase the system at a reduced price, initiate another PPA, or have the solar installation removed.
Under this model VEMC, one of the foremost solar companies in Mumbai, finds the investor and set up a solar project at your location or in some common location. The investor sells the generated power to you at a cost that is less than your current cost of power.
The PPA financing model is a “third-party” ownership model, which requires a separate, taxable entity, in this case, VEMC, to procure, install, and operate the solar PV system, on a consumer’s premises.