It’s no secret that inflation has impacted our cost of living – and the cost of doing business. We are now seeing the ripple effect beyond our eggs at the grocery store and into nearly everything, including electricity rates throughout the nation.
- In the Northwest, Oregon’s PacifiCorp Utility is expected to increase rates by 6.8%.
- Arizona’s APS is looking at a 13.6% hike in rates.
- The Rocky Mountain region’s Xcel Energy is planning to jump 7.7%.
- In the South, Duke Energy is rolling out a 3-year plan ending at a 16% increase.
- And a real kicker: Massachusetts’s National Grid is assuming a 64% increase in monthly bills as they implement their own price hikes.
That means a medium-sized business operating in Attleboro could go from paying $2,000 to $3,280/month – a huge and unexpected increase in fixed, operational costs. Mind you, these are just some of the many examples across the United States.
Pretty serious trend, right? But it doesn’t have to be this way.
PPAs show their value
On the other end of the spectrum, some organizations are choosing a more sustainable path that may just counteract these rising operational costs.
One example is Colorado State University’s nearly completed 4.5 MW solar energy project, which will keep the university locked into the same electricity rate for that solar power for nearly 30 years – even as utility rates increase. This is just one of several organizations across the country that have found a way to fight inflation by financing a solar energy system through a Power Purchase Agreement (PPA).
A PPA is a 20–30-year term contract that allows a business to go solar with no money upfront and only pay for the solar energy produced at a rate typically lower than the current utility rates and paired with a known consistent 0-3% annual escalation over the term of the contract. This means that all the energy that the business pays for at this new lower and consistent rate replaces the traditional costly and unknown rate hikes, increasing savings over time.
This mortgage-like financial instrument for commercial solar energy has only an improved outlook in the years to come with help from policymakers. As we’re seeing utilities increase electricity rates the federal government has been using various levers to attempt to keep inflation from getting out of hand, including the passing of the Inflation Reduction Act (IRA). Because of the IRA and the naturally produced energy of the sun, organizations can continue to see PPAs play a major role in reducing operational costs immediately – and increasingly so over the long term.
In fact, as inflation drives up utility rates and federal incentives kick in, those who choose to go with a solar PPA will likely see even better financial terms than before the Inflation Reduction Act, furthering key savings in a time of increasing prices everywhere else.
For solar contractors in the C&I space, be sure customers see how going solar could benefit their business and their fixed expenses (which may not be as fixed as they thought).
Janna West-Heiss is Director of Communications and Corporate Development at Solaris Energy, a nationwide commercial solar PPA provider.