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Questions and Answers

Solar Power Purchase Agreements (SPPA)

Q: What is the duration of a typical Horizon Solar Energy SPPA contract? Is that flexible?
A: The typical timeframe is 20 years. There is some flexibility, but there are limits depending on the financial institutions that back the project and the energy pricing will vary depending on the term.

Q: Why does the price of electricity rise over time under the terms of the PPA when the cost of sunshine does not change?
A. It’s really a question of making the economics work. We could have rates remain flat or even possibly decrease over time; however, we would need a financial model that would make it economically viable for Horizon Solar Energy and our investor groups. We completely expect that utility electricity rates will continue to rise, perhaps aggressively, and therefore a fixed rate escalator that is likely to be lower than the utility rates is a sound and common way to structure the agreement.

Q: Is there a standard kWh rate in the SPPA and what is the escalator rate?
A: The kWh cost for electricity depends on a great variety of factors, including local sun insulation, panel orientation, size of the system, term of the agreement and other criteria that impact the system installation cost and production of the system over time. Thus, there is no standard rate. The escalator is the rate at which the SPPA electricity rate increases year over year. The escalator also varies and can be adjusted to meet specific scenarios with customers.

Q: Does Horizon Solar Energy handle the utility interface application and negotiation?
A: Yes, Horizon Solar Energy, along with the various contractors installing the system, handle utility interconnects. We have close relationships with many utilities across the country and the folks responsible for interconnection to mitigate risk around interconnect. Each project has a project manager and detailed schedule under which such project milestones are closely tracked and managed.

Q: What are the buyer's options at the end of the SPPA term? If the buyer has the option of buying the system, how will the price be determined?
A: There are three options at the end of the SPPA term: 1) the contract may be renewed and Horizon Solar Energy will continue managing the system, 2) the host can purchase the system and own it moving forward, or 3) if neither of those options are desirable, then Horizon Solar Energy is obligated to remove the system.

Q: What are the categories for up front costs to the host (legal, accounting, etc.)?
A: Since Horizon Solar Energy covers all up front design, permitting, equipment purchases and installation, the costs to the host are foremost related to legal review of contracts, which, generally is relatively insignificant.

Q: How do you verify the energy produced? Is that done with a reliable, 3rd party (neutral) technology?
A: Yes, energy monitoring and data availability is handled by accredited 3rd parties. Such data acquisition and reporting is very important to Horizon Solar Energy as well as our customers. Since we are paid only for the renewable energy that is generated, we take great care to ensure the system is performing at optimal levels and that the data is reliably captured and tracked. Additionally, many state incentive programs, like the NJ Solar Initiative, require energy monitoring and metering systems to be properly certified under strict accuracy, reporting and auditing guidelines.

Q: How can you guarantee the results you are promising – energy generation and system performance?
A: Once a system is put into service, there is a performance test to determine actual power output. Our installation partners provide a guarantee for specified energy at that point. There are also guarantees from the module manufacturers. Additionally, the SPPA electricity rate and escalation rate is contractually obligated and will not change. What we cannot guarantee is if the sun will shine due to weather factors. However, keep in mind that the host customer only pays for the energy produced.

Q: Does the customer pay for energy produced or energy used? What if the panels produce more than the customer can use?
A: There may be periods where production exceeds demand and energy is delivered back into the utility grid and generating a credit with the utility. We size the system so that it closely matches actual demand. However, if you are a school for instance, you will generate more energy than you need during the summer months at a high rate, but use more from the grid in the winter when you are paying lower rates. This is one of the great advantages of solar PV – sell energy when rates are high; buy it when rates are low.

Q: If the solar system generates more electricity than can be used on that site, can the customer use the excess to offset electricity use on another site?
A. If you’re at a facility with multiple meters, we can likely tie into multiple meters so that each one receives the optimum benefit of the energy produced. Using power from one site for a site that is in a different geography is not something that we typically see.

Q: What happens when the panel/generation technology changes - will Horizon Solar Energy update with the more efficient tech?
A: Horizon Solar Energy will constantly track developments in solar technology. New technologies can be employed when the economics justify replacing older equipment. Our analysis of this investment will be similar to a host’s analysis – when it pays off, we will make the change.

Q: Since Horizon Solar Energy outsource's/manages third party installers, is Horizon Solar Energy the one point of contact for customer service or will the customer need to interface with multiple providers?
A: Horizon Solar Energy will be the point of contact. We work very closely with the installers during all phases of the project. Horizon Solar Energy gets payments for energy produced; we are highly motivated to keep the systems performing at its maximum output.

Q: Does the purchased solar power work to offset demand charges (given that the peak production of solar occurs during peak demand periods)?
A: Yes, that’s one of the great attributes of solar – it is often coincident with peak demand charges, thus potentially reducing total utility charges disproportionately.

Q: Does Horizon Solar Energy manage residential PV projects?
A: No, at this time Horizon Solar Energy serves commercial, government and non-profit organizations.

Tax Incentives

Q: in a typical SPPA, who receives the Solar Renewable Energy Credits (SREC's) from the project, the host or Horizon Solar Energy?
A: Typically, Horizon Solar Energy manages the SREC's and monetizes them. Horizon Solar Energy is generally in best position to obtain the optimal value for the SREC's and manage them year in and year out.

Q: If Horizon Solar Energy retains the SREC's, does this prohibit the host from claiming any environmental benefits from the system?
A: Careful wording around claims is warranted under this typical scenario. Horizon Solar Energy works with hosts to determine the appropriate communication strategy. Factual statements about the solar facility being deployed on the host’s site (its size, performance and environmental benefits) are all fair grounds for disclosure to the public.

Solar Systems and Projects

Q: What is the average amount of time from beginning to end of a project, with the beginning being the initial contact?
A: Anywhere from as little as 4 months to one year, with typical projects lasting 6 months or longer.

Q: Do Horizon Solar Energy installations include battery storage?
A: We typically do not include battery storage. We view the utility grid as a monster battery that provides power during periods where the sun is not shining. Off grid systems do exist, however, our customers have not yet requested this.

Q: Can solar be used as a reliability source? If the power goes out, will solar still produce power to the facility?
A: No, in typical setups without battery backup, the PV system will shut down during grid power loss.

Solar Technologies

Q: Can you discuss any new solar technologies that are on the near and far term horizon, especially in regards to efficiencies?
A: With regards to efficiency, we look at the penetration that can be achieved from solar for a given facility to maximize savings. In some cases we look for high production where the output of the panels is maximized per sq meter available; or we go with a tracker solution that offers good economics. If space is not a constraint, we also look at newer thin film technologies where the overall install cost may be lower but efficiency may not be as high. On the inverter front, there are new developments that increase efficiency – down to the module panel level, meaning that every panel is optimized, versus the string or array. The SPPA model benefits from new, proven technologies.

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