5 tips for solar PPA invoicing
We often get asked if there is a smart methodology to do solar PPA invoicing.
Most solar asset managers use a combination of Excel spreadsheets, PV monitoring systems and accounting systems to produce their solar PPA invoices. It works, but it is time consuming and prone to errors. If the person in charge of PPA invoicing is absent or leaves the company, there is a steep learning curve for his or her successor to figure out the correct PPA rate. They will also need some time to get comfortable with the formula's in somebody else's spreadsheet.
We recommend the following 5 tips to make solar PPA invoicing easier.
1. Establish a fixed monthly PPA billing cycle
Make the monthly invoicing date the earliest date you can find in all your PPAs, for instance the 10th calendar day in the month. This way you can get all the PPA invoices out in one time and have to go through the procedure only once a month.
2. Now calculate backwards
If the invoices have to be sent out on the 10th calendar day, you will need to give the person who approves them a day or two to approve (and give you time to make corrections if necessary). This means that you will need to have the invoices ready on the 5th or 6th to make sure you don't have to change this monthly date for a weekend or holiday. This means you will have to pull your data from your PV monitoring system(s) and prepare your invoices on the 4th or the 5th.
3. What to do with missing data?
Regardless how well you are set up, there will be a point in time when you are missing some metering data. Guaranteed. This could be due to data communication issues or logger failures. Even if you think that this will never happen to you, it will still be smart to plan for the time that it might. In the best case scenario, your PPA is written to accommodate for this. It will allow for a reconciliation payment at the end of the year. Or for adding the missing data to your next invoice. Or give you the opportunity to issue a second invoice. If your investment or development team is asking for your feedback on a PPA invoice for a new project, make sure that some language is included that makes it as easy for you as possible to manage missing data. Typically a once a year reconciliation is the least work for you.
4. Establish PPA rate sheets
If you are lucky, you are invoicing based on a fixed rate PPA. This means that the PPA agreement will have an exhibit with all the PPA rates over the duration of the PPA agreement. If you are less lucky, there will be a starting PPA rate and one (or more) annual escalators. This is where it gets tricky: you will have to look if the PPA includes language on how to round the next year's PPA rate. And you have to make sure that this is done consistently over the duration of the PPA. If you are calculating the PPA rounding wrong for just one year, this could have a bad knock-on effect for the rest of the PPA and could cost the project company thousands of dollars. Things get even more complicated if you have a discount or indexed PPA. In this case you will need to be very careful in administering the PPA rate table and ideally have an audit trail in place as well.
5. Establish a good relationship with our PPA off-taker
Yes, they may be locked in for 20 years. But after all, they are your customer. Sometimes PPAs are based on old fossil fuel PPAs or have been negotiated in a rush and have provisions in them that don't make any sense. A good relationship with your customer will help you navigate these provisions and make practical decisions on what to do with them. Just don't forget to document what you ended up deciding. His successor may challenge your successor on it.....