Power Purchase Agreement Calculator

Both rates compound annually at their own separate escalation percentages, and if the PPA's escalation rate is higher than the utility's, the gap between them shrinks every year and can eventually flip -- the PPA rate overtakes the utility rate at the "crossover year." A PPA that starts meaningfully cheaper but escalates faster can still end up costing more than staying on utility power by the later years of a long contract, which is exactly why comparing starting rates alone isn't enough.

The average PPA rate is a per-kWh figure -- total PPA cost divided by total kWh consumed over the contract -- so it describes the RATE structure itself, independent of how much electricity is actually used. Total savings, by contrast, is a total DOLLAR figure, and multiplying the same per-kWh rate difference by a larger annual consumption naturally produces a proportionally larger total dollar amount, even though the underlying rate comparison hasn't changed at all.

Escalation compounds annually, so small percentage differences multiply on top of each other year after year -- the gap a 1% higher escalation rate creates by year 5 is much smaller than the gap it creates by year 20, because each year's increase is calculated on an already-larger base than the year before. A short contract term barely gives compounding time to matter; a long one lets even modest escalation differences swing the total comparison significantly.

It means the PPA rate path never overtakes the utility rate path WITHIN the contract term as modeled -- either because the PPA escalates more slowly than the utility (the gap never closes), or because it escalates faster but the contract ends before the crossover would occur. It doesn't guarantee the PPA is cheaper in every single year; check year 1 savings and the full total savings figure together for the complete picture, not the crossover year alone.