CEN Solar Blog

A Beginner's Guide to Solar Terms

Jul 12, 2021 11:02:51 AM / by Sara Richardson

The solar industry is a world unto it's own, though it does share similarities with the real estate, legal, and energy industries. Acronyms in solar are commonplace, and though there are many, there are a few core terms that will help beginners to the industry understand it better.  

A Beginners Guide to Solar Terms

 

 

PPA - Power Purchase Agreement. When electricity is generated with a solar array, it's produced in DC, or direct current. Inverters change that into AC, or alternating current, and that power is then ready for sale. A power purchase agreement is a formal agreement, often with a kilowatt hour rate, between a seller of electricity and a buyer. 

Lease - Similar to renting an apartment, a lease is a legal document signed between two parties, a lessor and a lessee, who agree to allow the lessee to "rent" the lessor's space. In the solar industry, that lease is to build and operate a solar power generation system. 

There are a few key differences in a solar lease. The owner of a solar system can be a different person or entity than the owner of the land or area the system is installed on. For example, an investor may own a solar power generation system that is installed on the rooftop of a commercial building that is leased by a tenant and owned by a company that has two mortgages on the property. In this case, the lease is created between the investor and the building owner with separate exhibits attached to that lease detailing the relationship between the tenant and the building owner and the mortgage holders and the building owner which relate to the operation of the solar array. 

Permits - There are a ton of permits involved in the process of developing a solar power plant, but the main buckets they fall into are related to the land or real estate, the power generated by the system, and how the system gets built. 

LNTP - A Limited Notice to Proceed is issued during the stage of a solar project when all of the required permitting has been applied for and the project manager is allowing part of the work (usually relating to engineering and procurement) to start. This is usually after much of the pre-construction work has been completed, legal documents have been signed, and the project is getting ready for construction. 

NTP - A Notice to Proceed is issued after an LNTP whereby the project manager is directing construction to begin.  

COD - In the finance world, COD means Cash on Demand. In the solar industry, COD means Commercial Operation Date. This is the date that the fully completed solar array is turned on and begins operations. 

O&M - A company is usually awarded a contract for Operations and Maintenance of the completed solar system during the development and construction stages of the project to begin after COD. This company is responsible for keeping the solar array clean and operational, and often must resolve issues affecting the power generation in a certain timeframe to minimize production losses. 

EPC -  An Engineering, Procurement, and Construction company is often the company providing project management with the goal of building the solar array by a certain time and within a certain budget outlined in the contracts. They're often referred to as the construction company and must have experience in permitting solar builds, electrical relating to solar (particularly converting DC to AC and connecting solar panels through inverters), and have experience purchasing solar modules. 

kWh/MWh = Kilowatt hours and megawatt hours are the units of measurement that solar power is measured in. Electricity cost is usually measured in kWh. Related to these are kW and MW, which stand for kilowatt and megawatt respectively, and are used in the solar industry to indicate the size of the system. One MW is one thousand kW. 

 

We hope this short guide helps those new to the solar industry make sense of some of the terms we use in a practical way!

 

 

Picture credited to DepositPhotos.com

Tags: Solar

Sara Richardson

Written by Sara Richardson