In PPA mode, the developer owns the assets and user/buyer pays per unit.
One must consider that the installer/developer assumes Total cost of ownership over contract period & IRR upwards 15%:
- Total cost of solar plant construction & installation ( survey, permitting & liaosoning, design, engineering, equipment, installation team & labor, commissioning, insurance, freight, taxes)
- Cost of equity ie. how much installer/developer have to pay to investors to get finance for the equity portion. Investors expect risk-adjusted IRR above 15%.
- Cost of debt ie. interest & principle repayment
- Total cost of Scheduled & Unscheduled O&M including part replacements
- Loss during Non-performance of the plant
- Loss due to Payment default by buyer
- Warranty servicing cost
- Insurance premium payment
- Legal costs of Liaosoning, permits
With these assumptions, developer/installer arrives at Levelized Cost of Electricity (LCOE) by discounting expected IRR over contract period and arrives at the Tariff rate per unit.