PPA & ESA Agreement Structures

Structure 1

Power Purchase Agreement

You pay a fixed price per unit of energy delivered. Simple, transparent, and directly comparable to your utility rate.

✓Fixed $/kWh (and $/MMBtu for thermal) — priced below your blended utility cost
✓Kite owns the system — development, construction, and operating risk stay with us
✓ITC stays with Kite — and its value is reflected in your contracted rate
✓Pay only for energy actually delivered and metered
✓Terms typically 10–20 years with options at expiry

Best for: facilities that want utility-style simplicity — a known rate per unit, with consumption flexibility.

Structure 2

Energy Service Agreement

A fixed monthly service fee covers the system, its output, and everything required to keep it performing — one predictable line item.

✓Monthly service fee — budget-certain, all-inclusive pricing
✓Guaranteed performance — measured, verified, with shortfall make-whole provisions
✓O&M included — maintenance, monitoring, repairs, and upgrades are Kite's job
✓Can bundle efficiency measures alongside generation assets
✓Terms typically 15–25 years; fair-market-value buyout options available

Best for: facilities that want guaranteed outcomes and a single fixed payment covering the entire energy service.

Which Is Right for You?

There's no universally better structure — only the one that fits your operations, accounting preferences, and risk appetite.

Choose a PPA if…

Your consumption varies and you want to pay strictly per unit delivered, benchmark against utility rates, and keep the agreement off your maintenance ledger entirely.

Choose an ESA if…

You want one fixed, predictable monthly payment, contractual performance guarantees, and a structure that can also wrap efficiency upgrades into the same agreement.

Not sure?

Most clients aren't at first. The site assessment models both structures against your actual load data so you can compare real numbers side by side.

The Right Contract Vehicle Depends on Where You Are

Energy agreements are governed by a patchwork of state statutes, public utility commission rules, and local requirements — and the structure that works in one state may not be available, or optimal, in another.

PPA Availability Varies by State

Third-party power purchase agreements are expressly authorized in some states, restricted in others, and unaddressed in the rest. Where PPAs face limits, the project doesn't die — the contract changes shape.

ESAs & Service Structures

Energy service agreements are often the vehicle of choice in jurisdictions where selling kilowatt-hours could trigger utility regulation. Structured as a service rather than an energy sale, they deliver comparable economics within local rules.

Utility Territory & Market Rules

Deregulated markets like ERCOT in Texas, regulated monopoly territories, and municipal or co-op utilities each carry their own interconnection, standby, and tariff considerations that shape the agreement's terms.

Kite structures each agreement to comply with the laws of the state and utility territory where your facility operates — and we coordinate with your counsel throughout. The comparison on this page is general information, not legal advice.

Agreement FAQs

What is an Energy Service Agreement (ESA)?

An ESA is a contract where Kite provides renewable energy systems, efficiency improvements, or other energy services to your facility. Kite covers all upfront project costs and is paid through a service fee over the agreement term — most structures minimize or completely eliminate upfront capital expenditure for the customer.

What are the typical contract terms?

PPA terms typically run 10–20 years; ESA contracts typically range from 15 to 25 years, depending on project scope and payback period. Longer terms are common for capital-intensive projects like CHP installations or major equipment deployments.

Who owns the equipment installed?

Kite owns and maintains the equipment throughout the contract term. In some cases we are open to discussing a buyout at appraised Fair Market Value at year 10, and in some structures we jointly own the equipment with a capital partner.

What happens if promised savings or performance don't materialize?

We use measurement and verification protocols to track actual delivery against baseline. Our agreements include performance guarantees with make-whole provisions — if the system falls short, that's Kite's problem to fix, not yours.

What are the tax implications?

Because Kite owns the equipment, Kite realizes the depreciation and federal tax credit benefits — and those economics are baked into your contracted rate. Your payments are generally treated as an operating expense; confirm specifics with your tax advisor.

Can we terminate the agreement early?

Agreements include defined early-termination provisions, typically involving remaining contract value or an equipment buyout. We walk through these terms in plain language before anything is signed.

How does this affect our utility relationship?

Agreements generally don't disturb your existing utility service. Where interconnection or standby arrangements are needed, Kite manages the utility process — including permits and interconnection agreements — as part of development.

See Both Structures Modeled on Your Facility

Request a site assessment and we'll model PPA and ESA economics against your actual energy data.

Buy Energy, Not Equipment