The Interstate Renewable Energy Council (IREC) has developed a comprehensive toolkit on retail solar power purchase agreements. The aim is to reduce solar soft costs and assist local governments and other public entities seeking to install and finance rooftop solar systems.
Under the PPA model, a third party owns a solar energy system located on the property of a host customer, such as a local government, and sells the electricity produced by the facility to the customer under a contract designed to provide long-term electricity cost savings. For public entities, the PPA model delivers long-term energy cost savings without requiring large up-front capital expenditures. It also allows them to indirectly benefit from tax incentives that cannot be accessed by tax-exempt entities.
IREC's new
PPA toolkit is designed to help overcome the common challenges and costs associated with PPAs by providing a full suite of resources in a highly user-friendly format. With the addition of a
free webinar and forthcoming toolkit workshops, IREC will supplement the toolkit with hands-on training to empower municipal entities that seek to utilize solar PPAs. The end goal, in line with the DOE SunShot Initiative goals, is to simplify, streamline and reduce costs for solar.
IREC’s new toolkit includes the following:
- Background information on the PPA model and the associated contractual elements;
- Annotated model PPA and site right agreement documents, supplemented with numerous examples of how different provisions were addressed by individual local jurisdictions, and possible alternative language;
- "Clean" templates that may be customized for local use (for informational purposes, with each user expected to seek independent legal and tax counsel);
- General guidance on procurement design and implementation, also supplemented with numerous local examples;
- Short case studies of individual projects surveyed and links to project documents;
- Summaries of existing resources, such as previously published reports and fact sheets, other model PPAs, and prior webinars.
"The PPA trend has definitely been a little rocky in some instances," says Justin Barnes, co-author of the toolkit. "Procuring solar under a PPA can be a complicated and time-consuming process. There are a lot things to consider and decisions to make, from how to design an RFP to select the most suitable provider, to establishing the terms of the contractual documents in a manner that allocates rights and risks in a mutually acceptable way. The details are often heavily negotiated, so a PPA deal in one jurisdiction can differ significantly from one in a neighboring locality."
Prolonged PPA negotiations with significant transaction costs can ultimately deplete the value of the project for all participants, explains Barnes. This can be particularly troublesome for projects that are relatively small or that are financially compelling only if transaction costs can be minimized. Many early adopters encountered PPA challenges that resulted in delayed or even canceled projects.
"These past experiences provide valuable insights that can help other public entities avoid common pitfalls," adds Kathleen Kapla, co-author. "[The toolkit] can help them navigate the many contractual issues present in these legal arrangements."