Municipal Solar & PPA's

   >> Municipal Solar &  PPA Consulting Services

Motives:

New Jersey's municipal solar energy projects are earning recognition throughout the state and the world.  However, since governmental entities are not entitled to various state and federal incentives, purchasing solar energy systems is often less attractive than a lease or PPA arrangement.  Motives are environmental and an overall reduction in utility costs.


How Municipal Solar Makes Sense:

Towns considering municipal solar energy often find outright purchase (even when financed by a loan) may not be the most attractive option for several reasons:

1.   Government bodies, such as municipalities, don’t have the benefit of the 30% federal tax credit, making solar more expensive.

2.   Municipalities may not want to assume the risk of a large loan. (PSEG does not offer their loan program for large systems).

3.   Substantial loans for municipal solar system purchases adversely effects a municipality’s balance sheet.

The remaining options for municipalities are leasing and power purchase agreements, or “PPAs.”  These can help munis avoid many of the problems of an outright purchase.

In a leasing arrangement, munis pay a fixed monthly rate to use a municipal solar system owned by the lessor. This rate is independent of system generation.  Generally a lease will be contracted for 10-20 years.  The lessor, a private company, can take advantage of tax incentives that are unavailable to the municipality.  The municipality generally receives SRECs for the system’s generation.  In many leasing arrangements, the muni’s involvement with solar does not effect its balance sheet.  In most arrangements, the muni is responsible for maintenance and insurance.

In a PPA, the municipality pays a predetermined rate per kWh generated.  The PPA provider owns the system, and sells the electricity generated to the muni, generally for 5-15% less than the grid rate.  The PPA provider receives the tax benefits, controls the SRECs, and is responsible for maintenance and insurance.   Terms are usually 15-20 years. 

The following grid compares purchase, leasing, and PPAs.

 

Purchase with Loan

Leasing

PPA

System Owner

Municipality

Lessor

Investor

Pricing

Fixed loan payment

Fixed monthly payment

Fixed rate per kWh

Performance Risk?

Yes

Yes

No

Accounting treatment

On balance sheet

Generally off balance sheet

Always off balance sheet

Federal Tax Credit

Not available

Lessor’s Acct

Investor’s Acct

Federal Depreciation

Not available

Lessor’s Acct

Investor’s Acct

NJ Incentives

Ineligible

Lessor’s Acct

Investor’s Acct

SRECs

Yes

Possible

Investor’s Acct

Maintenance

Municipality pays

Municipality generally pays

Investor pays

Insurance

Municipality pays

Municipality pays

Investor generally pays


For the Accountant In You:

Regardless of the route chosen, solar lease or PPA, an overall reduction in utility costs is the goal, along with recognition for responsible energy production. 


Where We Fit In:

Solar leases and PPA's are contractual arrangements which bind the parties for 10 - 20 years.  Finding the right installer, deciding between PPA's and leases, has long term financial consequences.  We know what's usual and customary, can obtain competitive bids on your behalf, and apply our proprietary financial model to determine which transaction is in your best interest. 

   >> Municipal Solar Consulting

 

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Municipalities save on their electric costs through
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