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Presenting a live 90-minute webinar with interactive Q&A
Renewable Energy Projects:
Negotiating Power Purchase Agreements Structuring Terms To Meet State and Federal Renewable Power Standards
Today’s faculty features:
1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific
THURSDAY, FEBRUARY 9, 2017
W. Bryce Chastain, Partner, Atkinson Andelson Loya Ruud & Romo, Pleasanton, Calif.
Darin Lowder, Partner, Ballard Spahr, Washington, D.C.
Kristen Thall Peters, Partner, Cooper White & Cooper, San Francisco and Walnut Creek, Calif.
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Renewable Energy Projects: Negotiating
Power Purchase Agreements
February 9, 2017
Kristen Thall Peters, Esq.
Cooper, White & Cooper LLP 1333 N. California Blvd, Suite 450
Walnut Creek, California 94596
(925) 935-0700
201 California Street, 17th Floor
San Francisco, California 94111
(415) 433-1900
www.cwclaw.com
Darin M. Lowder, Esq.
Ballard Spahr LLP 1909 K Street, NW, 12th Floor
Washington, DC 20006-1157
Direct 202.661.7631
Mobile 571.251.1837
www.ballardspahr.com
Private versus
Public Utility PPAs
Understanding Limitation of IOUs
Renewable Auctions
Energy Service Providers (ESPs)
Community Choice Aggregators (CCAs)
Municipal Electric Utilities
Over the Fence Buyers
Combinations of the Above
6
Other Project Contracts
o Land
o Turbine Supply
o Operations
o Permits
7
More Project Documents
oWarranty, Maintenance and
Service Agreement
oRenewable Energy Credit
Purchase and Sale Agreement
(may be integrated with Power
Purchase Agreement)
oProject Interconnection Agreement
8
More Project Documents (con’t)
oTransmission and Operating
Agreement
oAgency Agreements
oEngineering, Procurement and
Construction (EPC) Agreement
oAgreement Performance Guaranty
Agreement (in favor of power
purchaser)
9
Interconnection Agreements
Construction
Distribution
sending energy directly to utility
sending energy via utility’s system to 3P off taker
Term & Renewals
Point of Interconnection/Access
Allocation of Responsibility
PUC guidelines/tariff
Disconnection of Unit
Invoicing & Payment
Security
Governing Law
10
o Most frequently used to support some form
of project financing
o PPA must be financeable
o Critical that PPA and related revenue
stream remain in place for term of
financing
Fundamental Role of PPA
(Project Finance 101)
11
o Credit of Offtaker
o Scale of Project
o IOU
o Commercial
o Residential
o Ownership/Sales Structure
o Seller – Project Company
o Third Party
o Joint Ownership – Tenancy in Common
Key Issues for PPAs
12
o Obligation to sell delivered energy
o Capacity/Availability – applicable on in limited circumstances
o Guaranteed Energy Quantities over a rolling period of time
o Qualification for and transfer of RECs
Nature of Seller’s Obligation
13
o Must take and pay for energy delivered
Nature of Buyer’s Obligation
14
PPA: What is it?
Description of PPA Under a power purchase agreement, a private entity (or group
of developers, construction contractors, and finance
companies) typically installs, owns, operates and maintains a
renewable energy project “behind the meter” on a customer’s
site.
Customer purchases electricity or thermal energy through a
long-term contract with fixed energy pricing (either fixed for the
term, or rising each year at a pre-determined rate). Payment is
only made for thermal or electric energy actually delivered.
Private ownership of the renewable energy equipment enables
the project to qualify for federal and state tax incentives
unavailable to non-taxpaying entities.
15
Incentives / Flow of Funds
Government
Project Developer & Owner * Provides capital
* Constructs & operates project * Sells electricity & renewable credits
Host Customer
* Hosts project on its land/roofs * Buys physical power from project
Utility or Other Solar Renewable Energy
Credit (SREC) Buyer
SRECs Payments
Payments
Electricity
Tax-related incentives
16
PPA: What is it?
Obligations
Provider typically has obligation to finance and
construct project, operate, and deliver energy
Minimum outputs may be specified (failure to deliver
results in penalties or “make whole” provisions)
Customer has obligation to take and pay for all power
delivered
Ownership of renewable energy attributes (RECs or
SRECs) is negotiable, and may be sold separately
from energy output
17
Power Purchase Agreements: Why
and How?
Why Moves construction, development, operations & financing
burden to third-party
Maximizes financial and tax incentives
Public-private collaboration possible
Facilitates renewable energy development that may not otherwise occur, providing environmental, educational, financial, economic development (e.g., green jobs) benefits to the community
How Competitive procurement (RFP or RFQ/RFP)
Specific project or open invitation to bid
Add-on through master energy performance contracts
Alternatives: customer may propose key terms or seek form PPA from provider 18
Power Purchase Agreements:
Risks
Risk-Sharing
Risk to public property
Project completion risk
Schedule risk
Losing financial incentives (grants, rebates)
Change in law
Loss of use of project site by Customer (convention center)
Decrease in solar resources (allowing a building to block sun)
PPA must continue through financing term
Risk of lower future power prices 19
PPA: Tax Issues
Tax Issues Who owns the system (according to the IRS)?
Control, risk of damage, benefits & burdens of ownership
Risk of Recapture of federal tax benefits
20
PPA: Financing Issues
Financing
Step-in rights for lenders to operate project
Consent to assignment of PPA
Results of customer default (requirement to
remain in place or be removed – at whose
cost?)
Financing lien on system property (the project
– not the underlying real property, land, or
other improvements)
Documents recorded in full or in
memorandum form 21
PPA: Business Terms
Business Terms Energy pricing – output guarantee?
System size variation
PPA lease renewal (beyond normal 15-20 year initial term)
Purchase option pricing & timing
Performance / completion bonds (construction, removal)
Costs of interconnection
Customer-caused temporary outages (roof replacement)
Billing and payment
Claiming/promoting green attributes of system 22
o Pricing Methodology
o Power Production
o Term/Renewals/Extensions
o Completion Schedule
o Consequences for Failure
o Credit Protection
o Downgrade
o Adequate Assurances
Other Key Renewable
PPA Issues
23
o Termination Payments
o Fuel Risk
o Maintenance Requirements
o Environmental Credits and other green
attributes
o Compliance with RPS
Other Key Renewable
PPA Issues
24
o Facility Ownership
o Tax Ownership
o Option to Purchase Facility
o Decommissioning
o Access
Other Key Renewable
PPA Issues
25
o Regulation and “reg out” provisions
o Change of Law
o Grid Access and Interconnection
o Transmission Risk
o Defaults
Other Key Renewable
PPA Issues
26
“Corporate” PPA’s
o Brief Overview
o Applicability
o Variations
27
Corporate Renewable Deals
(2012-2016)
28
Corporate Procurement Growth
From 1,180 MW in 2014 to 3,240 MW in
2015
For wind, switch from mostly non-
corporate PPA’s in 2014 to Corporate
PPA’s in 2015 (17% of 2,750 MW’s in
2014 were corporate, v. 55% of 4,398
MW’s in 2015)
29
U.S. Wholesale Power Markets
Source: Federal Energy Regulatory Commission (www.ferc.gov) 30
Procurement Process – Corporate
PPAs
Offtaker decision-making: how does it
compare to selling to a utility?
Differences in negotiating with a
corporate versus a utility offtaker?
Delivery Point or Settlement Point
Term of Agreement
Price
Additionality
31
REC’s Only
(no power)
Physical Delivery Financial Delivery
• Buyer purchases RECs but
never takes title to power at
any location
• Environmental Claims are key
• Power procurement /
redundancy not critical
• Where are these available?
• Direct procurement of power
from offsite generation source
• Transmission / Distribution /
Scheduling
• Firm Delivery
• Redundancy / certainty and
continuity of power key
• Long-term power price
certainty essential
• Where are these available?
• Often Contract for differences
(buyer retains RECs; power
sold into spot market) - Hedge
• Transmission / Distribution /
Scheduling unnecessary
• Firm Delivery not required
• Redundancy / certainty and
continuity of power already
addressed or not critical
• Long-term power price
certainty
• Where are these available?
• AKA Virtual, Synthetic or
Financial PPA’s
Types of Transaction Structures
32
Financing Issues - Corporate PPA’s
Requirements for tax equity and banks or higher-risk
lenders
PPA Terms
Credit Support Requirements
Sponsor Role and Contracting Party Role
Developer requirements for lenders / investors
Key distinction – shorter PPA tenors
Onsite v. Off-site
Long-term financial benefits to offtakers
Regulatory certainty
33
1. Sale or retention of solar renewable energy
credits (SRECs) and other environmental
attributes
2. Roof selection, replacement schedule, and
warranty
Parallel issues with ground and parking sites
3. Understanding special purpose entities (SPEs)
and other contractual risk issues
Three Issues that Often Stop Solar
PPAs in their Tracks
34
Why it is important?
Can be a major (sometimes the largest) project revenue stream
Can affect green energy accounting and communication
Why it can be overlooked?
Can be complex and non-intuitive that solar projects produce
two distinct revenue streams (physical power and SRECs)
Complicates the “sale” of a solar project
How it can stop or slow solar projects?
Executive and Communications staff are not educated early
and, then, are told that agency is not buying green energy
under certain accounting, reporting, and communication
regimes and that communications language must be
circumscribed
Tension between sustainability plans and financial goals of
solar projects
Issue # 1: Selling or Retaining Solar
Renewable Energy Credits
35
Key (overlooked) stakeholders to involve early
Executive
Communications
Finance
How and when to involve
Discussion (before RFP issuance) among Executive,
Communications, Sustainability/Environment, Finance, and
Procurement staff on the best decision on SRECs for the
agency
Sell all (to utility, private broker, regional procurement group)
Retain all (to retire and be entitled to make green claims)
Retain a portion
Purchase substitute RECs or participate in other environmental
programs
Issue # 1: Selling or Retaining Solar
Renewable Energy Credits
36
Why it is important?
Roofs differ greatly in their “solar- readiness”
Timing of roof replacement schedules is critical
Facility roof repairs are often more expensive than solar projects
Roof damage can affect property and people in building
Why it can be overlooked?
Aggressive assumptions by non-engineering or non-facilities
staff about available roof space or lack of knowledge on roof
vulnerability
It is always viewed as important, but often dealt with too late in
the process
How it can stop or slow solar projects?
Not enough solar-ready roofs available to support RFP specs
Insufficient time for facilities/engineering planning
Inability to integrate solar projects with roof warranty
Issue # 2: Roof Selection, Replacement
Schedule, and Warranty
37
Key (overlooked) stakeholders to involve early
Engineering/Facilities
Finance/Insurance
Third-Party Project Provider
How and when to involve
Conduct realistic internal or external assessment of roofs (and/or
parking and grounds) that are good candidates for solar in Year 1
Assessment should be completed as part of pre-RFP project goals,
or RFQ process can support discovery from industry experts
Consider roof replacement schedules, structural integrity, shading &
roof obstructions, zoning, pitch and orientation, visual impact, size,
distance to sufficient building electric load, etc.
Make sure roof warranty issuer can integrate solar project into
roof warranty before transaction is finalized with solar owner
Have substitute sites lined up
Include solar planning in longer-term roof replacement planning
Issue # 2: Roof Selection, Replacement
Schedule, and Warranty
38
Why it is important?
15- to 25-year agreement with legal entity often created to
own agency’s projects and sometimes a broader portfolio of
renewable projects
Liability of agency for SPE obligations
Long-term outside ownership of equipment on government
agency’s roof, parking, and/or land sites
Why it can be overlooked?
PPAs are an industry standard for government agencies
Contracts are sold as, and intended to be, turnkey leases
Issue # 3: Understanding SPEs and
Other Contractual Risk Issues
39
How it can stop or slow solar projects?
Legal, Finance/Insurance, and/or Executive staff become
concerned about risks in PPA documents
Final contract negotiation is not the best time to start thinking
about risk mitigation
Issue # 3: Understanding SPEs and
Other Contractual Risk Issues
40
Key (overlooked) stakeholders to involve early
Legal (ability to form entities, share risk, waive rights)
Finance/Insurance (liability issues)
Executive (PR impacts of corporate actions)
How and when to involve
At initial project organization/feasibility meeting
Contract structure and risk mitigation can affect fundamental
aspects of procurement process
Whether a PPA is right for the agency, PPA size and duration,
favored provisions, types of owners desired by agency, etc.
Ask for each solar bidder’s standard PPA contract during RFP
process and for its flexibility in meeting agency’s legal
requirements
There can be significant differences among bidders in these areas
Consider having Legal integrated into bid review at some level
Issue # 3: Understanding SPEs and
Other Contractual Risk Issues
41
Commencement
“Synchronous Operations”
Successful completion of construction
and testing of the Facility
Facility has synchronized with Buyer’s
distribution system
42
Commencement
Seller has determined in accordance with
Prudent Electric Industry Practice that the
Facility is ready to deliver the Energy to
the Delivery Point in accordance with the
provisions of this Agreement
Written notification
43
Standard of Care
“Prudent Electric Industry Practice” Practices that, at a particular time, in the exercise
of reasonable judgment in light of the facts known or reasonably should have been known at the time a decision was made, could have been expected to accomplish the desired result consistent with good business practices, reliability, economy, safety and expedition.
Generally conform to operation and maintenance standards recommended by the Facility’s equipment suppliers and manufacturers, applicable Facility design limits and applicable Governmental Approvals and Applicable Law.
44
Standard of Care
“Prudent Electric Industry Practice” Not intended to be limited to the optimum
practice, method or act to the exclusion of all others, but rather to include acceptable practices, methods or acts generally accepted.
Includes, but not limited to, practices engaged in or approved by a significant portion of the U.S. electric power generation industry.
45
o Wind PPAs
o Solar PPAs
o Geothermal PPAs
o Biomass PPAs
o Landfill Gas PPAs
Overview of Key Characteristics of
Renewable Technologies
46
o Wind
o Intermittent resource
o Incremental project size
o No fuel supply contracts
Key Characteristics
of Wind Technologies
47
Intermittent resource
• “As-delivered energy” (timing/amount of delivery not guaranteed; no capacity/reliability value)
• Payments for energy only
time-of-day/seasonal pricing
• Curtailment/transmission constraint issues
allocation of risk
• Transmission instability/upgrade costs
Wind PPAs
48
• Availability/output guarantees
ramp-up, rolling average, annual caps
wind-adjusted
• COD issues
no performance testing pre-COD
Post-COD warranties are key
Wind PPAs (cont’d)
49
Incremental project size
• What is project size?
project phasing for large projects
shared facilities
• When is COD?
RECs available for financing
• RECs: need to define ownership and examine ability to separate them from delivered electricity – state law issue
Wind PPAs (cont’d)
50
RECs
PPA Damages should include tax and
other non-cash losses
No fuel supply contracts
• No fuel pass-throughs
• Force majeure issues
Wind PPAs (cont’d)
51
Solar
• Intermittent resource
• Incremental project size
• RECs available for financing
• No fuel supply contracts
• Current paradigms: customer PPAs and
utility PPAs
Key Characteristics
of Solar Technologies
52
Intermittent resource
• Same issues as wind PPAs
Incremental project size
• Same issues as wind PPAs
No fuel supply contracts
• Same issues as wind PPAs
Solar PPAs
53
Current paradigms: customer (retail) PPAs and utility PPAs
• Customer PPAs: rooftops and parking lots
one option for financing project
leaves ownership, operation issues to
seller
end of term/transfer of underlying real
estate issues
• Utility PPAs
mimics traditional wind PPA structures
Solar PPAs (cont’d)
54
Geothermal
• Non-intermittent resource
• Resource degradation
• Station service requirements
• RECs available for financing
Key Characteristics of
Geothermal Technologies
55
Non-intermittent resource
• Receive both capacity payments and
energy payments
• Must demonstrate capacity and other
performance measures at COD and
during contract (usually annually)
Geothermal PPAs
56
Resource degradation
• Must be incorporated into capacity/output
guarantees
• Force majeure for unexpected depletion
of resource
Geothermal PPAs (cont’d)
57
Station service requirements
• Can be significant in order to use
geothermal resource, need to ensure
associated RECs run to project
RECs available for financing
Geothermal PPAs (cont’d)
58
Biomass
• Non-intermittent resource
• Fuel shortage and supply issues
Key Characteristics of Biomass
Technologies
59
Non-intermittent resource
• Same issues as geothermal PPAs
Fuel storage and supply
• Supply logistics extremely complex
• Shortage requirements can be
burdensome
• Ability to claim force majeure for third
party supplier acts/omissions critical
Biomass PPAs
60
Landfill Gas
• Non-intermittent resource
• Resource degradation
• RECs available for financing
Key Characteristics of Landfill and
Digester Gas Technologies
61
Non-intermittent resource
• Same issues as geothermal PPAs
Supply Issues
• Logistics can be extremely complex
• Shortage requirements can be burdensome
• Ability to claim force majeure for third party supplier acts/omissions critical (quality and/or quantity)
Resource degradation for LFG
Landfill and
Digester Gas PPAs
62
Strategies For Negotiation
What is the Market for Renewable Energy?
RPS and other Required Standards
Green Building/LEED Certification
Voluntarily Green
Why does the lessor/seller/grantor what to contract with you?
Royalty
Recipient of clean energy
63
Strategies For Negotiation
Initial Stage of Development vs. Established Facility
Who is the Off taker? And will the Off taker help you?
IOU
Local power company
Private User
Long Term v. Short Term - Guessing Future Markets
REC prices
Energy Prices
64
Post-PPA Discussion
The slides that follow address project finance considerations that are not PPA-specific.
65
ESP Agreements
Energy Service Provider (“ESP”)
contracts directly with its customers to
provide electric supplies
Used in jurisdictions that do not allow
direct access service
66
ESP Agreements
Power producer sells power to ESP which,
concurrently, sells power to power
purchaser, most often at same price
ESP is often signatory to PPA, as buyer,
as well as to separate ESP agreement
with ultimate customer
ESP agreement terms must match those
of PPA
67
Project Documents o Good Standing Certificate
o UCC Searches
o Certified Copies of Insurance Policies
o Balance Sheet and Financial Statements
o Project Budget
o Project Schedule
o Notice of Establishment of Accounts and Account
Numbers from Depository
o Notice to Proceed
o USDA Loan Guarantee Materials
o USDA Grant Materials
68
Land Contracts
Purchase & Sale Agreement
Site Lease
Real property interest
Ability to obtain title insurance/lender
security Leasehold Mortgage/Fixture Filings
69
Land Contracts (con’t)
License
Personal property interest
Sublease or sublicense
Often used for tax purposes
Access, ROW and Easement Agreements
typically non-exclusive
supply
operational
70
Lease vs. License
Lease is real property interest
Can be secured by a leasehold
mortgage
Eligible for leasehold title insurance
Notice of lease can be recorded
License is personal property interest
Contractual right only
Can be secured by UCC lien
71
Mortgages
Mortgages can be granted on any real
property interest
- Fee ownership
- Leasehold interest
Underlying interest must be recorded
in official records in order to encumber
72
Financing and Security
Documents
o Financing Agreement
o Promissory Note
o Depository Agreement
o Security Agreement
o Membership Interest Pledge Agreement
73
Financing and Security
Documents
o Real Property Security Documents
o Inter-creditor Agreement
o Consents
o UCC-1 Financing Statement
o Guaranty Agreement (in favor of
Lender)
o Forbearance and Non-disturbance
(SNDA) agreements
74
Supply
Solar & Wind are Free
Easement to ensure non-interruption
Lease or License
e.g. landfill gas, geothermal
Purchase Agreement
e.g. biomass, digester gas
75
Operations
Construction Agreements
Operation Agreements
Maintenance Agreements
Interconnection Agreements http://www.ferc.gov/industries/electric/indus-
act/gi/small-gen/agreement.doc
Transmission/Distribution Agreements
76
Construction, Operation &
Maintenance Agreements
Turn-key facility vs component
construction
Well field O & M
Pipeline O & M
Turbine O & M
PV O & M
77
Engineering, Procurement &
Construction Agreement
Scope of Work/Project Schedule
Compensation
Terms of Payment
Warranties
Indemnification
Insurance
Termination and Cancellation
Completion and Transfer
Guarantees
Dispute Resolution
78
Permits
Building Permits
CUPs/LUPs
Environmental
Special Disposal Requirements
Emissions
Generator/USTs
79
Permit Process
What is the timeline for issuing permits?
Do all timelines match those of leases,
PPAs and loan documents?
Are public hearings required?
Are hearings necessary to gain public
support?
80
Thanks for Listening!
LICENSE: The text of the foregoing is licensed under the Creative Commons Attribution http://creativecommons.org/licenses/by3.0. Pursuant to this license, you may copy this PowerPoint presentation as long as you give attribution.
DISCLAIMER: The information contained in this presentation has been prepared by Cooper, White & Cooper LLP (“Cooper”) and is not intended to constitute legal advice. Cooper has used reasonable efforts in collecting, preparing, and providing this information, but does not guarantee its accuracy, completeness, adequacy, or currency. The publication and distribution of this presentation is not intended to create, and receipt does not constitute an attorney client relationship
COPYRIGHT © 2014, Kristen Thall Peters & Darin Lowder. All rights reserved.
81
Cerritos • Fresno • Irvine • Pleasanton • Riverside • Sacramento • San Diego
Power Purchase Agreements
— Best Practices and How to
Avoid Pitfalls, Snafus and
Faux Pas…
Presented by: Bryce Chastain, Esq.
What is a Power Purchase Agreement or
“PPA”?
A Power Purchase Agreement (“PPA”) is a legal
contract between a power generator and a power
purchaser under which the power purchaser
purchases energy from the power generator.
83
Who are the Players in a Typical PPA?
1. Owner/Host — Almost anyone… Companies, Public Entities (i.e., City, County, School District, College, etc.)
2. Vendor/Provider (PFMG, SolarCity, etc.)
3. Financier (Constellation, Onyx, etc.)
4. Utility (PG&E, SoCal Edison, etc.)
84
Power Purchase Agreements
The Power Purchase Agreement (PPA) is one alternative to financing and owning an energy generating system.
Advantages:
- It offers the owner an opportunity to obtain power without paying upfront costs
- Owner usually doesn’t have to worry about system operation and maintenance.
- Provides 15-25 years of predictable, pre-set power prices.
85
Alternatives to
Power Purchase Agreement
1. Direct Purchase Model
2. Lease/Purchase Option
86
An owner can purchase a system outright or through a lease-purchase transaction utilizing a combination of bonds, credits, grants, loans, rebates and cash reserves
Advantages:
- Increases the value of the owner’s facility
- May make better financial sense
Disadvantages:
- Requires operations and maintenance expertise
- Retains all costs and risks of ownership, i.e. component failures
Alternatives to
Power Purchase Agreement
87
Top 10 Mistakes Owners Make When
Pursuing Power Purchase Agreements
10. Failing to Comprehend their Actual Power Usage Before Pursuing an Alternative Energy Solution
– Energy Audits and Assessments
– Free and low costs assessment resources
– The California Energy Commission can provide free or reduced cost assessment if certain conditions are met (http://www.energy.ca.gov/)
– The Center for Sustainable Energy can also provide free or reduced cost assessment (http://energycenter.org/)
– The California Energy Commission's existing Energy Conservation Assistance Account Program (ECAA) makes low interest loans available for investments in energy efficiency and carbon emissions reduction
– Local utilities have various programs that provide free or subsidized energy auditing
88
Top 10 Mistakes Owners Make When
Pursuing Power Purchase Agreements
• Deliverables from the Owner
–Historical Utility Usage and Cost Data
–Projected Future Energy Requirements – Master
Planning Issues
• Access to Records and Sites
89
Top 10 Mistakes Owners Make When
Pursuing Power Purchase Agreements
9. Failing to implement energy efficiency
measures prior to determining system size
– The more energy efficient your facilities are, the
smaller (and less expensive) the system will need to
be.
90
Top 10 Mistakes Owners Make When
Pursuing Power Purchase Agreements
Energy Efficiency Contracts
• Use Results of Energy Efficiency and Projected
Energy Requirements Analyses
• Analyze Cost of Solution
• Analyze Cost of Energy Post-Solution
91
Top 10 Mistakes Owners Make When
Pursuing Power Purchase Agreements
8. Failing to make prospective vendors compete by utilizing a competitive RFQ/RFP process
– Don’t just use the first vendor that approaches you. In this highly-competitive environment, you’re better served in requiring the vendors to compete for your business.
– Don’t worry about having every last detailed engineering aspect sorted out prior to the RFP. Let the vendors provide different options to give you ideas on how best to structure the transaction.
92
Top 10 Mistakes Owners Make When
Pursuing Power Purchase Agreements
7. Failing to retain appropriate expertise
The Right Power Company
Whether it’s solar, wind, geothermal or
other alternative energy source, consider
the company behind it:
- Corporate History
- Record of Past Performance
- Good References
93
Engineer/Construction Manager
- Installation Experience
- Relevant Private or Public Project Experience
- Successful past collaboration with Alternative
Energy Provider and Installers
94
Financial Consultant
- Aggressive and independent verification of
financial and cost escalation assumptions
provided by Vendor
- Experience with financing of similar systems
under PPA and Direct Purchase Models
95
Legal Consultant
- Experience with all phases of project, from
initial consideration, through RFP selection
process, through PPA negotiation and
construction and operation of project
- Demonstrated ability to effectively coordinate
owner’s team
96
Environmental Consultant
• Familiarity with the particular environmental
conditions where system installation is
proposed
• Past experience with applicable
environmental regulatory schemes and their
impact on the particular energy source and
apparatus (i.e., NEPA, CEQA, etc.)
97
• Assembling the right team with the right expertise is critical to insuring you obtain the best arrangement possible.
• Alternative energy PPAs involve complex financial, legal, environmental and construction considerations.
• The vendor’s job is to look out for the vendor. Who’s looking out for you?
Top 10 Mistakes Owners Make When
Pursuing Power Purchase Agreements
98
Top 10 Mistakes Owners Make When
Pursuing Power Purchase Agreements
6. Failing to obtain aggressive energy production guarantees
Guarantees That Preserve the Economic Benefit Enjoyed By The District
- Minimum Production Guarantees
- Metering Accuracy Guarantees
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Top 10 Mistakes Owners Make When
Pursuing Power Purchase Agreements 5. Failing to conduct proper project analysis under
the applicable environmental and other legal and regulatory schemes
Many PPA projects generate light, wind, or heat and their installation in some cases may displace or harm threatened wildlife species.
In some cases, failing to conduct appropriate environmental review leaves the project vulnerable to legal challenge.
For public owners, funding source may dictate a specific and/or competitive process to qualify for funding, i.e., Proposition 39 in California
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Top 10 Mistakes Owners Make When
Pursuing Power Purchase Agreements
4. Accepting a PPA term that is too long.
As technology in the advances, we will see
more efficient and less expensive equipment,
which in turn, will have a significant impact
on the current economics of the PPA.
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What were cell phones like
25 years ago?
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How About Computers?
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Top 10 Mistakes Owners Make When
Pursuing Power Purchase Agreements
3. Failing to Insure that the anticipated cost to the Host of the energy services will be less than the avoided costs if the services were not utilized.
In some states, like California, this is a legal requirement for publically-owned facilities that wish to contract outside of a competitive low-bid procurement process.
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Top 10 Mistakes Owners Make When
Pursuing Power Purchase Agreements
2. Failing to consider direct purchase as an alternative to a PPA
Because of the falling costs of some systems and the availability of credits, rebates, grants and opportunities for selling bonds and obtaining other financing, the economics of ownership may be a preferred option for.
The right financial consultant can help you understand the “true” cost difference between ownership and a PPA.
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Top 10 Mistakes Owners Make When
Pursuing Power Purchase Agreements
1. Failing to look into alternative power
arrangements now…
Given the long-term savings opportunities
achieved through lower system costs coupled
with the availability of rebates, credits and
grants, given the current challenging fiscal
environment, owners should look into
alternative energy solutions as a part of its
long-term fiscal strategy.
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Do’s and Don’ts for Approaching
Public Owners for PPA Projects
DO’S
- Understand the legal framework under which the owner
has to operate in pursuing such projects
- Get to know the particular challenges unique to public
owners in their pursuit of alternative power
arrangements
- Figure out the local politics around the issue
- Understand who the decisionmakers are and how they
make decisions.
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Do’s and Don’ts for Approaching
Public Owners for PPA Projects
DON’TS
• No hard sells — Don’t come across as a used car
salesperson
• No end run around the decisionmakers
• No violation of conflict of interest laws — i.e., taking
board members or council members out on golf
junkets then failing to report
• Failing to understand the framework (and restrictions)
inherent in public works projects
•
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For questions or comments, please contact:
Thank You
Bryce Chastain (625) 227-9200