drafting and negotiating the optimal power purchase agreement
DESCRIPTION
Presenter: Sophie Akins, Best Best and KriegerTRANSCRIPT
Drafting and Negotiating the OptimalPower Purchase Agreement
Presented by:Sophie A. Akins, Esq.
Experience
• Since 2007, worked on about 15% of California
public agency solar projects.
• Clients include private companies, non-profits,
school districts, cities, counties, and special
districts, such as, water districts, joint powers
authorities.
Solar Project Delivery Methods
• Traditional
Approaches
(Design/Bid/Build,
Design-Build etc.)
• Power Purchase
Agreements
Power Purchase Agreements (“PPAs”)
Lease or
license ground or
roof space to 3rd
party Solar Company
PPAs (cont.)
• Company Constructs/Owns/Maintains
Solar Project
• Company receives federal tax credit (cash
grant), State rebate and depreciates
equipment
• Company sells electricity at negotiated
rate (with or w/o escalator)
• 20 or 25 year term
Public Agency Contracting
Government Code provides flexibility to
local agencies to procure PPAs
– Section 4217 et seq. requires:
• Board findings (usually in a Board Resolution)
• 2 weeks notice of Board meeting
– Section 53091: Qualifying Facilities Exempt
From City/County Permitting
PPA Case Study # 1: Valley Center Municipal Water District
• 1.2 mW Project by Solar Power Partners.
• 25 year term.
• $.093/kWh with 3% annual escalation rate; 2.5% escalation rate beginning on the 21st year.
• Construction Bond / Letter of Credit.
• VCMWD owns Renewable Energy Credits.
• Option to purchase System at end of term.
• System removed if not purchased at the end of term.
• Financial penalty if system underperforms.
• Project provides about 20% of the VCMWD electrical load at Betsworth Pump Station.
• District saves about $40,000 per year, at least $1 Million dollars over 25 years.
PPA Case Study # 2: Padre Dam Municipal Water District
• 861 kW Project (3 different meters) by SunEdison.
• Shade structures over RV storage lot allow District to increase storage fees.
• $.1835/kWh with 4% escalation rate.
• 20 year term with renewal option.
• Option to Purchase System after 6th year following Commercial Operation Date.
• SunEdison owns Renewable Energy Credits.
• Financial penalty if system underperforms.
• System (but not Mounting/Shade Structures) removed if not purchased at the end of term.
PPA Case Study # 3:
Rancho California Water District• 1.12 mW Project by SunPower.
• 20 year term with 5 year extension option.
• $.1115 cents per kWh w/ no escalator.
• Option to purchase System after 6th year following Commercial Operation Date.
• District owns Renewable Energy Credits.
• System removed if not purchased at the end of term.
• Project provides about 30% of the electrical load at the Santa Rosa Water Reclamation Facility.
• District saves about $152,000 per year, $6.7 Million over 20 years.
PPA Case Study # 4:
Dixon Unified School District
• 820 kW Project by Honeywell (constructed by SPG Solar).
• 20 year term with 5, 1-year extension options.
• $0.135/kwh, 3.5% escalator; $0.197/kwh cap.
• Honeywell reimbursed District for legal fees and consulting costs incurred by the District under the PPA.
• Option to purchase System after 6th year following Commercial Operation Date.
• Honeywell owns Renewable Energy Credits.
• System removed if not purchased at the end of term.
• Project provides about 80% of the high school’s electricity needs; saves about $1 Million over the next 20 years.
• Educational tool (Website monitoring of System performance)
PPA Case Study #5:
Worst Case Scenario• PPA price and escalation rate above industry standard.
• Ownership of Renewable Energy Credits is not addressed/negotiated.
• No deadline/penalties for completion.
• Technology/materials not clearly specified.
• Requires agency to pay for “estimates” of energy produced.
• No penalty/default for underperformance of System.
• Public agency payment of insurance or other costs triggers prevailing wages.
• Completion of CEQA not addressed.
• Requires agency to purchase System at end of term at pre-determined price.
Ensuring Your Project’s Success:
Enforcing Performance Goals
• Allocating Risk
– Environmental Compliance (CEQA)
– Completion Timing
– Bonds/Letter of Credit
– Insurance
– Buyout Clause
– Underperformance
• Monetary Penalty
• Breach / Default
QUESTIONS?
Contact Information
Sophie A. Akins, Esq.
Solar Attorney, Best Best & Krieger LLP
619-525-1332