Power Purchase Agreements Unlock Powerful Savings for Small Towns
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Beaches, rugged coastline, lakes, streams, ponds, vast tracts of public forests and mountains – life in New England is pretty idyllic… Except for our high electric rates. One of the few downsides of life in New England is facing some of the most expensive electric rates in the country.
A combination of a relatively low population spread out among a broad geographical region, an aging grid, and the phase-out of older, polluted plants has led to significant rate hikes over recent years. However, municipalities now have a solution: the sun.
Towns of any size can benefit from solar power’s unique combination of longevity and reliability. For many towns in Maine, New Hampshire, and Massachusetts, though, the upfront capital cost is too high. As well, since municipalities, like nonprofits, can’t access federal incentives, tax policy has also made it historically difficult for smaller towns to access solar energy.
Innovative Path to Solar
Now, New England municipalities that enjoy a small-town quality of life can make big moves toward sustainability with a Power Purchase Agreement (PPA) of solar electricity.
A PPA is an innovative finance tool that allows municipalities, schools and nonprofits to unlock free power from the sun to reduce taxpayers’ electricity costs and cut carbon pollution for no upfront cost. Towns enter into an agreement with ReVision Energy to purchase solar-produced power for a period of years at a lower-than-market rate, and we (or an investor) put up the upfront capital to build the project.
ReVision Energy, an employee-owned solar company, has completed over 100 PPAs, many of which are structured for municipalities. New England is already rich with examples of small towns taking advantage of what the future holds for all of us, and our region holds plenty more solar PPA potential.
Making an Impact
The PPA process begins with locating an investment partner who can monetize the federal incentives that towns can’t. For this purpose, ReVision has established an Impact Investors fund, composed of a group of third-party investors who want to hasten New England’s transition to renewable energy.
Impact Investors accept a modest rate of return on their investment to participate in this mission. Since Impact Investors are mission-driven, and not purely commercially-motivated, ReVision is able to offer lower PPA rates than the traditional model – delivering the greatest value for towns.
ReVision then designs, installs, operates and maintains the project for the town and the investor. ReVision is an expert solar installer, with over 7,000 residential and commercial projects across Northern New England. Solar has other complementary technologies that ReVision installs as well, such as heat pumps and LED lighting. LED lighting is a great way for towns to cut costs, since the technology uses far less electricity and lasts many times longer than traditional lighting.
Conserving Taxpayer Dollars
Once their solar array is online and producing power, the town begins purchasing electricity at a competitive, fixed rate for a period of up to 25 years. Utility rates are steadily increasing year over year, and in contrast, solar locks in a price for electricity over the life of the system – presenting the lowest 40-year cost of electricity of any source. Not only will their solar array be revenue-neutral, in the long run it will save taxpayers’ money.
After an agreed upon term, the town will have the option to purchase the system at a discount, often 50%-60% below the original cost – or they can continue to purchase the power. For towns that plan to purchase the system, a capital reserve account is often established.
If a small town’s electrical use is not large enough to fit the PPA model, there is an alternative. ReVision Director of Community Solar Initiatives Jack Ruderman explained, “The majority of small towns that I have spoken with have found it hard to come up with the upfront capital cost. For many of them the PPA is the better option, however, some towns don’t have enough electrical use to qualify for that financing. In that case, we work to connect them with resources like Community Development Finance Authority in NH to help them find a path to a low-interest loan to buy a turnkey solar array.”
New England Resilience
Whichever path fits best, there has never been a better time for towns in New England to go solar, as project costs have fallen by 75% over the past ten years. New England’s solar resource is strong, thanks to bright, cold winters and long summer days. Tapping into this resource is already producing undeniably positive results across New England. Solarizing our region’s small towns will bolster local self-reliance, create jobs and strengthen local economies.
Ultimately, solar offers a solution to the rising cost of electricity, and with a Power Purchase Agreement, New England municipalities can unlock the power of the sun.