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Solar Schools PPA
A very low risk proposition with out investing a dime.

Third-party financing is particularly useful in helping non-tax-paying entities, such as school districts, implement solar projects that cannot otherwise benefit from federal incentives. Using solar power purchase agreements (PPAs) districts can host on-site solar systems without any up-front capital investment.


 

Power Purchase Agreements (PPA) 101

What is a PPA?

A power purchase agreement (PPA) means that the school district only buys the solar electricity generated by one or more solar systems installed by a third party at one or more of the school district facilities. Notice that school district does not buy any equipment. It is just a contract to supply solar electricity at a know price for the long term.

Does it make sense?

Under the terms of a solar PPA, a third party owns, operates, and maintains the solar system and sells 100% of the solar electricity generated to the school district at a locked price for a term of up to 25 years. The federal tax incentives available to businesses - the investment tax credit (ITC) and accelerated depreciation - can offset 50% or more of the installed cost of a solar system. The PPA provider can then pass a portion of the savings on to the school in the form of a lower PPA cost of electricity.


Is it cost effective?

As a result, the third-party ownership model can be a cost-effective arrangement for many public entities that are interested in pursuing solar but lack access to the necessary funding or prefer to forego ownership for other reasons. Additionally, buyout options can be negotiated into the contract for the host to purchase the system sometime after 6 years and up through the end of the PPA term at the solar system's fair market value.

Advantages of Third-Party Ownership




01


Ability to benefit from the Federal Investment Tax Credit (ITC).

Commercial entities can benefit from the 30% ITC. By lowering the cost of the project to the solar developer and its investors, a lower solar electricity price can be offered to the school districts.




02


Ability to benefit from accelerated depreciation.

Solar installations can be depreciated over a 5-year period rather than over the expected useful life, which is much longer. The impact of depreciation usually is greater losses for the investors, which then are used to offset other taxable gains. Like the ITC, the host benefits from accelerated depreciation in that it could allow for a lower price per kilowatt-hour of electricity in the PPA.




03


No up-front capital investments.

Although installed costs are declining, the required initial investment to install a PV system is still significant, even after rebates. The cost of a 1MWp solar system on a middle school, for example, can exceed $2,500,000. Using the third-party PPA model, it is the solar developer and investors that finance and own the system, thus eliminating the need for the school district to invest its own capital into the project.




04


Locked electricity prices for 20+ years.

Power purchase agreements are structured with a locked price per kilowatt-hour of electricity that is adjusted annually with a pre-determined inflation rate, also known as escalator, for the length of the contract. The kWh price is most likely competitive with the utility rates that a school is currently paying.




05


Operation and maintenance responsibility is handled by the system owner.

The system owner operates and maintains the solar system, removing this burden from the school district. This includes replacing the system's inverters should they fail after the standard 10-year warranty but prior to the end of the PPA term.




06


Buyout option provides ownership potential.

Often PPAs are structured so that the school district has the option to buy the system at various points during the life of the PPA. The first option to buy the system takes place sometime after year 6, because changing ownership before then causes significant tax penalties. The buyout price is typically calculated as the greater of fair market value of the solar system or the discounted cashflow of the remaining payments in the PPA term.




07


Risk avoidance.

The risk of electricity production is borne by the PPA provider. The school district only is obligated to purchase what the system produces. Additionally, the PPA provider commonly guarantees a certain level of minimum production of electricity, compensating the school district for any shortfall.

Disadvantages of Third-Party Ownership




01


No free electricity.

Although the PPA price will ideally be less than retail utility prices, the school district does not own the solar system; therefore, it will pay for the solar electricity generated at the facility. There isn't a feeling of free electricity from the sun when the distric owns the solar system outright.




02


No ownership of the "clean" energy attributes produced by a PV system.

Whoever owns the system claims its environmental benefits, unless those benefits have been sold to another party such as the utility.




03


School districts are not familiar with PPAs

Because a PPA is a new financing tool, school districts need to allocate resources and time have to understand it. To recoup some of these transaction costs, some PPAs reimburse the school district for legal expenses incurred in negotiating the PPA. This could be a way to develop internal support for a transaction.




04


Large solar systems drive costs down

Placing numerous small solar systems on many school buildings is unlikely to be cost effective. Ideally, for example, a high school or maintenance facility that can host a system as large as 1 MW to anchor a system-wide PPA project could be required. In the absence of a large installation, costs will increase.




05


Facility access by third parties is necessary.

The developer and its subcontractors need access to the site to install the solar system and then to maintain it over time. For school districts this often must be coordinated so that students and faculty are not disrupted during the installation process.

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Free solar installation

A free solar installation is included with a solar lease or PPA. In exchange you buy the solar electricity generated saving money from day one. This is one option. There isn't a one size fits all, and you actually have several options to go solar. We would like to help you determine which one is right for you. Here are your options:



01



Onwership - cash

No different than any other major home improvement like putting in a deck or a home remodel, you can buy the solar system with cash and let the solar system generate free electricity for the rest of your life. If you want to maximize the return of your investment, you have the money available and are willing to use it towards this purpose, you should seriously consider buying.



02



Ownership - Finance

Similar to cash purchase, you own the solar system and once it is paid, it will generate electricity for the rest of your life. There are several options to finance your system include equity financing, unsecured financing and in certain counties we have a property tax financing (PACE).



03



Leasing or PPA

In the past we didn't recommend leasing until we put this program in place. This is the best program in the country. We install a solar system on your home with zero out of pocket expense. You can make a small monthly payment that is less than the utility payment.



04



Do nothing

Continue with the status quo is your most expensive option. Pick any of the other 3 options and you will save money. Electric rates have gone through the roof over the last 25 years. More regualtion is imposed on utilities and the grid is outdated, guess who will pay for that? You.

The governments pays 30% of the cost

These are real dollars. Basically as long as you pay federal income taxes , the federal government pays for 30% of the cost of the system.





Federal Tax Credit or ITC

The credit is equal to 30% of expenditures, with no maximum. Eligible solar energy property includes equipment that uses solar energy to generate electricity.





Use it against alternative minimum tax

The Solar Tax Credit gives you the ability to take the credit against the alternative minimum tax. There is no credit limit for solar-electric systems. Another important feature, is that the home served by the system does not have to be the taxpayer's principal residence.





What qualifies for the credit?

The federal tax credit was established by The Energy Policy Act of 2005. The federal tax credit for residential energy property applies to solar-electric systems, solar water heating systems, fuel cells, small wind-energy systems and geothermal heat pumps.





Carry the credit forward

If the federal tax credit exceeds your tax liability, the excess amount may be carried forward to the succeeding taxable year. The excess credit may be carried forward until 2016.

Paying $200+/month for electricity?

With power cost continuing to go through the roof, it might be a good time to consider solar. I am sure your air conditioning has been running for most of the year and the bill is never any fun to get.
Can solar lower that electric bill though?





No need to suffer

You can slash your bill without sacrificing your air conditioning and suffering through the hot summer months.





The government will pay for 30% of the cost

A home solar power system offers you free, clean, renewable energy. Plus, you may qualify to have the government pay you $20,000 or more to install a medium-size residential solar power system.





Here is a real example

A family of five living in a 3,200 square foot home with 3 refrigerators, 3 computers, a 220V well and lots of landscape irrigation just received a PG&E bill for only $4.61.





Solar is going mainstream

This dream is a reality for many families who have invested in their homes by installing a residential solar power system.

How quickly can you see the savings?

You can see savings from day 1. Once we design, pull the permits, install the equipment and turn on the system, your meter can start to spin backwards. Whether you lease or buy it, from day 1, the monthly investment on the system is less than what you are paying your local utility. In other words, you are ahead of the game.

Should I own a solar system?

We are only one of the few companies that offer purchasing and leasing. Ownership is always good because once you own the solar system, the electricity generated is free for the next 25 years or more. So you purchase a solar system today and for the rest of your life you get free energy from the sun.

WATCH THE PROS AND CONS OF OWNING

  • Freedom to choose your solar panels

    When you buy you choose what solar panel and inverter to use unlike when you go with a lease.

  • Own the equipment

    You can buy it with cash or finance it. We have multiple options.

  • 25 year factory warranty

    That's right! The output of the panels is guaranteed by the manufacturer for 25 years.

  • You get all incentives

    Because you are the onwer, you will receive the 30% tax credit and any other incentive available to you.

MYTH:
Cost is too high and payback too long

We have helped thousands of homeowners go solar, but unfortunately most people have a miss conception that solar energy is too expensive and the payback is too long. Today this is not the case. Solar system costs are at historical lows and electric rates are at historical highs. THERE IS NO BETTER TIME TO GO SOLAR THAN NOW. The industry is installing more systems than ever before because the numbers make sense. People have options. #1 they can buy a system or they can lease one with advantages to both.

Utility Rates Have Gone Through The Roof

Electricity costs have skyrocketed over the last 10 years or so. Below is the comparison of Tier 4 Residential rate for Pacific Gas and Electric (PG&E), similar with other utilities like Southern California Edison (SCE).

  • Fast Solar Adoption

    The solar industry has grown 1000% since 2007 because the costs have gone down and therefore the numbers make sense.

  • Incentives are available

    Incentives are key to the adoption of solar. Take advantage while they are here.

  • Financing

    Today we have several options to go solar, including leases, cash purchases, and financing (equity and non-equity).

  • Costs are half than before

    In 2004 an average 3kWp solar system cost $27,000, today it costs less than half because the cost of the solar panels decreased as much, if not more.

Should I do a solar lease or PPA?

With a lease your solar installation cost can be Free and the leasing company owns the equipment. They maintain it and give you a production guarantee. In exchange you will make monthly payments for the term of the lease/PPA. Your savings are more than your lease/PPA payment

WATCH THE PROS AND CONS OF A PPA

  • Solar panels chosen for you

    The leasing company owns the equipment and therefore choses the equipment

  • Leasing company owns the equipment

    You can buy it cash or you can finance it and we have multiple options for your current financial situation.

  • Production warranty

    The output of the system is guaranteed by the leasing company.

  • Leasing company gets all incentives

    Because they are the onwers, they will receive the 30% tax credit and any other incentives available to you.

You can have an $5 electric bill! Here's how...

A K12SOLAR residential solar power system can SLASH your electric bill by collecting the clean and abundant rays of the sun while converting them to electricity to power your home (refrigerators, computers, TVs, DVDs, dishwashers, water pumps, air conditioning, etc.).

The solar power system is seamlessly connected to your electric company's grid. After dark, the house uses solar power stored in the grid. And in times of low demand and strong sun, it can even spin your meter backwards and sell electricity back to your electric company.

Considering going solar? let's talk.

One of our specialists can help you navigate all the options for your unique circumstances.

  • +1.916.871.0552

  • info at k12solar.com