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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

[email protected]

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

[email protected]

www.ballardspahr.com

mailto:[email protected]

http://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


• 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


• 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


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


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


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


Engineering/Facilities

Finance/Insurance

Third-Party Project Provider


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


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


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


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



40


Legal (ability to form entities, share risk, waive rights)

Finance/Insurance (liability issues)

Executive (PR impacts of corporate actions)


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



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


50

RECs

PPA Damages should include tax and

other non-cash losses

No fuel supply contracts

• No fuel pass-throughs

• Force majeure issues


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


No fuel supply contracts


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


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


• Fuel shortage and supply issues

Key Characteristics of Biomass

Technologies

59


• 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


• Resource degradation


Key Characteristics of Landfill and

Digester Gas Technologies

61


• 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


— 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


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



• Deliverables from the Owner

–Historical Utility Usage and Cost Data

–Projected Future Energy Requirements – Master

Planning Issues

• Access to Records and Sites

89



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



Energy Efficiency Contracts

• Use Results of Energy Efficiency and Projected

Energy Requirements Analyses

• Analyze Cost of Solution

• Analyze Cost of Energy Post-Solution

91



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



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?



98



6. Failing to obtain aggressive energy production guarantees

Guarantees That Preserve the Economic Benefit Enjoyed By The District

- Minimum Production Guarantees

- Metering Accuracy Guarantees

99


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

100



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.

101

What were cell phones like

25 years ago?

102

How About Computers?

103



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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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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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

[email protected]