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The Massachusetts Clean Energy Center (MassCEC) and the Department of Energy Resources (DOER) are requesting proposals from designated Green Communities interested in participating in the second round of Solarize Massachusetts. This program aims to drive community adoption of PV projects through localized marketing and installation efforts, which in turn will help reduce the installation costs of small-scale PV projects within SolarizeMass communities.

 Per MassCEC, those applicants that “demonstrate a clear and committed plan to increasing education and outreach around solar PV, as well as how to streamline the permitting processes around small-scale solar PV installations, will be highly competitive.”

MassCEC will be accepting responses until March 21, 2012, and a bidder’s conference is scheduled for February 27th.

More information about this solicitation can be found here.

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For those interested in wind, we are pleased to announce the public release of the Distributed Wind Site Analysis Tool (DSAT).  Built with funding from US DOE’s Wind Powering America Program and other sources, DSAT is a powerful new online tool for making accurate performance predictions for distributed wind energy projects.  Combining proven calculation techniques, computer modeling, and real-world performance data, DSAT is a valuable resource for landowners and communities considering wind power projects.

Please visit http://dsat.cadmusgroup.com to see DSAT for yourself.

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In a typical solar power purchase agreement (PPA), a community hosts solar PV on public rooftops or land and enters into a long-term contract for the purchase of electricity from the PV system(s). This third-party ownership model is the most common way in which Massachusetts communities procure solar PV systems (as opposed to outright ownership, for example).  While 2010 and 2011 saw a significant number of public solar PPA projects in the state, interest from solar developers has slowed in recent months. As a result, those communities just releasing RFPs for their solar project or reviewing bids from a recent solicitation may not see as many responses or as attractive prices as their predecessors, leaving many to wonder –what is going on in the Massachusetts community solar market?

Concern over Renewable Energy Incentives

Solar Renewable Energy Credits (SRECs) generated by PV systems (which communities typically give over to solar developers in PPAs) are an important revenue stream in a developer’s financial model for a PV project. Due to recent analyses of and concerns about the state’s SREC market, some developers are struggling to secure SREC contracts at sufficient prices. Without adequate SREC contracts, developers cannot offer attractive PPA rates to communities. Many solar developers active in Massachusetts have slowed or stopped activity in the state.

What does that mean for my community’s hopes for a solar PPA project?

Some developers and analysts believe that Massachusetts SREC prices will recover in six to nine months and that the pace of development will pick up again at this time. In the interim, communities may not see as much interest from the development community or receive attractive PPA rates (e.g., less than 10 cents) on proposed projects.

In order to take advantage of federal incentives that apply to solar projects developed in 2012, community solar project teams should use this period to prepare for a summer 2012 RFP (or RFQ) release, should the SREC market turn around at that time. Proactive teams can use online tools such as the National Renewable Energy Lab’s In My Backyard tool or PVWatts for preliminary resource assessments and to narrow down potential project sites. Using the results of these analyses, as well as details about the sites, solar project teams should begin preparing language for a RFP or RFQ. If more detailed site assessments are conducted, finding should also be included in the RFP.

If and when Massachusetts SREC market projections improve, the most proactive project teams will be first in line to do business with an eager solar industry.

What if we are currently negotiating a solar PPA?

Local officials and staff in Massachusetts are constantly contacted by interested solar developers. If your community is executing a PPA project at this time, be sure to get as much information as possible as possible about the SREC assumptions used in the developer’s financial model for your project. If a developer assumes more than $285 per megawatt-hour (28.5 cents per kilowatt-hour) for 10 years worth of SRECs, tread cautiously. Make sure that your PPA does not contain, for example, a “Change in Law” provision that allows the developer to renegotiate the PPA price with you during the contract term if their SREC assumptions do not hold (e.g., if the assumptions about SRECs used to price your project were out of date or overly optimistic). Also, if the solar developer will use SREC brokers to sell the SRECs from your project, encourage them to get regular updates from their brokers on available SREC contracts.

 

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The Commonwealth’s “Energy Smarts” blog is featuring the Town of Sutton’s Simonian Center for Early Learning Solar PV project – a Cadmus-supported project. At 202 kW, Sutton’s PV system is one of the largest municipally owned PV systems in the state. Cadmus provided owner’s agent services to the Town of Sutton through a technical assistance grant from the Massachusetts Department of Energy Resources (DOER).

See the blog post here.

Cadmus assisted the town throughout the development process, helping the town identify the most advantageous contract for the sale of Solar Renewable Energy Credits (SRECs) generated by the system (SRECs are tradable credits that represent the “greenness” of the solar electricity generated). A Cadmus master electrician inspected the completed project for compliance with electric code, ensuring that the system is safe for staff, students, and visitors at the Simonian Center. Finally, Cadmus organized a “virtual ribbon cutting” on behalf of the Town to celebrate the successful completion of Sutton’s PV project.

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Power Purchase Agreements (PPAs) are appealing to cities and towns for several reasons, and frequently because they require no upfront investment by the community. Rather, cost to the community (in addition to non-price factors) is the per kilowatt-hour (kWh) rate for electricity generated by the renewable energy system –the PPA rate. Different developers may propose significantly different PPA rates when responding to the same solicitation. However, PPA rates proposed that are noticeably lower than other bids received may be too good to be true. Inappropriate pricing can compromise the economic viability of these projects and increase risk to the community.

This diagram shows the relationship between parties in a typical, community-scale solar PPA in Massachusetts. Not all PPAs are structured in this manner.

When considering PPA price proposals, it is important to consider both the cost in cents per kilowatt-hour and how financeable the project is at the given PPA rate. PPA projects with PPA rate that is too low may suffer from significant delays as the developer seeks financing from financing parties looking for some return on their investment. Such delays and false starts waste the significant time investments that proponents make to introduce renewable generation in their communities.  In addition to lost momentum, incentives and other benefits (e.g., 30% U.S. Treasury Grant) that may be critical to a project’s economics may expire while the developer seeks financing.  Ultimately, if the developer is unable to secure financing, the project will likely fall apart.

 When examining PPA rates in cents per kilowatt-hour, bid evaluation teams should weigh the benefits of low PPA rates with potential risks:

  • Extremely low PPA rates and subsequent narrow margins can prevent conservative lenders from investing in the project.
  • In contract years 11 and beyond, the PPA rate should be high enough to fund operations and maintenance costs. That is, the PPA provider should have a financial incentive to continue to operate and maintain your system. PPA rates less than $0.02/kWh in years 11-20 should be considered cautiously.  If your community entered into such a contract, and the PPA provider abandoned the system, would your community be able to fund maintenance or decommissioning costs?

Low PPA rates may be workable in the context of large projects that will generate significant revenue for the developer, for example, through solar electricity sales to the community and SRECs. However, small and moderately sized projects –especially those with relatively high installed costs (e.g., lengthy interconnection runs, tree stumping required), may not be financeable at a low PPA rate.

Finally, many PPAs contain language that allows for developers to exit the contract prior to commercial operation if they are unable to find financing. Therefore, selecting a PPA rate that makes financial sense to your community, the developer, and their financing partners is important to helping all parties efficiently realize the benefits of renewable energy.

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This is the second post in our series highlighting “keys to success” for community renewable energy projects. In this post, we focus on how to build a savvy project team to ensure the success of your project.

Who should I consider for the project team?

To build a project team, consider the human capital in your community. Local resources may include volunteer energy committees, municipal energy coordinators, schools and universities, and private citizen groups. Invite interested parties to lend their expertise to the community’s clean energy efforts and create a strong team through collaboration.

Renewable energy projects can be very time-intensive. We have found that the most successful teams have at least one project champion. Ideally, this individual is able to manage the time requirements of the project, and they can organize and motivate a strong team of supporters. The project champion ensures that the project progresses even when other project team members are largely unavailable. They help identify solutions in the face of opposition. These individuals are the backbone of the project team, and they can be critical to a project’s success.

With their wealth of knowledge of municipal facilities, finances, and politics, local officials and staff are also valuable project team members. Facilities managers have detailed knowledge of potential project sites. Finance committee members can critically review price proposals. Teachers can help negotiate the most valuable educational “add-ons” to a project. Town counsel or city solicitors can provide a detailed legal review of contract specifics such as indemnification, representations and warranties, and default and remedies. While local officials and staff may have limited time, their expertise and ownership of a project makes for a very strong negotiating team.

Savvy volunteers often represent the majority of project team members. Consider energy and sustainability-focused disciplines at local academic institutions. Professors may be willing to lend their expertise, and students may have both valuable skills (e.g., financial modeling) and a flexible schedule. Solicit participation among your community’s retirees. Former small business owners, financiers, and engineers –especially those with an interest or experience in clean energy—frequently lead very effective project teams. Tap into existing local energy or climate change committees for those with demonstrated interest in municipal sustainability efforts.

Finally, look to regional organizations, such as regional planning commissions, and state and federal government for technical assistance programs. The U.S. DOE regularly presents technical assistance webinars for state, city, county, and tribal energy practitioners through their Technical Assistance Program (TAP). On September 28, 2011 at 2 p.m. EST, a TAP webinar will cover “Advanced Topics in Power Purchase Agreements,” including the complex terms and conditions of these contracts. The TAP blog provides an up to date list of technical assistance webinars and other resources for communities interested in renewable energy. In Massachusetts, DOER’s Green Communities program provides a range of resources and funding to cities and towns promoting energy conservation and renewable energy.

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One of the main determinants of whether an RFP for a Power Purchase Agreement (PPA) will attract qualified developers and advantageous bids is estimated total potential capacity. If this information is not available, site area or rooftop square footage can serve as a proxy.

More Space. More Attention.

When conceiving of a renewable energy project, cities and towns should look to aggregate potential sites. Whether or not a PPA makes sense for the community will depend on the total amount of capacity that is feasible. For example, some PV developers require 500 kW of PV potential before proposing a solar PPA. Others will not pursue landfill solar projects that are smaller than two (2) MW. By aggregating as many rooftops and open spaces as possible in your project RFP, you will attract more vendors and capture economies of scale.

Whether conducting your own due diligence or investing in site assessments, your RFP should ultimately focus on quality sites. Buildings with aging roofs, for example, should be set aside for future phases. Those with many rooftop penetrations and little usable space should similarly be deferred.

 If publicly-owned buildings and open spaces are very limited, look elsewhere. Consider partnering with a neighboring municipality or other public entity in the region (e.g., schools, hospitals). This may be especially helpful where the potential partner has experience with renewable energy projects. Together, you may receive bids that neither could have attracted alone.

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