Almost everyone wants to go solar; they just can’t afford it.
At least that’s the idea behind distributed power purchase agreements, in which companies pay the upfront costs of solar-power projects in exchange for a contract requiring the customer to buy the resulting electricity.
It’s the same business model that utilities use to buy power, now being used to help finance solar projects for individual buildings.
And Greentech Media analysts say its working.
Such power purchase agreements will account for three-quarters of U.S. commercial and industrial solar sales this year and next, according to a Greentech Media report slated for publication Thursday.
The forecast bodes well for companies such as MMA Renewable Ventures and SunEdison, which finance large projects once stifled by large upfront costs.
That type of sales dominance doesn’t surprise Paul Fenn, CEO of Local Power, which helps government agencies set up renewable-energy programs.
“I think it’s indicative of the doors that can be opened by finance in the renewable-energy world — not just solar,” he said of the forecast.
But the promising numbers in regards to power purchase agreements are by no means certain.
Solar sales’ upward mobility could be threatened by government incentives (or lack there of), according to report authors Jon Guice and John D.H. King. “The big question for the future is the status of the federal investment tax credit,” they wrote.
Earlier this month, the U.S. Senate fell one vote short of the 60 needed to call for a vote on a bill that would have extended renewable tax incentives for a year (see Renewable Tax Incentive Still At Risk). The vote was reminiscent of the energy bill debates in December, when the Senate twice failed — by only a few votes — to end filibusters on a bill that would have included $21.5 billion in renewable tax credits over the next decade (see Senate Rejects Green Incentives to Pass Energy Bill, Will Greentech Get Anything from the Energy Bill? and Portfolio Standard Could Get Cut From Energy Bill).
Despite all the hoopla, Guice and King are betting the federal government will pull through and renew the tax credit soon.
But for companies working to roll out power purchase agreements, another dark spot could be on the horizon.
Local governments tired of waiting for the federal government are spearheading their own power purchase agreements style financing to get more solar.
In November, Berkeley, Calif., made headlines when its City Council approved a loan program to pay the upfront costs of solar projects for business and residential property owners, who would pay back the loan over 20 years as part of their property taxes (see Berkeley to Finance Solar Installations). Other cities, as well as the state of California, are considering similar measures to help finance solar projects.
While companies like the MMA Renewable get money from major corporations, which can take advantage of the tax benefits of owning solar installations, government agencies can tap into tax-exempt, low-interest financing such as bonds, potentially cutting costs in half compared to commercially financed installations.
But Fenn doesn’t see the situation heading toward a throw-down.
When it comes to local efforts to finance more solar, not all aspects of a solar installation project will be tax exempt.
“And that’s where I see MMA and others coming in to play a role,” he said. “Cities don’t want to borrow money if they don’t have to.”
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