By Ivy MainGuest Blogger Ivy Main has been an advocate for renewable energy with the Sierra Club since 2007. A lawyer by training, she lobbies extensively in the General Assembly for stronger clean energy policies and writes a regular blog, Power for the People VA, about energy policy in Virginia. She was the lead author of the Virginia Chapter’s 2010 report, Power Failure: How Virginia is Losing the Competition for Clean Energy Jobs. Since 2012 she has also served at the national level as a member of the Sierra Club’s Beyond Coal Campaign leadership team.
Faith communities, colleges, schools, local governments and non-profits will find it easier to “go solar” under a law that takes effect in Virginia on July 1.
Eligible customers will be able to install solar panels or wind turbines with little or no upfront cost, paying only for the electricity the systems provide. This arrangement, known as a third-party power purchase agreement (PPA), has been the driver for most of the solar projects in the U.S. in recent years, but prior to this year utilities had blocked its use in most of Virginia.
The new law creates a two-year pilot program allowing customers of Dominion Virginia Power to install projects as large as 1 megawatt (1,000 kilowatts) using PPAs financed by private companies. Projects must have a minimum size of 50 kilowatts, so the program can be used by many commercial customers but excludes homeowners, whose solar PV systems more typically fall in the 4-to-8 kilowatt size.
When most people think about using solar energy, they picture a customer buying solar panels from a company that installs them on the roof or elsewhere on the property. The customer owns the solar system and the electricity it produces. The upfront cost is high, but the solar panels produce free electricity for the next 25 years or more.
This ownership model is straightforward, but it requires a large outlay of cash to buy the solar system, something many customers can’t manage. A 30% federal tax credit on the cost of the system reduces the expense, but only for customers whose tax liability lets them take the full tax credit. If the customer is tax-exempt, like a church, college or non-profit, the tax credit isn’t available.
For nonprofits, a better way to buy solar power is through a “third party power purchase agreement,” or PPA. In the PPA model, the customer doesn’t own the system. There is no upfront cost and no maintenance responsibility. The customer simply buys the solar electricity the system produces.
With a PPA, the customer signs a contract with a for-profit company that will own the solar system and sell power to the customer. The company handles installation and maintenance of the solar system, and bills the customer only for cost of the solar energy the system produces. The company uses the federal tax credits to lower the cost of the system, passing along the savings to the customer in the form of a lower electricity price.
So with a PPA, the solar panels will still be on a customer’s property, but someone else owns them. There is no big capital outlay. All the customer has to do is pay for the electricity they produce. The terms of the PPA contract spell out the details: how much the solar electricity will cost, how billing is handled, and whether and how the customer can buy out the contract in the future.
Until recently, solar costs were high in states like Virginia that have no state subsidies or other incentives. But costs have come down steadily, to the point that the Federal tax credit alone is enough to make the systems economic – for those who can take the tax credit.
Nonprofits need to use the PPA model to get the benefit of the Federal tax credit, but in past years, some Virginia utilities blocked efforts to use PPAs. This year, the General Assembly enacted a pilot program to allow some PPAs in the area served by Dominion Virginia Power over the next two years. If the program proves popular, it may be extended – but nonprofits should get moving to be sure they can use this window of opportunity. It’s a great way to go solar with no upfront cost.
Ivy Main is the Virginia Chapter Renewable Energy chairperson.