Map of State 3rd Party PPA Rules

Date: 9 May 2012 | posted in: Energy, Energy Self Reliant States | 2 Facebooktwitterredditmail

In lieu of smarter policy, schools, libraries, and city buildings hoping to install solar power have to resort to complex public-private partnerships to access federal tax incentives.  One common strategy is the power purchase agreement (PPA).

In essence, a PPA allows the public building owner to buy solar electricity on contract from a third party (instead of the utility), who installs and maintains the solar array on the building roof or property.  It’s similar to a lease, but it allows for the capture of both the 30% federal tax credit and accelerated depreciation.

However, in states with a regulated electricity market (about thirty), utilities have a monopoly over electricity service and may have  standing to oppose PPAs on the grounds that it violates their legal monopoly.  A recent battle in Iowa illustrates the problem.

The good news is that the PPA arrangement is legal or at least unchallenged in most U.S. states.  But it’s an area where clarity will be increasingly important as solar grid parity approaches.

John Farrell
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John Farrell

John Farrell directs the Energy Democracy initiative at the Institute for Local Self-Reliance and he develops tools that allow communities to take charge of their energy future, and pursue the maximum economic benefits of the transition to 100% renewable power.