Which States Allow Power Purchase Agreements (PPAs)? | EnergyLink
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Which States Allow Power Purchase Agreements (PPAs)?

states allow power purchase agreements

Power purchase agreements are the perfect solution for businesses with roof or land space, the desire to incorporate renewable energy, and are lacking capital necessary to get a project started. It is important to recognize which states allow power purchase agreements in order to get projects funded and off the ground.

What is a power purchase agreement?

A power purchase agreement is an energy project financing option typically for larger project applications, that involves a contractual agreement between a developer, investor and a host customer. The developer covers the energy system installation on the customers property including the designing, building, and acquiring of funds for all renewable systems installed. The capital comes from the investor. The host customer does not pay for the system installation. Instead they are purchasing the services they system produces at a fixed monthly rate usually lower than the retail rate a utility would charge.

There are different types of PPAs, such as solar PPAs and wind PPAs, for different types of projects. Projects that utilize a PPA financing structure are usually of a utility scale upwards of 1 megawatt. This is because projects of this size yield the best economic and performance results while providing more confidence for a potential investor.

Benefits of power purchase agreements

There are many benefits of PPAs for both host customers and developers and investors. PPAs allow businesses to avoid debt and reap the benefits of a renewable energy system on their property without directly owning the energy assets. They also offer financial benefits such as reduced, predictable utility expenditures and electric rates while only requiring a simple monthly or yearly payment. With a PPA, the host customer also does is not responsible for any maintenance or repairs the energy system might require. Renewable energy installation, especially solar, has also been known to increase property value. A PPA will also demonstrate the businesses commitment to the environment and help reduce their carbon footprint.

As for developers and investors there are numerous benefits as well. A PPA will provide a predictable cash flow from client electric service payments. They will also allow for the ability to redeem and earn all tax credits from systems installed in the project. For nonprofit companies who are unable to take advantage of tax credits available, there PPA contracts with tax-equity investors exist. These allow these investors to off take the tax credits in exchange for an equity investment. This investment will also decrease the cost to the customer. Depending on the state, there is also the potential ability to sell Renewable Energy Certificates.

There are many industries that could benefit from using a PPA model to finance their next renewable energy project. These industries include: enterprise corporations, universities, hospitals, cities and municipalities, public school districts, and industrial or manufacturing industries.

Which states allow power purchase agreements?

There are currently fifteen states that have enacted legislation to authorize and/or regulate PPAs. The following states allow power purchase agreements: Arkansas, Colorado, Connecticut, Delaware, Hawaii, Iowa, Michigan, Montana, Nebraska, New Hampshire, New Jersey, Oregon, Rhode Island, Virginia, Washington. To read the full statues for states that allow PPAs, head to the National Conference of State Legislatures website.

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Interested in power purchase agreements?

After learning which states allow power purchase agreements, If your business is within one of these states and within an industry that can benefit most from them, consider starting a PPA-funded project. EnergyLink is a team of experts in the design, build and funding processes of energy projects. Let us guide you through the potential economic impact of your project, project cash-flow and other useful data points to inform your project decisions. Click the link below to get started or speak to an expert at (866) 218-0380.

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