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Federal On-Site Renewable Power Purchase Agreements

Federal On-Site Renewable Power Purchase Agreements

The Federal Energy Management Program (FEMP) provides project assistance to federal agencies interested in power purchase agreements (PPAs) for on-site renewable energy projects. A PPA is a financing option under FEMP's Renewable Energy Procurement (REP) Program.

FEMP assists agencies through the PPA evaluation and implementation process. On-site renewable energy generation projects can help agencies meet federal goals and requirements. PPAs are one method for implementing these projects.

Power Purchase Agreement Benefits

PPAs allow federal agencies to implement on-site renewable energy projects with no upfront capital costs.

A developer installs a renewable energy system on federal land or buildings. In exchange, the agency agrees to purchase the power generated by the system. These power purchase payments repay the developer over the contract term. The developer owns, operates, and maintains the system for the life of the contract.

Power Purchase Agreements at a Glance
Benefits Considerations
  • Minimal up-front capital costs
  • Ability to monetize tax incentives
  • Typically a known, long-term energy price
  • No operations and maintenance responsibilities
  • Minimal risk to the agency
  • Federal sector PPA experience still growing
  • Contract term limitations
  • Inherent transaction costs
  • Challenges with contract terms and conditions

 

Example Federal Projects

PPAs were used to fund these federal on-site renewable energy projects:

  • 14.2 megawatt (MW) photovoltaic (PV) array at Nellis Air Force Base
     
  • 2 MW PV system at U.S. Army Fort Carson
     
  • 2.3 MW from four PV systems at the National Renewable Energy Laboratory
     
  • 500 kilowatt (kW) PV rooftop system on the General Services Administration’s Sacramento Federal Building
     
  • 850 kW PV system at the U.S. Coast Guard Petaluma site

The renewable energy certificates (RECs) from all of the projects (except U.S. Coast Guard Petaluma) were sold by the solar project owner to improve project cost effectiveness. If high-value RECs are sold from a PPA project, low cost national replacement RECs must be purchased for credit toward the federal renewable energy goal and on-site project bonus. This is also known as a REC swap. However, when making claims about a project involving REC swapping or REC sales, an agency cannot claim to be using power generated by on-site solar, for example, if the RECs are sold or swapped for some other type of RECs, such as wind.

Sample Documents

Sample documents from completed PPA projects provide examples of requests for proposals (RFPs), land use agreements, and more. See sample documents for federal on-site PPAs. 

Getting Started

The following categories contain questions that can help federal agencies determine if a PPA is right for their proposed project and to gather the necessary background information. The answers to these questions should be collected prior to moving forward with a project.

Legality
Basic Project Information
  1. What is the proposed renewable energy project (type, location, size, estimated generation)?
     
  2. Do you have management approval for use of the land or roof?
     
  3. Where will the electricity be used? Will generation exceed load?
Basic Site Information
  1. What goals do you want to accomplish with this on-site renewable energy project (federal renewable energy, GHG emissions goals, electric rate cost stability, energy security, other)?
     
  2. What is your site’s electricity use (annual usage, peak demand, and aver- age demand)?
     
  3. What are your electricity costs (energy rate and demand charge)? Are rates differentiated (peak/non-peak or time-of-use)?
Project Cost Effectiveness
  1. Has a renewable screening/assessment been performed recently at your site? Does the project have an acceptable levelized cost of energy range based on the assessment assumptions?
     
  2. What incentives are available (rebates, tax treatment, etc.)? DSIRE outlines incentive information.
     
  3. Do you want to purchase the RECs along with the energy, or do you plan to purchase replacement RECs for credit toward the federal renewable goal?
Other Considerations
  1. Have you talked to your serving utility about this project? For example, what are the interconnection costs, timelines, queues, and other related issues?
     
  2. Who owns the land and pays the utility bill? Have you discussed the project with them?
     
  3. Other important considerations include contract length, National Environmental Policy Act requirements, and land use agreements (leases, easements, etc.).
Training
  • Federal On-Site Renewable Power Purchase Agreements: This FEMP eTraining core course provides federal energy and facility managers and contracting officers with knowledge to develop a PPA.

  • Introduction to Alternative Financing for Energy Efficiency and Renewable Technology: Webinar explains how to use alternative financing tools to plan and implement energy- and water-saving measures and renewable energy systems in federal facilities. Read the updated PPA portion of the webinar, which features typical PPA processes, benefits, challenges, and case studies.

  • Regulatory Considerations for Developing Distributed Generation Projects: Webinar explains regulatory implications for on-site renewable PPAs. View the webinar recording.

  • Regulatory Considerations for Developing Generation Projects on Federal Lands: Webinar explains the types of transactions that fall under the Federal Energy Regulatory Commission's jurisdiction, as well as pertinent federal laws and how they apply. View the webinar recording or presentation.

  • Introduction to Renewable Energy Project Finance Structures: Webinar explains the most common financing structures (sale leaseback, partnership flip, and inverted lease) used by project