By: Michael J. Lipari, Esq.
Princeton Borough, Princeton Township and Princeton Regional Schools have contracted with the New Jersey consulting firm Gabel Associates to provide a feasibility study to explore the potential for solar installations throughout the municipalities. If all goes well, the entities will enter into a power purchase agreement (“PPA”) with a solar developer to implement the plan.
According to the Princeton Packet, the study will focus on ground and roof mounted solar systems at several locations throughout the municipalities including the Sewer Operating Committee landfill site on River Road. The current proposal provides that, “a solar developer would finance, own, design, install, commission, operate and maintain the solar facilities.” The municipalities and School District would benefit from reduced energy costs through a long-term PPA with the solar developer.
A PPA is a contract between an electricity generator/provider and a power purchaser for the purchase of electricity generated from a facility. PPAs are most commonly used in the generation and sale of solar and wind energy. These agreements typically range from 15 to 25 years, at which time the project may be renewed, modified or abandoned. The PPA is critical to a solar project because it secures a long-term revenue stream to the seller through the sale of energy to the purchaser, which is often the host of the facility. The PPA sets forth the terms of the electricity rates to be paid to the seller, which may be flat or escalate over time.
Once the seller can determine its revenue stream, it can obtain the necessary financing to move forward with construction of the infrastructure. Currently, there are federal tax credits available that will make the investment worthwhile for the seller. Qualifying tax credits obtained as a result of the Emergency Economic Stabilization Act of 2008 and the American Recovery and Reinvestment Act of 2009 can be combined with certain tax exempt financing to reduce the investment required to develop the project.
This exciting news for the Princeton community comes just one month after Princeton University announced its plan to develop a 27-acre solar installation system that could produce 8 million kilowatt-hours per year.