City of Sacramento Solar PPA

In 2008, the City of Sacramento, the capital of the leading solar state in the U.S., was awarded a $200,000 Department of Energy (DOE) Solar America Cities grant which was split up by the city to meet two different goals: (1) lead by example by attaining a solar PPA to bring the city closer to its renewable energy goal, and (2) break down long term barriers to onsite solar by installing four megawatts of generation on city property. Sacramento operates over 450 municipal buildings and facilities, ranging from libraries to community centers to city offices, giving managers a significant amount of potential roof space to work with. The City also wanted to install panels in highly visible community in order to promote the technology among Sacramento residents. From a dozen potential sites, the city eventually narrowed down the list and agreed on a final contract.

Barriers and Lessons

Despite support for the goals of the project, execution proved difficult. In particular, the significantly higher costs for renewables at the time made it more difficult to procure clean energy in an economically viable way. The city faced other barriers including a lack of financial capital and, as a non-taxpaying entity, the inability to qualify for tax incentives or other benefits.

To address these obstacles, the city decided to utilize the PPA model in which a third party would design, install, own, and maintain the planned solar systems while the city committed to buying all the resulting electricity. The other major benefit of a third party PPA was that they could take advantage of the 30% federal Investment Tax Credit (ITC) and other tax benefits like accelerated depreciation which the city would not have been able to exploit on its own. However, because the third party would own the solar panels placed on city property, Sacramento worried that they might not be able to fulfill their obligations over the multi-year contract or that the relationship may someday sour. These concerns were overcome by looking about the best practices of other cities who have used PPAs to finance solar projects and implementing what was learned. James Christensen, senior electrical engineer with the Department of Utilities in Sacramento, suggested, “the key to successful competitive bid process is to definitely do your homework ahead of time. You want to see what others have done.”

Another city concern was the quality of the businesses with which they would be signing a long term contract, so considerable time and resources were dedicated to determining whether or not the energy companies sending in bids were reputable and reliable. One of the ways they proved the quality of a company was through a survey which examined the quality of materials used, financial strength, number of years in business, liabilities, and developing into each company’s long-term forecast. Only after the assessment did the city feel they were in a position to make the best decisions.

While the City of Sacramento achieved its solar energy goals, the procurement of the PPA was a learning process. Looking at the best practices as well as the mistakes made by similar municipalities when bringing in clean energy was especially useful. In this situation, a combination of teamwork and independent studies proved essential as well as using a survey to address concerns about the quality of potential PPA bidders.