3 Nov

A Solar Power Purchase Agreement and the Switch from Natural Gas

The Florida Power and Light Company, has designed and built the first solar-natural gas hybrid plant. A great step towards going 100% solar!

The solar industry is currently experiencing rapid growth fueled by declining costs, economies of scale, favorable federal, state and local incentives for renewable energy, and advantageous solar financing options. While the cost of owning a solar array is still exorbitant for most business owners, those in Massachusetts can buy the electricity that is generated by solar equipment with no out-of-pocket expense to install.  

Through the use of a specific type of solar financing, a solar Power Purchase Agreement, Massachusetts’s business owners can buy solar electricity at a rate that is generally 10% to 20% less than electricity provided by the utility companies. The Power Purchase Agreement contains a moderate annual escalator to provide operation and maintenance of the array. This escalator is typically much lower than the 4.33% average annual utility rate increase seen in Massachusetts over the past 10 years. Not to mention spikes in market rates such as the 37 percent rate increase Massachusetts will experience this winter. Solar can provide a hedge against the inflation of utility rates which enables business owners to budget for their future energy expenses and also provides for exponential compounded savings over the 25-year duration of the Power Purchase Agreement.

For large energy users the savings from going solar with a Power Purchase Agreement can amount to hundreds of thousands if not more than a million dollars over time. Solar is a proven technology as there are solar arrays still producing electricity after 50 years in the field. Today’s modules come with 25-year warranties and are producing electricity much more efficiently.

In addition to the savings solar can provide, it is important to look at where natural gas is heading. Massachusetts’s business owners are expected to pay twice the national average for electricity as a result of the winter price increase. Electricity prices are increasingly linked to the cost of natural gas as communities switch from coal and nuclear power generation. In a previous article, Businesses Brace for Soaring Electricity Rates and Consider Going Solar in Massachusetts, I explained that the increase in natural gas prices is a result of a combination of influences. First, there is an increase in demand for natural gas as coal power plants are taken offline or are retrofitted to burn natural gas. Second, inadequate transmission infrastructure is limiting the supply of natural gas during peak periods of usage especially in the winter months. Third, many companies are beginning to export increasing amounts of Liquefied Natural Gas (LNG) to satisfy global demand which further limits supply. These three factors are resulting in a higher price for natural gas produced electricity as well as intermittent spikes in market prices such as the astronomical 37 percent increase in winter electricity rates in Massachusetts. However, Massachusetts business owners can now combat these rising prices by going solar with no out-of-pocket expense to install by using a solar Power Purchase Agreement.

Kurt Easton

Kurt Easton

As a Managing Partner of Clean Footprint and professional Urban Planner with over 25 years of consulting experience, Kurt has an extensive background in both public and private sector initiatives. His experience provides valuable insight into public/private negotiations for renewable energy development. His network of municipal contacts through the Florida Redevelopment Association and Florida League of Cities enables direct access to decision makers for the successful development of solar PV projects throughout the State.Contact Kurt at kurt.easton@clean-footprint.com.