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Global - March 18, 2021

Arkansas Power Purchase Agreements: Schools, Universities & Colleges | YSG Solar

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Solar panel installations may be conventionally associated with residential and commercial properties, but did you know that virtually all organizations can benefit from going solar? This includes the likes of:

  • Schools
  • Universities
  • Educational Facilities
  • Government Buildings
  • Municipal Offices
  • Religious Institutions

In fact, educational institutions like schools, colleges and universities are uniquely positioned to take advantage of all the benefits of a solar panel installation. Solar PV projects bring a whole host of benefits, as well as a ton of savings. In Arkansas in particular, the successful passage of the Solar Access Act has opened up a world of opportunities for landowners, developers, property managers, schools, universities, and pretty much anyone interested in solar energy. 

The Arkansas Solar Access Act

The Arkansas Solar Access Act (SB 145), passed on March 12, 2019, is a bill which removed a number of regulatory barriers that had previously prohibited the growth of solar power in the state of Arkansas. SB 145 garnered bipartisan support, with the potential benefits of solar energy in the state clear to those on both sides of the political aisle. The Act is defined by a number of key features:

  • It enables solar land leasing and third-party purchasing for non-taxed entities, allowing greater flexibility for customers.
  • It more than triples the maximum solar size limit for businesses, opening up greater potential for economies of scale.
  • It adds a grandfathering provision which provides market certainty, protecting solar customers from potential future rate changes which could have impacted the value of their investment.

With these major changes, and the removal of prohibitory factors surrounding Arkansas solar, the state is now poised to take full advantage of its potential for solar deployment. Arkansas is one of the top states nationwide in terms of sunshine days, making it an ideal location for solar energy projects. 

What is a Power Purchase Agreement (PPA)?

A power purchase agreement (PPA) is a financing structure used for the purchase of renewable energy. A power purchase agreement is a simple, effective way for organizations to procure renewable energy in large quantities. It is an especially popular financing mechanism for large PV projects like solar farms, or for schools/universities/educational institutions leasing their roof/ground space for a solar project.

For school solar projects, solar farms, municipal solar leases, or other similar projects, a PPA is an agreement wherein a buyer/offtake purchases power from a provider at an agreed-upon rate for a fixed period of time. The buyer in this scenario does not take ownership of the actual PV system itself, instead they are essentially purchasing the services of the solar system as opposed to purchasing the system itself. 

Solar power purchase agreements are growing increasingly popular in states like Arkansas because of their flexibility and accessibility. A PPA can facilitate a predictable low-cost energy supply without substantial upfront costs. On top of this, a PPA allows the concerned parties to generate renewable energy certificates and take full advantage of the tax credits available as a result of the solar installation. For schools and universities, a power purchase agreement ensures a long-term revenue source that is both consistent and stable, allowing for easier financing of these types of projects.

There are a number of different types of PPA. Click on any of the three types of PPA below to learn more about it.

Each variation of the PPA allows for the purchase and delivery of renewable energy to meet sustainable energy requirements/commitments.

Arkansas Power Purchase Agreements 

Arkansas is one of fifteen states nationwide that has enacted legislation relevant to power purchase agreements. Under this legislation, Arkansas utilities are authorized to enter into a power purchase agreement, but the PPA must not exceed five years, and the cost of the PPA may not be recovered via rates, unless the following conditions are met:

  1. The cost of the PPA is reasonable.
  2. The PPA would provide savings for retail energy customers.
  3. The PPA is required by public necessity.
  4. The PPA is necessary to ensure incremental supply in order to rectify shortage.

PPA applications via Entergy Arkansas are typically due in spring of each year. 

Is a Power Purchase Agreement the Right Move for Schools, Universities, and Colleges?

With a solar panel installation, one of the biggest questions for both residential and commercial projects, is whether or not you should purchase the solar PV system outright, or lease the panels. Now, generally speaking, the broad consensus is that purchasing the system outright offers the greatest return on investment in the long run. However, in the case of educational institutions, which are generally categorized as nonprofit organizations, this consensus doesn’t necessarily hold true. 

When an organization is classified as a nonprofit, it is unable to take advantage of the excellent tax breaks available for solar PV installations. This negates much of the financial benefit associated with going solar, so the outright purchase of the solar system wouldn’t be the most beneficial approach under these circumstances. Thankfully, the alternative option of a solar power purchase agreement is available to schools, universities, and colleges looking to go solar and reap the rewards. 

It should be noted that purchasing the system isn’t necessarily the wrong decision for every nonprofit organization. A lot of factors come into play during the development of a solar PV project, and it may well turn out that purchasing the system is the most economical option. This is why it’s important to speak with an experienced developer like YSG in order to establish the best course of action for your specific needs. To learn more about all the benefits associated with solar and schools, please consult our in-depth article:

Solar Projects in Arkansas Schools

A number of educational facilities in Arkansas are already taking advantage of the efficient, cost-saving benefits of solar energy.