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Lowering the Cost of Public-Sector Solar Power in New Jersey

Officials in Morris County, New Jersey have pioneered a financing model for solar photovoltaic (PV) projects on public buildings that has led to significant cost savings, says a new report from the National Renewable Energy laboratory.

The mechanism, frequently called the Morris Model, combines many of the benefits of the two types of financing options that local government agencies have typically used to deploy solar power: self-ownership and third-party power purchase agreements (PPA).

The result is a bond-PPA hybrid model, in which a public entity issues a government bond at a low interest rate and transfers that low-cost capital to a developer in exchange for a lower PPA price. The mechanism can provide additional benefits compared to both the self-ownership and third-party PPA models, the report says.

For example, like self-ownership, the hybrid model allows the administrator to take advantage of low-cost public debt. And as with a third-party PPA, the model enables the tax-exempt administrator to benefit through savings passed on from federal tax incentives. In addition, the administrator receives fixed electricity costs for a long-term contract and has no operating and maintenance responsibilities for the solar PV equipment.

To date, the model has been used to finance solar PV projects on schools, colleges, county administrative buildings, and other public buildings in four counties in New Jersey, and some of those projects are lowering electricity costs by two-thirds. Seven other counties in the state are in the process of adapting the model.

The report says the model could be replicable in other states, though the existence of certain laws and regulations could impact its implementation.

Resources:

NREL Fact Sheet: Financing Solar PV at Government Sites with PPAs and Public Debt

CSG/ERC Webinar on Public-Sector Financing Options for Solar Power (February 25, 2011)

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