MILPITAS USD SOLAR PV PPA
- 3.4 MWp Solar PV on 14 District Sites
- Early PPA Buyout Resulting in $2 Million Additional Energy Savings Over 16 Years
In June 2008, Milpitas Unified School District entered into a 3.4 MWp solar PV Power Purchase Agreement (PPA) with Bank of America (BoA) and Chevron Energy Solutions (CES). Through this agreement, BoA financed and owned PV generation facilities located on 14 District-owned sites, engineered, procured and constructed by CES.
Energy generated by the PV systems offset the District’s electrical energy usage and cost of energy that would have otherwise been purchased from the local electrical utility, PG&E, at fourteen MUSD sites. MUSD agreed to pay a fixed annual energy price to BoA for the PV-produced energy. The energy cost per kilowatt-hour would escalate every three years. The agreement contained a modest PV production guarantee, and MUSD paid CES annually for O&M services on the systems.
In July 2014, MUSD contracted with Sage Renewable Energy Consulting to perform an evaluation of the agreement and the solar PV facilities. Sage was also requested to provide high level analysis and recommendations to help MUSD decide whether utilize the PPA’s Early Buyout Option with certificate of participation (COP) financing.
Following an on-site inspection of the 14 sites and a review of the historic and expected production of the facilities, Sage conducted a Fair Market Value (FMV) estimation of the solar PV systems based on IRS methodologies. The FMV analysis determined a weighted average of three appraisal approaches based on the estimated level of confidence in their accuracy. Sage also performed a cash flow analysis and compared the likely benefits and impacts of 5 possible scenarios: continuing with the existing PPA through its full term, or taking advantage of four different 3-year and 10-year variations of COP financing.
Sage carefully evaluated the financial risks to the District of assuming ownership and operation, identified degraded PV panels and recommended maintenance measures to mitigate production degradation, reviewed component warranties, and estimated the increased costs to the District of assuming operations and maintenance of the systems. Sage interfaced with CES to establish causes, resolve production issues and system defects. Sage recommended that the District request an ongoing accounting of monthly production data and O&M measures prior to exercising the early buyout option. Sage then assisted in negotiating the O&M contract.
Based on Sage’s review and recommendations, the Milpitas USD Board of Education voted in November 2014 to proceed with the $15.5 million buyout and took ownership of the PV facilities in January 2015. The District estimates it will save an additional $2 million over the life of the project due to the buyout.
- Early PPA Buyout Review
- PPA System Valuation
- O&M Review