By Tina Casey
Originally published on CleanTechnica
A legal ruling in Iowa has implications for the entire U.S. rooftop solar market. By clarifying the regulatory standing of non-utility solar installers, the affirmation of third-party PPAs provides much-needed market certainty for states that don’t currently provide a firm footing for non-utility solar installations.
If you’ve never heard of the company Eagle Point Solar before, you’re going to hear a lot more now. The Dubuque-based rooftop solar specialist’s biggest installed project to date measures up to only 370 kilowatts, but the company just won a big legal battle that could break the US rooftop solar market wide open in Iowa and beyond.
By clarifying the regulatory standing of non-utility solar installers like Eagle Point, the ruling provides much-needed market certainty in the many US states that don’t currently provide a firm footing for non-utility solar installations, on rooftops or anywhere else, for that matter.
Legal Victory For Rooftop Solar, And Distributed Solar
The solar installation involved in the case is a rooftop solar installation on a municipal services building in Dubuque, Iowa, but it applies generally to distributed solar installations.
The new rooftop solar ruling, a split decision handed down by the Iowa Supreme Court yesterday, basically says that Eagle Point can provide its turnkey solar installation services within an area already serviced by a utility.
That affirms a lower court ruling, which nulled out a previous finding by The Iowa Utilities Board, which had ruled that Eagle Point’s activities classified it as a public utility, which would mean that it could not operate within another utility’s service area. In this case, that would be the utility Alliant Energy.
Here’s how the Supremes came down (break and emphasis added):
According to the district court, Eagle Point’s provision of electric power through a “behind the meter” solar facility was not the type of activity which required a conclusion that Eagle Point was a public utility.
The district court further found that although it was conceivable under some circumstances that an entity that was not a public utility could nevertheless be an electric utility under the applicable statutory provisions, Eagle Point’s proposed arrangement with the city did not make it an electric utility for purposes of the statutes.
A Victory For Power Purchase Agreements
Oh ho, so now we’re getting somewhere. That arrangement with Dubuque was a power purchase agreement, specifically a third-party power purchase agreement.
Power purchase agreements (PPAs) have emerged as the key driver of non-utility distributed solar installations, most familiarly in the form of rooftop solar.
PPAs are a make-or-break financing mechanism for the distributed solar market. To own a rooftop solar installation on a single family home you would have to kick out thousands of dollars up front, even with the help of generous tax cuts. PPAs mean you get the solar without the up-front costs.
In a PPA, instead of owning a solar installation outright the property owner allows a solar developer to put their solar panels on the property. The property owner agrees to purchase the electricity generated by the installation, through monthly payments. The developer typically provides “turnkey” services, which covers everything including operation, maintenance, and repair, with the idea of making the whole thing as seamless as utility service.
Under many PPAs, the installation is grid-connected and the customer’s monthly payments go through their utility bill. In others, such as in the Dubuque case, the local utility is bypassed and the solar-generated electricity is sold through a third party.
In either case, aside from getting a crack at the solar-powered lifestyle of the future without up-front costs, the property owner wins out because their monthly payments are typically lower than what they would pay for grid-supplied electricity.
Rooftop Solar For Me, And Thee
PPAs are critical enough for private sector solar installations, but they play an even more crucial role for installations on public property, such as the Dubuque municipal services building.
That’s because public properties can’t take advantage of the same kind of solar tax breaks that reduce up-front costs for solar installations on privately owned properties.
The same goes for other non-private sectors, including non-profits and religious organizations.
The Rooftop Solar Domino Effect
The Eagle Point case has been closely watched by solar advocates. According to MidWestern Energy News (a project of the RE-AMP media center at Fresh Energy), industry watchers foresee that affirmation of third-party PPAs will create a more stable investment atmosphere in Iowa, attracting more institutional financing from banks and insurance companies.
According to a report in the Des Moines Register, industry watchers also foresee that the ripple effect of the Dubuque case could reach Wisconsin, Minnesota, and other states in the region.
The Register notes that even with Iowa in the fold, only 23 states currently allow third-party PPAs, so as the legal barriers fall Wisconsin and Minnesota could be just the beginning.
For that matter, the Obama Administration has already been going at PPA-financed solar installations hammer and tong on federal property, most notably through the Defense Department’s many PPA-financed solar projects.
We’re also going to go out on a limb and predict that as the technology for building-integrated solar grows, you may also see PPA-type financing go beyond standalone rooftop or ground mounted solar panels, and on into solar building elements including roof tiles, walls, and even windows.
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