Schools build solar to educate students about clean energy, but also to cut energy costs. But the structure of federal solar tax incentives means that owning solar is not an option for schools.
Take the Milpitas School District’s 14 distributed solar PV arrays. According to a news story, the district anticipates savings of $12 million over 25 years from the projects, which were financed by a power purchase agreement with Chevron Energy Solutions. Could the district have been better off owning their solar PV arrays rather than signing a power purchase agreement?
The answer is inextricably tied to the federal incentives for solar.
First, a little background on the district’s power purchase agreement with Chevron. The total cost of the 3.4 megawatt solar arrays was $30 million, for a cost of $8.82 per Watt (DC). Chevron paid for the entire installation and presumably used both the federal Investment Tax Credit and accelerated depreciation. Chevron also applied for and received the 5-year California Solar Initiative of 22 cents per kWh.
Since the school paid no money upfront, their contract with Chevron requires them to make annual payments for the solar power over 23 years. The first payment in 2009 was $856,000 and includes a guaranteed output of approximately 4 million kilowatt-hours (kWh) per year. In 2009, the difference between the district’s annual power payment to Chevron and its prior electric bill resulted in a savings of $51,000. The following chart from a district presentation illustrates the District's anticipated savings (in green) over 25 years.
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