Page 175 - Alternative Energy Systems in Building Design

ECONOMICS OF SOLAR POWER SYSTEMS 151

■ PPA or third-party ownerships in general involve a finance company, an interme-
diary such as a sales and marketing organization, a design engineering organization,
a general contractor, and in some instances a maintenance contractor. Considering
the fragmented responsibilities and the complexities embodying the collaborative
effort of all entities and the life cycle of the contract, the owners must exercise
extreme diligence in executing PPA contracts.
■ The owners have no control over the quality of design or materials provided; there-
fore, extra measures of caution should be exercised when evaluating final owner-
ship of the equipment.
■ In general, owners who elect to enter into a PPA, such as nonprofit organizations,
municipalities, city governments, and/or large commercial industries, seldom have
experienced engineering or legal staff that have had previous exposure to PPA-type
contracts.
■ The owners tie up the leased grounds or buildings for extended periods of time and
assume responsibility for insuring the property against vandalism and damage
owing to natural causes.
■ In the event of power outages, third-party ownership agreement contracts penalize
the owners for loss of power output generation.
■ PPA contracts include yearly energy escalation costs, which represent a certain
percentage of the installed cost and must be evaluated with extreme diligence and
awareness because these seemingly small inflationary costs could neutralize the
main benefit, which is the hedge against energy cost escalation.
■ PPAs for large, renewable solar power cogeneration contracts are relatively new
financial instruments. Therefore, their owners must be careful to take proper measures
to avoid unexpected consequences.

Preparation for PPA proposal Unlike conventional capital-intensive projects,
PPAs completely bypass proven engineering design measures, which involve project
feasibility studies, preliminary design and econometric analysis, design documenta-
tion, construction documentation, design specification, and procurement evaluation,
which are based on job-specific criteria. In order to ensure a measure of control and
conformance to project needs, it is recommended that the owners refer to an experi-
enced consulting engineer or legal consultant who is familiar with PPA projects.
To avoid or minimize unexpected negative consequences associated with PPAs, the
owners are advised to incorporate the following documents, reports, and studies into
their proposal request specification (RFP):

■ For ground-mount installations, employ the services of qualified engineering con-
sultants to prepare a negative environmental impact report, site grading, drainage,
and soil study.
■ Provide statistical power consumption and peak power analysis of present and
future electrical demand loads.
■ Provide a set of electrical plans, including single-line diagrams, main service
switchgear, and power-demand calculations.