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f N f A L Y~ O l U 1 1 0 M 5 • pcojcc~ Rc~~cuucs CSI Iuccutirc of S033/IcAC'h SCENARIO 3: POWER PURCHASING AGREEMEN'T' ht this model, a third parn~ enfifc (o~cner) with a rf~ liabilitc echo can rd:e advantage of the federal im~esunent tai n-edif :md accelerated depreciation, ~c-ill own and operate the solar PV' scstcm. "fhe Citc kill host the Pt' system and ageee to purchase the elec~ricitc genenued he the scstcm liar a <ef S~IcA\h price (the price ma~~ ha~-c a built iu escalator depending ou the ferens of fhe agreement) o~~cr a set period of time (n-picalh- 3fl to 35 cents). .At the cud of the term, the Cite utac 6ace the option to puedaase the PV' scstcm for fair mnrl:ef value. the PP.A arrangement mac also contain a louse that allo~~s the Ciic io purchase the scstcm after sip scan, at the end of dte accelerated depreciation schedule, for fair marker value the PP:A arrangement has the built-in incenti~-e for the scstcm owner io optimise scstcm perti~rmanee because the owner is paid uu the basin of elecfricitc generated. This model rcpicallc ~corhs hest for Pt' projects uflaling >3~I1 k\V~ so that the transaction costs can be spread o~~cr the iof al cost of a larger scsu~m. VA~ithin a PP.A, the cost o~ the dectriciic produced hoc the PV' sv~sfem will lil:eb~ be more than d,e dectricin- purchased h~om PG&I'. (although ~crms mac ~~arc depending ou ilfe length of nc~ agreenuut). Scenario 3 auaksis assumes Thal a Third park kith tam obligations kill serve as the oss~ner of ihe~ siau and the Ciic kill provide the host site. This arrangement improves the project economics due to the Third park's abilifc to rd;e advantage of federal tas credits, federal aeederated depreciation, and state depreciation. .lssuming that the tai imrs u,r would rcyuire at lease a seven percent talc of return on [heir invesnnenr, i6c Cih' would pac appro~imatek SU. L81 per k\C~h Cot clecu~icin~ generated from the proposed PV' scstcm in 1"car I." ~fhis rate represents a premium of about Sn.U(,I/k\C'h o~~er the average utilitc rate in l'car l for the <)SC s-stem (eschfdiug dcu~aud charges) and SU.U35~k\V-h over the average utility- rate in l"car I for VC ell No. 8.". l he net present rahu• of Scenario 3 is -S1,333,11011 (br the <)SC and S1,333,0Uf1 for AV'cll Vo. 8. The PP.A analcsis assumes the following: • Pcirate enti[c o~c~ucr can assume full federal tai credit and accelerated depreciation • '1'o~culcdive tear Icrm foe pP.A • I~:Ice~ricitc cost escalation of -I pecceut per scar • .Module degradation of OS percent per scar • project Costs PV' scucm capital cost of S_,~33,U11U (includes labor and materials) Permitting tees of Sd70 ORBI cods of U.S peceeul of gross scstcm cost per scar (wish 3 percem inflation) Kcplaccmcn[ inccrtcr in scar 13 at S7UI)~k\C~ ~, Ih~ rl.- I ii Burn i~b ul~m ih,l PA,Lrtib ii „_f^ ilia„ I,fi,. ihnf ~~~ not .air, JL. Ihi, a J,. ~i~~.nflw 1.-.1 <~in~innii. Ir.„u~ I,Lhi.I <<in„7 .,f bh PP A, ,.,.f l'\ ~ ~~i~~i, ~~i fhi, ..v~. I+ the a,>r diRcrrnri.d brreeen rhr ae~~r.fkr I:AA'h fnfr .end fhr evinnu rd I'P.A cnr is nut indi~~.u ter u(Ehc Erur e.J uv o(ihr tol.x I'V~ [lento if c. l'hc fol.fr PA' ss¢m kill prudurv the nnjurifc ail iu clcrninic uw~rut During fhr ~~r.rh and puni.il-pril: aunmar prriuds ut~an iqg f Lo nufst r~pon+ico rlrrtriritc.