Competitive solicitations for solar Power Purchase Agreements (PPAs) come with good intentions: holding a fair process to get the best value. However, RFPs with a few common pitfalls can unfortunately lead to undesired outcomes – creating an overwhelming matrix of options, incentivizing misleading claims, or driving away qualified bidders. In our experience responding to RFPs, we've come to understand the key elements that make a solar PPA solicitation successful – along with characteristics that tend to stall momentum, require a redo of the solicitation, or cause fatigue and confusion that may diminish the project's chances of success altogether. With these tips, you can design a solar RFP that allows you to efficiently and effectively evaluate which bidder will deliver the best solution for your organization.
1. Provide Relevant Information Upfront
Including the following information within or attached to the RFP solicitation will allow bidders to sufficiently evaluate the general feasibility of each site and create preliminary designs and price estimates:
- Site name and address
- Roof material, age, manufacturer, and remaining years on the warranty (if roof-mounted)
- Prior use of land (if ground-mounted)
- Current utility information at each site:
- Utility Name
- Rate Schedule
- Total electricity consumption (kWh) per year
- Average utility rate (total annual energy bill divided by total annual kWh)
- Electrical equipment information:
- Photo and kVA rating of transformer
- Photo of switchgear
- Voltage and amperage of main service
- Any other or notable site-specific information
By providing this information as part of the original RFP, you will reduce back-and-forth with public questions and answers and avoid the need for deadline extensions.
2. Define Uniform Pricing Assumptions
While you want your selected partner to be creative, adaptable, and able to think holistically about a project, it's important to set a foundation for comparison in the early-stage bidding process. We recommend holding some parameters constant in the bid pricing criteria, such as defining your preferred PPA term (ex: 25 years) and annual escalation rate (ex: 0% fixed or 3%). This consistency allows the evaluation committee to compare rates across bidders more clearly. If you want to see more options after short-list or award, any bidder should be able to provide a matrix of other term lengths and escalator scenarios upon request.
3. Compare Proposed PPA Rates, Not Savings
To determine who is offering the best deal, compare proposed rates ($/kWh at an equivalent annual escalator), not savings forecasts. The factors that influence savings (such as current utility rate, utility rate schedule, utility escalation rate) are not conditions that a unique bidder can influence. Therefore, evaluating bids based on savings forecasts incentivizes bidders to inflate savings estimates with misleading and/or opaque utility-related assumptions.
Although savings forecasts are not advised at the proposal phase, it is important to verify that your chosen partner is capable of sophisticated rate analysis, savings forecasts, and rate schedule advisory post-award. Therefore, we recommend asking bidders to explain their methodology and experience with rate analysis in their qualifications.
4. Don’t Cloud the Waters with Unrealistic Financing Options
Many organizations recognize that a third-party ownership agreement, such as a PPA, is the most (or sometimes only) feasible financing option for their organization because it can offer financial savings at no upfront cost. What’s more, the solar provider is responsible for operations and maintenance for the length of the PPA term, relieving your staff of that responsibility.
However, organizations sometimes feel compelled to explore every scenario by requesting quotes for purchasing and maintaining the system themselves. While it's understandable to evaluate all options, we encourage careful consideration of the feasibility of raising and committing capital funds—especially when a PPA can achieve similar goals without upfront investment. Requesting direct-purchase bids, if unlikely to be chosen, can derail momentum by clouding viable options, raising irrelevant questions, and causing decision fatigue that stalls or dissolves a potentially successful solution. Firms do not always offer both options, so the list of interested bidders may vary based on the specified financing structure.
A great happy medium is to request a PPA option only and then request that a buyout option be included in the PPA contract. IRS regulations allow the purchase of a solar system after the sixth year of the PPA term. Buyout options for two years, such as Year 7 and Year 20, can be written into a PPA contract.
5. Focus on Critical Success Factors
You want to choose a partner you are confident will deliver the right solutions for you and your project. A solar provider who can provide certainty, speed, and trust will give you confidence that your project will be successful no matter what factors may change beyond their control. Many solicitors do not realize that at the early stage of proposal, factors such as financial stability and staff qualifications are better indicators of project success than detailed technical or equipment specifications, as optimizing engineering designs and finalizing installation plans depends on later-stage due diligence and approvals. Furthermore, the use of quality, safe equipment has become relatively standardized (because companies are paid only for system performance under a PPA) and thus does not typically provide obvious differentiation between bidders. Ask for evidence of qualifications surrounding:
- Financing Capability: Solid and certain project financing is the foundation of a successful project, especially if financed by a third-party ownership agreement that will last for decades.
- Qualified Staff: The landscape of solar policy, permitting, supply chain, and community perception is ever-changing. Ask for qualifications and evidence of experience that make you confident that you are hiring professionals who can draw on previous experience to adapt to any changes, solve problems, and provide strategic solutions.
- Ability of the Project to Meet Your Goals: Make sure the bidder is proposing a project designed around your goals, not shaped around their ideal product offering.
6. Ask for Community Benefits
In addition to providing energy savings, solar projects can deliver additional value in the form of local, educational, and community benefits. Asking bidders what community benefits they can offer, such as curriculum integration and workforce development, can help a bidder rise to the top from a pool of other providers with similar technical qualifications.
Conclusion
A well-designed RFP for a solar PPA has the potential to deliver your organization tremendous financial, environmental, and community benefits. With these tips, you're well-equipped to craft a competitive solicitation that attracts qualified bidders and delivers the best value for your solar project. Madison Energy Infrastructure is committed to helping your solar projects meet your goals – reach out for more trusted support and insight.
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