Federal changes lead to new challenges for Centre County solar project

Changes at the federal level are causing new challenges for the Solar Power Purchase Agreement in Centre County, a project that involves 10 local entities and aims to reduce energy costs.

Contracts were signed in June for the project, which has stirred controversy and divided elected officials for more than a year since it surpassed a legal fee limit, leading to allegations of project mismanagement and wasteful spending. The SPPA was introduced as a concept in 2018 with two goals: obtain the lowest available cost of alternative source electricity, and help the entities meet carbon reduction goals by purchasing renewable energy credits (RECs) from the project’s developer, Prospect 14.

But a month after contracts were signed, President Donald Trump’s “One Big Beautiful Bill” was passed, which includes the expiration of federal energy tax incentives that reduce the ability of developers to profit from selling RECs.

Speaking Oct. 8 with the Centre County Solar Group — a recently-formed group composed of representatives of the SPPA’s 10 participating entities (separate from the original working group) — Prospect 14 founder Carl Jackson said the expiration of the incentives and other hurdles could render the project financially unviable and lead to the renegotiation of the entities’ contracts with the developer. That could mean changing the length of the agreement and price for the production of the electricity, though renegotiations have not been proposed at this point.

“When we originally signed the letter of intent [for the project] and got into contract negotiations, we saw a very different regulatory environment from where we are today,” Jackson said during the meeting. “There have been some impacts to how we think about not just this project, but every project.”

Prospect 14 has more than 50 ongoing projects across Pennsylvania, and hundreds more across the country.

The SPPA’s participating entities are State College Borough, College, Ferguson and Patton townships, the State College Area School District, the Centre Region Council of Governments, State College Borough Water Authority, College Township Water Authority, Centre County Government and the Centre Hall Potter Joint Authority.

Despite the new challenges, SCASD — the largest participant in the SPPA and the first to sign on to the agreement — remains confident that the project with accomplish its goals.

“Our commitment and the project timeline remain unchanged,” SCASD Finance and Operations Officer Randy Brown wrote to the CDT in an email. “Large-scale solar projects often involve adjustments during development, and we have been responsive to these needs throughout the process. If this becomes the case again, we are prepared to come together as a group and evaluate all options.”

How does the One Big Beautiful Bill impact the SPPA?

One of the main challenges Prospect 14 is facing is financing the project, Jackson told the solar group on Oct. 8. While the 10 entities have already paid $563,310 in fees, that money only paid for consulting and legal fees, with payments proportional to their planned electricity usage.

Prospect 14 must work out the financing for the 13.5 megawatt solar array’s construction, which is usually done with financial help from an investor — a business, individual or family interested in funding the development of solar arrays.

With the OBBB’s added hurdles though, finding an investor has proved more challenging than anticipated for a project that has already seen the timeline stray from what was initially planned.

Groundbreaking was expected to follow the signing of contracts, which was initially slated for early 2024. But as entities dropped out and the unexpected legal fees were handled, the project was delayed by more than a year.

Prospect 14 officials now anticipate work to begin in early 2026 near Clarion, after farmland in Walker Township was initially eyed for the array.

Before the passage of the One Big Beautiful Bill, the RECs’ pricing was projected to remain stable until around 2040 or later, when emissions levels reached 25% of 2022 levels. Now, the credits are set to be terminated for all solar projects placed in service after Dec. 31, 2027 — unless construction on a project was started within 12 months of the OBBB’s enactment, or before July 4, 2026.

If construction is started within that time frame, it must be completed within four years of its start date to be eligible for a 30% REC, under the Internal Revenue Service’s new “beginning of construction” rules, effective on Sept. 2.

Under these new rules, any developer constructing a solar project larger than 1.5 megawatts that they wish to get RECs for must provide proof of the beginning of significant work by using the physical work test, which is another obstacle standing in the SPPA project’s way.

Before Sept. 2, all solar projects could mark the beginning of construction by using the 5% test, or by paying/incurring 5% of the project’s cost. The more laborious physical work test requires proof of continuous on- or off-site work.

“[On-site work] is just starting something as simple as a road, but then continuing to progress the project over the course of a four-year period from the time that the project has been started,” Jackson said. “Or you can do what’s called off-site physical construction, which is purchasing equipment that meets a baseline threshold of something unique to the project.”

These purchases could include solar modules, inverters, transformers, solar tracking devices and more.

The changes in the OBBB have meant developers like Prospect 14 must find new ways to navigate projects.

“That bill is a calamity for almost every part of American life, and renewable energy is most certainly a part of that,” SPPA working group and SCASD board member Peter Buck told the CDT. “It feels like [the Trump administration] is trying to destroy renewable energy in the United States, and admittedly they’ve designed something very effective at doing that in this bill.”

But State College Borough Council member Josh Portney, a vocal opponent of the SPPA’s management, questioned the developer’s knowledge of REC risk before the contracts were signed.

“The consultant recently mentioned that the project would face financial challenges (with the REC market) even if it was signed last year,” Portney wrote in an email. “Why was this never mentioned before the entities voted to confirm their participation?”

Outside the OBBB, the U.S. Department of Interior released a memo in July mandating that the department’s secretary must personally approve up to 69 different permits potentially required for solar and wind projects.

The U.S. Department of Energy has also mandated that all projects starting in 2026 must comply with new Foreign Entity of Concern requirements, which, according to the presentation given to the solar group on Oct. 8, states that at least 40% of a solar project must not be constructed with materials obtained from an FEOC-prohibited source in order to qualify for RECs.

With work to be completed by the contract-required October 2026 deadline, it must comply with FEOC guidelines throughout its entire construction process, although Jackson doesn’t anticipate the permitting to be much of an issue.

Will contract renegotiations be needed?

If it is determined that the project is financially unviable, or if financing is unable to be attainted, a clause in the 10 entities’ original contracts can be activated to allow for the renegotiation of those contracts to make the project viable, Gregg Shively, a consultant for Green Sky Development Group told the solar group on Oct. 8. Green Sky has a six-year contract with the participating entities for management and consulting services.

According to a memo sent to SCASD summarizing the Oct. 8 meeting, “the developer has not offered a proposal nor produced evidence for the need for renegotiation to date.”

If a renegotiation is needed, it could change up to three aspects of the contracts, including the length of the agreement from 15 years to 20/25 years, the initial price for production of the electricity or the price escalation over the agreement, the memo stated.

SPPA working group and SCASD board member Peter Buck said that contract renegotiations would be a worst-case scenario.

“I’m pretty confident in saying that no one involved with project would like to reopen contract renegotiations, but if Prospect 14 comes to us and shows that 100% can’t be done, can’t be financed — and if we still want it — then the renegotiations start,” Buck said. “I think that there’s good reason to believe that this project is finance-able.”

Currently, each participating entity has a slightly different rate at which they’ll be purchasing energy, but with a fixed annual escalator. For example, SCASD and State College Borough will each purchase their energy from Prospect 14 for 7.3 and 7.6 cents per kilowatt-hour, respectively, but applied to both rates is a yearly 1.5% escalator.

In expressing SCASD’s continued commitment to the SPPA, finance director Randy Brown wrote in an email that the completion of the solar array will benefit the community financially, align with the district’s commitment to sustainability, provide long-term value for the district and serve as a model for future community partnerships.

He continued that sentiment during Monday’s school board meeting on Oct. 27, saying that Shively was communicating with him “every couple days” about whether a renegotiation would be needed.

Moving forward, the solar group will meet again if Shively determines the project’s financing has been significantly impacted and a renegotiation is needed.

College Township Assistant Manager Mike Bloom said at the township council’s meeting on Oct. 16 that he remains “cautiously optimistic” about the project.

He added that the possible financing issues on Prospect 14’s end were “very disappointing, considering the amount of time and effort that has gone into this, and quite frankly, resources too.”

Project opponents, including State College Borough Council member Josh Portney, continue to question the SPPA, calling it “a high-stakes gamble that hasn’t paid off.”

He’s raised concerns about an “early exit” clause was built into the entities’ contracts that would allow the developer to exit the contract at any time, leaving the entities with sunken costs.

Buck said that likely refers to an aspect of the contracts that would allow the entities to exit the agreement with Prospect 14 immediately in case anything went awry in the future, giving them an exit strategy so they aren’t locked into a bad deal.

“If there is something that comes up that’s out of the control of the developer or the energy-offtaker, then there has to be a way for us to leave the agreement,” Buck said. “If [Prospect 14] can’t finance the project and looked to walk away, they would have to be able to show us that in a lawsuit. Why would I negotiate a contract that wouldn’t be defensible in court?”

Aside from his critiques, Portney also said he’s eagerly awaiting reports from the county controller and state attorney general’s offices about the excess legal fees.

Despite the continued criticism though, longtime SPPA proponents like Buck are adamant that the hard work from Prospect 14 and the participating entities will pay off in the long run.

“I’ve had many people come up to me and say that they think the project and what we’re doing is awesome, and that’s been great to hear through all this,” Buck said. “Yeah it’s challenging for sure, but hard things are often worth doing, and this thing is definitely worth doing and worth fighting for.”