Solar panel arrays under consideration after presentation to Elkader Council

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By Willis Patenaude, Times-Register

 

The latest Elkader City Council meeting covered an array of issues, one of which was converting some city properties to solar energy and entering into a power purchase agreement (PPA). 

 

On hand to discuss this conversion were representatives from Eagle Point Solar, who provided the council with a presentation. City officials contacted Eagle Point after receiving information regarding a free solar analysis and decided to look into it. 

 

One thing the analysis looked at was possible locations. According to City Administrator Jennifer Cowsert, after looking “at all the city’s facilities,” few viable locations presented themselves. While Eagle Point looked at around 12 meters of potential sites, they settled on just three. 

 

Some of the locations, like the wastewater treatment plant, which is one of the biggest energy users at a cost of about $50,000 per year, do not qualify due to how Alliant has it categorized. Others, such as seasonal locations, don’t work because they don’t require power all year long. 

 

Some sites, such as the lift stations, are in flood plains and there is no chance of building ground arrays in a flood plain, while other sites, like the library, which is a viable option, has a board that is simply “not interested at this time” in pursuing solar energy. 

 

“After a site assessment, many of these dropped off due to the meters being located in a flood plain where we would not be able to economically get the modules high enough to be above flood grade. We also had a couple of meters where the property at the location of the meter was not large enough to build an array. We settled on the three meters presented based on the desire from the city and the feasibility of building those arrays,” said Eagle Point representative Kent Kraus. 

 

The three areas that passed analysis include the water wells and treatment, city shop and opera house. Together, this area is responsible for 209,260 kWh worth of consumption. According to Eagle Point, 100 percent of that consumption could be offset by solar at both the water wells and treatment meter and the Opera House, while offsetting 71 percent after installing as much solar as they could fit on the city shop. 

 

“When we talk about offset, we are talking about the number of kilowatt hours produced from the array in a year versus the amount of kilowatt hours consumed by a meter,” Kraus explained. 

 

With locations established, the next issue revolves around what’s known as a power purchase agreement (PPA). According to Cowsert, a PPA is necessary because the “city cannot take advantage of tax incentives, which are transferred to a private person and they own the solar equipment.” 

 

Kraus expanded on this definition, adding that a PPA “is a form of financing where a third party investor pays for the construction of the array(s) and would own, maintain and insure the array(s) through the term of the contract. The city would simply enter into an agreement with the investor to purchase the energy being produced from the array(s) at an agreed upon rate.”

 

One of the benefits of a PPA is there are no upfront costs associated with it for the city and “no financial burden to the residents,” as Cowsert stated. Basically, the city is “purchasing energy at a lower rate per kilowatt hour from the array than the utility” and, according to Kraus, if the city declines to purchase the solar array at the end of the 35-year agreement, “there is no cost to the city at all” beyond purchasing the energy being produced by the solar arrays, which should be at a lower rate than what the city would pay to a utility. 

 

Additionally, Cowsert stated any potential costs would occur only after the PPA expires, “such as the equipment could hit its life expectancy or need to be repaired. During the PPA, the owner makes all of those repairs or replacements.”

 

With the city assuming no upfront cost under a PPA, the investor in this project, who cannot be disclosed until after the contract is signed, assumes all the upfront risk. But that risk comes with financial incentives, such as the monetization of the tax credits, depreciation of the arrays and cash flow from the sale of energy the array is generating. 

 

“We have done several of these and the attraction to the investor is this is a low risk, long-term investment,” Kraus said. 

 

According to the presentation from Eagle Point, under the 25-year PPA, the city would save over $300,000. As Kraus explained during a separate interview, this number is calculated by taking the savings from buying energy from the solar arrays versus the cost of that energy from the utility. 

 

“The first year savings is estimated at $5,741. For our model, we keep the consumption consistent. We model the utility energy increasing at 3.78 percent and the PPA rate increasing at 3 percent. We also estimate the panels to degrade at .5 percent annually. This will continue to increase the city’s energy savings year over year for the 25 years to an estimated combined net cash gain of $308,927,” Kraus said. 

 

The presentation also noted the use of these solar arrays, at least within that three-meter area, allows the city to budget without the “worry of unexpected increases.” Unlike dealing with a utility, which can experience dramatic rate increases, under the PPA, the city enters into an agreement with “known rates,” Kraus said. 

 

Also, since the city does not own any of the arrays, they are not responsible for any repairs or replacements that occur during the 25-year agreement. Those costs fall entirely on the investor. Of course, Kraus added the solar panels have a 25-year production warranty and the inverters usually have a warranty between 20 to 25 years, which also limits risk to the investor. 

 

At the end of the presentation, Eagle Point, while not trying to rush or force the issue, noted how “time is of the essence.” However, there are financial considerations to take into account if decisions are delayed, such as ongoing supply chain issues and rising inflation. 

 

This could potentially impact the kilowatt-hour rate the city would pay to the investor, which is based on the investor’s initial cost. So, if the investor’s initial cost goes up, the rate the city pays will also go up prior to signing an agreement. After an agreement is signed, whatever the rate became due to increased investment costs, if there were any, would essentially be locked in and the city would know exactly what their kilowatt-hour rate would be from year to year. 

 

As for installation of the solar panels, should council agree on the project, that will be done by Eagle Point. Kraus estimated it would take around six months after the agreement was signed before they “would have permission to operate from the utility and…would start generating energy.”

 

There was a generally positive reaction to the presentation and the solar array project from city representatives, with mayor Josh Pope stating, “I support converting some city properties to solar. I support anything we can do to reduce our operating expenses.” 

 

Council member Deb Schmidt said, “solar energy appears to be an advantage to those who use it and it is only getting better with the studies that have been done from the past years.” 

 

Likewise, council members Peggy Lane and Grau agreed, with Lane stating, “I’m interested in alternatives to traditional power sources as a way to save the city some money and potentially position us to procure the array in the future.” 

 

Grau, when asked if he supported the project, replied, “Yes, anything to potentially reduce costs and reduce our carbon footprint would seem to be a win-win.”

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