SOUTH PORTLAND — South Portland is hoping the sun will come out
tomorrow, and tomorrow, and tomorrow, for about 30 years.
On Monday, the City Council got its first look
at a proposal by ReVision Energy of Portland to install photovoltaic solar panels on the roofs of both
City Hall on Cottage Road and the planning and development office on Ocean
Street.
To take full advantage
of energy savings promised by ReVision, the council must act before the end of
the year. That’s when the sun will set on solar energy credits contained in
President Barack Obama’s 2009 stimulus package.
“That’s one of the last
remaining parts of the bill,” said ReVision co-founder Fortunat Mueller. “In
2013 that reverts to a lower-level depreciation [schedule].
“We would still do the
project in 2013, but your economics get worse,” he told the council.
“I think we’ve got to
get our skates on, on this thing,” said Councilor Tom Coward, voicing what
appeared to be the majority opinion of the council, which agreed to pursue the
project for the planning office, but not City Hall.
“Certainly, the planning
office makes a lot more sense than City Hall,” said L’Heureux. “The economics
of that aren’t as great.”
In the deal offered by
ReVision, the company would install $76,000 worth of solar panels at no cost to
the city. It would own the panels for six years and lease them to the city for
a nominal fee under what it calls a “power purchase agreement.”
During that time, the
city would buy its electricity from ReVision at a rate guaranteed to be 2 cents
less per kilowatt hour that the rates South Portland pays under a bulk purchase
deal with Maine Power Options. Because the roof of City Hall has a smaller area
that faces less directly to the south, ReVision would only promise a 1 cent per
kilowatt hour savings there.
After six years, the
city could continue to buy the electricity generated by solar panels on the
roof of the planning office, or it could buy the solar panels for $20,000.
“We’re a mechanical
contractor not an energy provider, so, our preference is to flip that to you as
soon as possible so we can take that money and put it into another project,”
said Mueller. “However, if you like, we can continue to own and maintain that
equipment, sell you the energy, and make our money over time as a generator
selling you electricity, but that’s not out preferred business model.
“Our vision is to put
communities into solar at the lowest possible price we can put together,” said
Mueller. He predicted that after buying the solar panels, South Portland would
recoup its $20,000 investment in 5.8 years, based on lower energy costs.
According to ReVision’s
director of financing, Steve Hinchman, the reason his company needs to own the
equipment for the first six years is due to strings attached to the stimulus
money.
The primary funding
model is an investment tax credit worth 30 percent of the installation cost for
solar panels. The catch is that only taxpayers are eligible for the credit and
South Portland, as a municipality, is tax-exempt. Other credits include a
federal “bonus depreciation” up to 50 percent of equipment value in the year of
installation, with declining rates for the following five years. That’s the
incentive that runs out at the end of the year. Maine also has a capital
investment credit equal to 10 percent of the federal bonus depreciation.
“Those three things
together add up to almost 60 percent of the installed cost of a project,” said
Hinchman, noting the additional availability of a $4,000 per project state
solar rebate for commercial-grade installations.
Maine also allows the
transfer of renewable energy credits, trading at $50 per megawatt hour, as well
as net metering, under which a site that produces more energy than it consumes
can trade that power “back to the grid.”
“That all makes solar
very viable for a lot of projects,” said Hinchman.
Added together, the
various government incentives can lower the cost of solar power to 6 cents per
kilowatt hour for 20 years, said Hinchman. South Portland pays 8.8 cents/kwh at
City Hall and 12 cents/kwh at the planning office.
“Solar would be cost
effective then for anybody with a long-term view, but you have to be a taxpayer
to get the incentives,” said Hinchman. “Since you don’t pay taxes, the industry
has created this sort of Byzantine structure that allows us to capture the tax
subsidies for nonprofits.”
As part of the proposal,
ReVision would create a “single purpose” LLC known as South Portland Solar. The
LLC would design, build, own and operate the solar panels on roof space leased
from the city for a nominal fee for six years – the minimum the feds say a
company getting tax credits must retain ownership of the equipment.
South Portland Solar
would funnel all the tax credits to ReVision. Once ReVision is able to sell the
solar panels, it would do so at a cost equal to whatever it needs to recoup the
balance of its installation costs. Although Hinchman said his company can make
a profit on tax credits alone in Massachusetts, which is more aggressive in incentivizing
solar conversions, his company will make its money in South Portland on the six
years it spends selling the city electricity generated on its roofs –
electricity Mueller promises will cost the city less than it is paying now.
The council looked on
the proposal favorably. However, questions raised included the condition of the
planning building’s roof and the long-term plan for the site, given interest in
folding that office back into a single administrative complex with construction
of a new city hall, possibly within a decade but certainly within the 40-year
life span of the solar cells.
The council also asked
for clarification on how, or if, any deal with ReVision might affect South
Portland’s contract with Siemens Industry’s building technology division, inked
in early 2011. In that deal, the city bought into nearly $1.1 million in
upgrades to buildings throughout the city, which it is paying back with the
resulting savings on energy costs.
“As a city I hope we
would move in this direction to lessen our oil dependency and our carbon
footprint,” said Mayor Patti Smith of the solar proposal. “But I don’t want to
make a decision in haste.”
A CLOSER LOOK
Terms of a “power purchase agreement” offered to South Portland by ReVision Energy of Portland, for solar power projects proposed for City Hall and the planning and development offices.
City Hall Planning Office
System size 18.7 Kw 19.2 Kw
System cost (paid by vendor) $76,187 $76,459
Annual electrical production 20,570 kwh 24,000 kwh
Elec. cost, Years 1-6 1¢ below market rate (currently 8.8¢/kwh) 2¢ below market rate (currently 12¢/kwh)
Year 7 purchase price $25,000 $20,000
Annual savings after purchase $2,700 $3,400
Return on investment 9.8 years 5.4 years
Projected 30-year savings $42,000 $64,000
System life expectancy 40+ years 40+ years
CO2 reduction 27,500 lbs 32,160 lbs
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