SOUTH PORTLAND — South Portland city
councilors are hoping for a bright future after voting unanimously Nov. 5 to
enter into a deal with ReVision Energy of Portland that will see the
installation of photovoltaic solar panels atop the planning and
development office at 496 Ocean St.
Because the funding model that makes the project
possible includes federal tax credits that could soon expire, construction is
expected to be complete before the end of the year.
“The federal solar energy credit has been
authorized in the past,” said City Manager Jim Gailey, “but because we don’t
now what Congress will do, the city needs to proceed with installation of the
panels this fall.”
“This project allows us to dip us in the water so
to speak into solar energy,” said Mayor Patti Smith. “I feel comfortable this
is a good pilot project. Hopefully we will learn a lot from the experience
without a lot of risk.”
Under terms of the agreement, ReVision will install
$76,459 worth of solar panels at no cost to the city. It will 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 will buy its electricity
from ReVision at a rate guaranteed to be 2 cents less per kilowatt hour than
the rates South Portland pays under a bulk purchase deal with Maine Power
Options.
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 outright for $20,000.
Because the roof of City Hall has a smaller area
that faces less directly to the south, ReVision could only promise a 1 cent per
kilowatt hour savings there, prompting the city pass on that option. The city
also decided not to install panels on the Community Center on Nelson Street.
The steep pitch of the roof over the public pool put the infrastructure cost
need to the hold the panels in place out of reach, said City Manager Jim
Gailey.
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, when introducing
the project to the council in August. 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.”
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 will create a
“single purpose” LLC known as South Portland Solar. The LLC will 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.
Terms of a “power purchase agreement” offered to South Portland by ReVision Energy of Portland, for a solar power projects to be built atop the planning and development offices.
System size 19.2 Kw
System cost (paid by vendor) $76,459
Annual electrical production 24,000 kwh
Elec. cost, Years 1-6 2¢ below market rate (currently 12¢/kwh)
Year 7 purchase price $20,000
Annual savings after purchase $3,400
Return on investment 5.4 years
Projected 30-year savings $64,000
System life expectancy 40+ years
CO2 reduction 32,160 lbs.
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