Davis City Council unanimously voted to execute a legal agreement that will move a solar photovoltaic system at the wastewater treatment plant forward.
Councilmembers discussed the project at Oct. 13’s city council meeting.
The city staff examined the project’s ability to reduce energy costs and further the sustainability goals of the city, mainly reducing green house gas emissions from electricity consumption.
The staff determined that the $6 million project will offset almost the entire cost of consuming electricity used at the plant, which is $250,000 per year. Even though the city asked for federal stimulus money, no money has been seen.
If there are no grants or loans, it is not financially feasible for the city to finance the project without significant ratepayer impacts, according to the staff report.
The Power Purchase Agreement (PPA) between the city and the development team will list the risks associated with the project as well as the negotiated terms.
Under the PPA, the city will host a system that the vendor will design, build, own and operate. The city agreed to purchase electrical energy produced by the solar project for 20 years at a constant rate.
The rate will be 13.9 cents per kilowatt-hour during the 20 years.
“So that means we will pay substantially less in dollars, which is really an important thing for people to understand,” said Councilmember Sue Greenwald at the meeting.
Davis is partnering with a team consisting of SPG Solar, which will handle the engineering and construction, and SunEdison, which will arrange the finances and operate and maintain the system.
The partnership is advantageous because the city will be able to consider federal tax incentives that are not available to public organizations, the report says.
Davis obtained a California Solar Initiative grant that provides a $2.6 million incentive, lowering the cost of energy. Since CSI incentives decrease over time, the city’s Senior Civil Engineer Michael Lindquist said execution of the agreement becomes even more urgent. The current incentive is about 25 percent less than what was initially reserved. Oct. 23 marks the deadline when the CSI reservation will expire if an executed PPA is not provided.
An important aspect of the project is to meet the city’s sustainability goals along with saving money for ratepayers, Lindquist said.
“This project yielded significant reductions in greenhouse gas emissions and really represents the single largest greenhouse gas reduction measure undertaken by the City since we began tracking greenhouse gas emissions,” Lindquist said. “The staff believes it’s a very important step in our goal.”
Councilmember Stephen Souza had some reservations about the project, which Greenwald echoed later in the meeting. Souza said he was unsure of the claim that the city would be better off financially by having someone build the project for Davis and sell the City the energy. The City can buy it from the vendor at the end of the term.
Considering the costs involved, Souza asked why the city should not build it itself and own it, even with the agreement in place.
With the PPA, the vendor realizes a larger incentive though the CSI program. Additionally, the city does not pay federal taxes, so the project will cost less, Lindquist said. Also, establishing funding for the city to build the project would have another cost.
Souza also said he preferred building a 52 megawatt system for the entire community, compared to the current project’s 1.6 megawatt system.
“1.6 megawatts is wonderful but at the end of the day, there is probably a better arrangement for taxpayers and our entire community, from our carbon footprint perspective,” Souza said.
Greenwald also questioned whether the city would regret a small project if it decided to go forward with a 50-plus megawatt system.
Sustainability Programs Coordinator Mitch Sears said smaller projects can be very effective, especially with this project’s location. Power consumption is sized to meet the power demand and the project is a good way to offset the costs of using energy at the plant, Sears said.
Despite Greenwald and Souza’s reservations, the council nevertheless, decided to move forward with the project in a four to zero vote.
The project will be completed by spring 2010.
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