The Brooklyn Park City Council discussed potential options for solar power installations on city facilities at a Feb. 6
Greg Ackerson of Apex Solutions presented two plans for the installation of solar panels on six city facilities. These panels could generate a total of 1,497 kilowatts of electricity for the city, reducing the city’s electricity bill, he said.
The plans do not necessarily require the city to fund the purchase and installation of these solar panels. That is, one plan involves a third-party investor that funds the installation.
If the council votes in favor of the first plan, a third-party tax investor would pay approximately $3.1 million for solar panel installation and maintenance, rather than the city. The investor would own the system for 20 years after installation.
The city would sign a power purchase agreement and agree to buy electricity from the investor before buying from Xcel Energy, thereby reducing the city’s electrical bill. After 20 years, the city would take over ownership of the panels at a minimal cost, Ackerson said. Once the city owns the panels, they would generate power at no cost other than maintenance to the city.
In return, the tax investor would receive federal tax incentives during the agreement. A federal investment tax credit would provide relief worth approximately 30 percent of the value of the system. Likewise, the modified accelerated cost recovery system would provide tax relief worth approximately 30 percent of the total cost of the system, Ackerson said. Those benefits are passed on to the city in the form of low-cost electricity, he said.
The investor also makes an approximate 5 percent return on the investment, Ackerson said.
The city would also realize incentives from Xcel Energy that would reduce costs, Ackerson said. A capacity credit at $5.15 per kilowatt would result in $64,112 in yearly savings, and a two-month demand charge holiday would result in $36,343 in yearly savings.
The electricity generated by the panels would be worth $179,640 in the first year of operation. However, as part of the power purchase agreement, the city would pay $233,532 to the investor. The Xcel energy incentives of approximately $100,000 result in approximately $8,000 in energy cost savings for the city.
Savings would increase yearly as the cost of electricity continues to climb, Ackerson said. By year 20 of operation, the city will save approximately $40,000 per year. Total savings during the 20-year period would be approximately $508,000. Once the city owns the panels in year 21, they will generate approximately $400,000 in savings for the city that year.
“Most of the tax investors end up being east coast deregulated utilities,” Ackerson said. “They want a couple things: one is they want solar, so this helps them. The other piece is they’ve got a large tax appetite … so even though 5 percent isn’t great, for them, they’ve got the tax appetite, and a 5 percent guaranteed return to leverage their tax appetite is kind of a no-brainer,” he said.
“At the end of 20 years, they’ve gone through depreciation, they’ve taken the investment tax credit, they’ve recouped their return, and now, they basically donate them to the city for $1,” Ackerson said. “At that point in time, all that electricity is now free, because you own it,” he said.
A second option exists for the council: prepay for some of the electricity by funding approximately $2.5 million or 76 percent of the system cost. In this model, the tax investor still owns the system for the first 20 years of operation. However, the city does not have to pay a yearly power purchase agreement charge, resulting in larger savings.
With this model, the city saves approximately $130,000 in energy costs per year, with slight yearly increases as the value of electricity is raised.
The city would take ownership of the panels after seven years, but would continue making a debt service payment on the $2.5 million building cost through year 20.
Dan Ruiz, director of operations and maintenance, said the cost to maintain the panels should be approximately $20,000 per year once the city takes ownership.
Ruiz said staff members would recommend the prepay option.
A building with a solar panel would use solar-generated electricity first, then pull from the Xcel power grid for its remaining needs. If a panel overproduces, the electricity is pushed back onto the power grid.
This project spawned from the police station remodel project, Ackerson said. The station roof was constructed in a way that facilitates the addition of solar panels at a later date, he said. Apex worked with the city on the police station remodel project.
The police station, community activity center, three operations and maintenance buildings and the water treatment facility are all being considered for solar panel installation. There is potential for ground-mounted panels at the community activity center, Ackerson said.
The buildings were selected based on the condition of their existing roofs, Ackerson said.
Roof-mounted panels are mounted at a low angle to reduce wind resistance, Ackerson said. The systems would have a long life span, but certain parts of the system would require maintenance, he said. Panels have a long life span, but degrade about half of 1 percent per year, he said. Inverters, which convert directed current into alternating current, last 20-25 years, and replacement is part of the regular maintenance for the system, he said.
If the council votes to approve the project, installation would begin this summer.
Apex has worked on similar projects with the cities of St. Cloud, Columbia Heights and Inver Grove Heights, Ackerson said.
Contact Kevin Miller at [email protected]