Brooklyn Park is narrowing down its options for a solar power system project that would power city buildings and reduce the city’s power bill.
If adopted, the city would be provided rooftop mounted solar panels on six city-owned buildings, which would be purchased, installed, owned and operated by a private tax investor for 20 years.
The city would agree to buy power generated by the solar panels from the tax investor before purchasing it from Xcel Energy, thereby reducing the city’s power bill. Xcel would also provide the city with financial incentives for such a program, which would also generate savings for the city.
In return, the investor would receive federal tax incentives for its part in the program, a federal investment tax credit worth approximately 30 percent the total system cost and accelerated depreciation tax incentives.
The investor makes an approximate 6-8 percent return on the investment.
After 20 years, the city would be given the solar panels and be able to produce electricity at no cost.
Apex Efficiency Solutions has identified tax investors who want to partner with the city and Apex to bring the project to fruition.
If the city decides to implement this plan, it would have one of the largest city-sponsored solar panel installations in the state, according to Dan Ruiz, operations and maintenance director. Approximately 65 percent of the power used in city facilities would be renewable after implementation, he said. The city would then look at other options for renewable power that could further reduce dependence on the Xcel grid.
Maintenance costs for the panels are approximately $10,000 to $15,000 per year. The panels degrade approximately half a percent of efficiency each year.
Panels are proposed to be built on the police station, the Community Activity Center, three operations and maintenance buildings and the city’s water treatment plant, for a total potential output of approximately 1.5 megawatts. The water treatment plant would have the largest set-up and could produce up to 950 kilowatts of power.
While the solar panels themselves would have no cost impact for the city, the city could also prepay for electricity produced by the panels. Depending on the level of investment, the city could see increased savings over time.
City staff members worked with Apex to develop three plans that the city could move forward with.
The city could pay for the electricity generated by the solar panels, along with a yearly power purchase agreement charge. Annual revenue in the first 20 years of operation under this plan would be approximately $7,000 to $10,000, with a cumulative cash flow of approximately $2 million over 25 years.
Another option recommended by staff members involves prepayment of the energy generated by the panels on the water treatment plant, which would cost $1.6 million and would do away with some annual purchase agreement charges. Assuming the city had already paid back this funding at 3 percent interest, the city would generate approximately $50,000 to $55,000 in annual revenue in each of the first 20 years of operation. Cumulative cash flow over 25 years would be $2.7 million.
A third option is to prepay for all power generated by the panels, a $2.45 million venture that also forgoes annual charges. Assuming the city would have already paid this back at 3 percent interest, the city would generate approximately $95,000 in annual revenue in each of the first 20 years of operation. Cash flow over 25 years would be $3.7 million.
The city could pay for panels without an external loan, according to Ruiz. That is, the city could borrow from its own funds, which would eliminate the need to pay interest to an outside financial institution. General fund retained earnings or the water and sanitary sewer utility fund could be used to provide the funding, he said.
No councilmember said they would support a plan without prepaying for power, and no member said they were opposed generally to the plan. There was no consensus on whether the city ought to pay only for power generated at the water treatment plant or for all power generated by the panels.
Councilmember Bob Mata said he would support the maximum investment in prepayment, as this would bring the city the highest return on investment.
“I’m all for the solar panels, I’m just looking at the return, and anytime I can double my return with half the amount of investment, I’m all for it,” he said. “It’s a no-brainer.”
“Part of the debate is how much money we want to tie up in this investment,” City Manager Jay Stroebel said.
Mayor Jeff Lunde said he would support pre-purchasing power from the water treatment plant panels.
“I lean more towards [the water treatment plant],” he said. “I think it’s a good way to proceed … but I think [prepaying as much as possible] could be an option as well.”
Councilmember Lisa Jacobson said she would also support pre-purchasing power from the water treatment plant panels and would like to see more specific details on the financial aspect of the plan.
“I’m excited to see us head down this path,” she said.
Councilmember Mark Mata said he was worried about long-term costs for maintaining or potentially disposing of the solar panels in the future.
“The good news about solar panels is they’re fairly benign,” said Greg Ackerson of Apex.
To this point, resident support for the program has been strong, according to Ruiz.