California City Gets Discounted Electricity from Solar Energy Provider
A California city is benefitting from a solar energy system provided by a third-party developer.
By Noreen Seebacher|December 11, 2008 at 12:31 PM
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City officials in Willits, CA are cutting energy costs and improving the municipality’s carbon footprint without spending a cent. All they provided was the use of city-owned land to a company that develops solar energy installations. “It’s a hackneyed expression, but it really is a win-win,” says City Manager Paul Cayler.
Cayler credits the new solar energy system at the Willits Water Treatment Plant to an innovative business model that shifts the cost of renewable energy projects to a third-party developer. Perpetual Energy Systems, a Harrison, NY-based developer of photovoltaic solar energy systems, arranged the financing of a system at no cost to the city. Stellar Energy Solutions, a commercial solar integrator in California, developed and installed it.
Mayor Holly Madrigal called the project an economic and environmental success. “Even as a community of 5,000 residents, we feel it is important to do the most we can to reduce or eliminate our impact on the environment,” she said. The project has the capacity to generate about 530,000 kilowatt-hours AC (kWh) per year–100% of the water plant’s power needs.
Perpetual Energy Systems will own and maintain the system–on land it’s leasing for the next 25 years–and sell the energy the system generates to the city for a negotiated rate. The rate represents a discount over the cost the city would have paid its traditional electric supplier, guaranteeing lower energy costs, Cayler says.
Laurance Friedman, co-chair of Perpetual Energy Systems, declined to say specifically how much of a discount the company is giving the city. But he says discounts typically range from 3% to 10%, depending on the size, efficiency and scope of the installation. “Each one is different,” Friedman says.
Solar energy is a hot topic in commercial real estate. Southern California Edison, for instance, just unveiled a warehouse rooftop in Fontana, CA covered with 33,700 solar panels that will provide green energy directly to its grid. Denver-based ProLogis owns the warehouse, which is the first of 150 commercial buildings that Edison plans to equip with solar panels. The photovoltaic project has the potential to power more than 160,000 homes when the sun shines.
Perpetual Energy Systems finances the design, construction, installation and operations of large-scale solar energy systems through conventional credit and equity from renewable energy tax credits. Just two months ago, President Bush signed legislation that extended tax breaks for renewable energy investments.
The Energy Improvement and Extension Act of 2008 provides a one-year extension of the production tax credit (PTC) for wind energy and a two-year extension of the PTC for electricity produced from geothermal, biomass, solar power, trash-to-energy, small hydropower projects and capacity additions to existing hydropower plants. In addition, the bill creates a new PTC for electricity produced by marine and hydrokinetic renewable energy systems.
The biggest beneficiary of the tax extensions is the residential and commercial solar power market, which gained, among other things, an eight-year extension of a 30% tax credit. The Solar Energy Industries Association predicts the continuing tax breaks will keep solar power in the spotlight generating more than 440,000 jobs, at least $325 billion in private investment and more than 28 gigawatts of solar power.
President-elect Barack Obama has already called for a national renewable portfolio standard to mandate that utilities get 10% of electricity from renewable sources–wind, solar, and geothermal–by 2012 and 25% by 2025. Just this week, representatives of the financial community met in New York City to discuss the growth of solar as an investment opportunity. The two-day forum, Solar Innovation; Investment, featured analysis of the current regulatory framework, new technologies and innovative financing for solar projects.
The renewable energy sector currently employs about 2.3-million people globally, according to the Worldwatch Institute, including 170,000 in solar photovoltaics (PV) and at least 624,000 in the solar thermal industry. And the numbers are growing. While employment in most sectors of the economy lags, 43% of the energy executives polled expect hiring levels to increase in the short term, according to third quarter 2008 McKinsey Global Survey on the economic and hiring outlook.
In California, for instance, Gov. Arnold Schwarzenegger has set a goal of increasing California’s renewable energy sources to 20% by 2010–and supports reaching 33% by 2020. Schwarzenegger said clean-technology businesses are getting venture capital dollars and hiring new employees at a time when nearly every other segment of the economy is lagging.
The US Dept of Energy, meanwhile, reports new manufacturing facilities for solar cells and modules–in Massachusetts, Michigan, Ohio, Oregon and Texas–could add enough capacity to produce thousands of megawatts of solar devices per year within the next few years. Since September:
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