Standard Solar consultant and financial analyst Rob Busler detailed funding options for the 1.2 megawatt solar photovoltaic (PV) facility planned for the John Hanson Waste Water Treatment Facility (WWTF) at the Town Council meeting on Monday night.
The impact of the PV facility would be to dramatically decrease the Town of Chestertown’s dependency on Delmarva Power, generating enough energy to not only power the WWTF, but also cover 93% of the energy needs of six major municipal power consumers.
According to Busler’ report, construction on the facility could start as early as June 30 2012, however, it is expected that this may not begin until December, with the project’s completion slated for June of 2013 when the town’s contract with its third party electricity supply (Integrys Energy) for the WWTF expires.
The Council has yet to determine what form of financing to use to begin the PV project. Busler presented them with two options, a direct cash purchase plan, or a power purchase agreement with a third party.
In the case of the cash purchase option, the Town of Chestertown would be capable of making an initial down payment of $499,000, compensating for the remainder of the costs with a twenty year loan at 5% interest. Busler’s financial model indicates that during the first year, the town could save $36,000 on energy expenditures, but the real savings would not begin until the twenty first year – after the facility is fully paid for – allowing for approximately $435,000 in savings. By year twenty-five, the savings are expected to be around $1.2 million.
The other alternative, the power purchase agreement, would require no upfront cost for the Town of Chestertown, nor would there be any cost for operations and maintenance. The value of the electricity generated by the PV facility would essentially cover these expenditures, allowing for $600,000 of savings on energy expenses over a twenty-year period.
The general tone of the council, however, seemed to suggest a predisposition towards the cash purchase option.
“There’s no question that a PPA (power purchase agreement) is an easy thing to do. It’s an easy choice to make, it’s not a bad deal, I can see why people who don’t have a utilities commission would say, ‘Hey that’s great, it’s a nice guaranteed rate for twenty years’,” said Town Manager Bill Ingersoll during the meeting.
“But I see it a different way,” he continued, “I think we are in the utility business already, the savings could be incredible, and if we had the support of say, the USDA, it would be even better.[…] I think we have to endow ourselves for the future, I don’t see things getting better for a while[…] We have to find ways to make money ourselves or do better ourselves, rather than push this on the consumer who is using water and sewer.”
Mayor Bailey echoed Ingersoll’s comments, speaking of posterity and greater financial independence for Chestertown.
Steve Payne says
Is the 1.2 Million savings after debt service and depreciation? I think a simplified CBO style cost study should be done.
Jack Offett says
And put it out to bid.
S Pennington says
Unless it’s described incorrectly here, why would anyone choose the purchase option, rather than the PPA option? Where exactly is the town coming up with the down payment and the loan payments? With a purchase, the town is on the hook for everything… including a 20 year loan on a field full of solar panels *which have a useful life of 15 years*. With the PPA, all the problems belong to someone else.
You’d think the town had enough to think about with running the marina. Now we’re going into the electric business? What next?
Steve Payne says
I’m still waiting to hear back on a couple of questions I asked. What I do have shows the Cash Flow analysis to begin after settlement and shows those numbers.
The problem is once the downpayment is put on the spreadsheet the savings drop by the $499,000.