Bright Idea Saves City of Manteca $$$
City will install, then sell solar panels at treatment plant to reduce power costs
Manteca city leaders have found a way to recovery much of the $8.2 million being spent on a massive solar installation including a $1.3 million PG&E connection charge while at the same time locking in a rate for the bulk of the electricity needed to run the wastewater treatment plant for years to come.
It also will mean the city will not have to worry about the operation and maintenance of the system that Borrego Solar is under contract to build on the southwest section of the municipal wastewater treatment plant. The firm was contracted to design a 5 megawatt solar facility with 2.5 megawatts being constructed initially.
Interim City Manager Miranda Ludlow has indicated Manteca is in talks with a number of firms to hammer out a solar power purchase agreement.
It would involve a firm financing and installing the system on city property and then selling the power generated back to the city at a fixed rate.
What makes such an arrangement valuable to a firm are federal tax credits that they can use but a public entity can’t. That, along with the payment for power, creates a desirable flow of income for a private entity. Tax credits are used to reduce a firm’s tax liability typically over multiple years to increase their margin of profit on various ventures.
Such PPAs normally are in place for 10 to 25 years. At the end of the contract the city could either buy the solar installation from the developer or else have it removed.
Ludlow noted the length of the PPA hasn’t yet been determined.
It will include provisions, however, that will pay the city the price of any electricity that is not produced under the terms of the contract. That means at an annual true up, if 2.5 megawatts of power was not delivered to the city, but 2.485 megawatts was delivered instead the city would be paid the difference to offset power they would have to buy from PG&E.
Lutzow noted not all of the $8.7 million the project will cost would be reimbursable. That said it is likely 50 percent or more will be meaning what money is saved from the funds the city committed to the project can go toward other major sewer projects such as $10 million or so needed to replace an aging north Manteca trunk line that is in poor condition and could fail at any time.
The city more than four years ago started looking at solar to reduce the power costs of operating the treatment plant that is by far the largest consumer of electricity in Manteca. Three years ago the plant’s power bill was in excess of $1.3 million.
The solar panels will flat-line the majority of the cost of running the plant as whatever electricity is generated won’t be subject to PG&E rate hikes including the 12.6 percent hike the for-profit utility is currently seeking.
The wastewater treatment plant operations as well as the operation of the sewer system citywide are paid by monthly charges billed to ratepayers.
The impact of solar by itself without a PPA would have simply stabilized power costs resulting in savings as the years go by. But because the city is now seeking a PPA with a private firm that can harness tax credits, that frees up capital improvement funds that are collected as part of monthly rates to go toward other sewer needs.
While Lutzow was cautious not to say it would stave off rate increases in the near future, the use of solar power plus the PPA deal would reduce the amount of money needed to cost and operate the system that effectively would somewhat ease pressure on the amount of future rate hikes.
The PPA angle was not pursued prior to changes that have been made recently with city management.