The city could save or lose as much as $1 million on energy
costs over the next 20 years if they enter a solar power purchase
agreement with a Bay Area company.
The city could save or lose as much as $1 million on energy costs over the next 20 years if they enter a solar power purchase agreement with a Bay Area company.
A proposal by Borrego Solar, of Berkeley, and city staff would allow the company to install enough solar power panels on public facilities to produce 1.5 megawatts’ worth of energy. Presented Wednesday at the city council meeting, the proposal would include installation of the systems in the parking lots and on the rooftops at the city hall campus (including the development services center), Centennial Recreation Center, Community and Cultural Center, police station and Aquatics Center.
The council, by a unanimous vote, agreed to pursue the agreement, but asked city staff to return later this month with alternatives that would cause less disruption to events and patrons at the facilities, limit the removal of trees, and minimize what city staff see as a “disincentive” to conserve energy.
Because the city would agree to purchase a precise amount of power over the 20-year contract period – no more and no less – it would not make a difference financially if the city is able to conserve energy at the facilities, Morgan Hill program administrator Anthony Eulo said.
Borrego would pay all costs associated with the construction, installation and maintenance of the systems. The project was described as “major construction,” and would involve tearing up existing parking lots at the sites and repaving them with carport structures with elevated solar panels providing shade for parked vehicles.
The five sites were chosen for consideration because of their high use, which results in high energy consumption, and the vast amount of land available there compared to other city properties, Eulo said.
The city hopes to sign an agreement by Dec. 15, if both parties can agree to the possible new provisions added by the council Wednesday. Specifically, that included eliminating the Community and Cultural Center from the project, as the parking lot there is used often for community events which could be disrupted by the construction.
That site is the smallest of the five, and Borrego solar project developer David Potovsky said its removal might not make that big a difference in the overall project. However, another request by the council to consider alternatives to scale back the panel array at the Centennial Recreation Center might have a more significant impact on the overall savings to the city.
The key to the council’s ultimate decision will largely hinge on which benefit is a more urgent priority for the city – reduction of the city’s carbon footprint, or financial savings of up to $1 million.
But because the rate at which energy prices increase over the next 20 years is unpredictable, the city could lose nearly $1 million. The deal proposed Wednesday had the city paying a fixed rate to Borrego, with a 3 percent increase in the price per kilowatt-hour each year.
If PG&E, which the city pays now for electricity, raises rates more than 3 percent per year, the city will save money, Eulo said. Specifically, if PG&E’s rates go up 4 percent for each of the next 20 years, the city would save $1.1 million off its current expected rates under the deal with Borrego.
However, if PG&E rates escalate more slowly, at 2 percent per year for example, the city would pay about $981,000 more for energy at the facilities than it projects to pay now, Eulo said.
City staff and Borrego think that, based on historical trends, PG&E’s rate of escalation will be more than 4 percent over the next 20 years, thus assuring a savings.
In 2009, the city paid about $415,000 on electricity for the five facilities. The project is designed to offset the total power costs at each site, and about 80 percent of each facility’s kilowatt-hour consumption.
The renewable energy project as proposed Wednesday would reduce the city’s carbon dioxide emissions by about 27,000 tons, Eulo said.
Borrego is working with Morgan Hill as part of a larger deal to implement similar contracts with the cities of Milpitas and Cupertino, and with Santa Clara County.
Without a definitive determination of whether or not the city would save money on the deal, based on the unpredictability of utility rate increases for the next two decades, the council discussed the proposal at length and asked numerous questions.
“I think this is a great idea, for lots of reasons,” Councilman Larry Carr said. “Carbon footprint reduction is very important because it is the right thing to do, but I was hoping the financial incentive would be more clear-cut for us.”
All councilmembers indicated a preference to proceed with a contract with Borrego that satisfies the concerns they voiced Wednesday.
Morgan Hill electricity bills, 2009
-City Hall: $38,000
-Development Services Center: $30,000
-Centennial Recreation Center: $114,000
-Community and Cultural Center: $62,000
-Police station: $80,000
-Aquatics Center: $90,000
