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HomeMy WebLinkAbout09 12 2016 Community Solar Gardens Phone 952.447.9800 / Fax 952.447.4245 / www.cityofpriorlake.com 4646 Dakota Street SE Prior Lake, MN 55372 CITY COUNCIL WORK SESSION REPORT MEETING DATE: SEPTEMBER 12, 2016 AGENDA #: A PREPARED BY: KATY GEHLER- PUBLIC WORKS/NATURAL RESOURCES DIRECTOR PRESENTED BY: KATY GEHLER AGENDA ITEM: COMMUNITY SOLAR GARDENS DISCUSSION: Introduction The purpose of this agenda item is to introduce the background of community solar gardens in Minnesota and to lay out the options and savings available to the City of Prior Lake should it subscribe to a facility in development by SoCore Solar. History Starting in the early 2000s efforts were initiated nationwide to create incentives and subsidies for renewable energy sources to help them compete with the existing subsidies for fossil fuel sources. In 2013 the Minnesota Legislature enacted Statute § 216B.1691, subd. 2f that requires public utilities in the state to generate or procure electricity from solar sources so that by the end of 2020, at least 1.5% of the utility’s retail electricity sales in the state are produced from solar energy. At least 20% of this energy must be generated by facilities with a capacity of 20 kW or less: community solar gardens. A community solar garden is a local-scale solar energy system from which nearby electricity customers can purchase a subscription that reserves to them a fixed monthly share of the electricity generated by the project. To date, solar gardens have been most often constructed and owned by a third-party developer, rather than the electric utility directly. How it works:  A third-party developer builds a facility and sells subscriptions to Xcel customers based on a fixed amount of solar power that is no more than 120% of their average annual electrical use.  The city pays the solar company directly for the power they produce each month on the City’s behalf.  The solar company sells the solar power to Xcel on the city’s behalf.  Xcel bills the city for the actual power used, but provides a credit for the solar power produced at the solar garden. The credit from Xcel is the applicable retail rate (ARR) plus a fixed subsidy of $0.02/kWh. The credit is greater than the amount paid to the 2 third party developer so that the city can expect to see a net savings through the solar garden subscription. SoCore Solar, a third-party developer, approached the city with the opportunity to subscribe to a solar installation they are building in Dakota County. Prior Lake is eligible to participate in any of the Xcel Energy- sponsored community solar garden projects within Scott County or any county adjacent to it. SoCore is looking for subscribers to fill the remaining capacity of the site and has offered up to 1,511 kW of solar capacity to Prior Lake or roughly 65% of the city’s average annual electrical consumption in 2014-2015 (1 kW of solar production = 1,332 kWh of electrical consumption). FINANCIAL IMPACT: SoCore offers a range of subscription options based on rate structure and duration of the contract. The different options provide the city a range of possible savings from roughly $200,000 to $2,800,000 over the life of the subscription (15-25 years, depending on the plan chosen by the city). These savings are calculated on the assumption that electricity rates will increase at an average of 3% annually. Rates have increased an average of 3%-4% annually over the last 10 years, which would yield a greater savings. The actual savings the city will see are subject to the ARR calculated by Xcel and the subscription rates. While there is some risk that the credit from Xcel may drop below the cost of the solar power subscription paid to SoCore, the state-mandated $0.02/kWh subsidy provides a cushion of security that the city is unlikely to see a net loss over the term of the subscription. CONCLUSION: The community solar garden subscription offers the City an opportunity to participate in the renewable energy efforts of Minnesota and Xcel Energy and to save money at the same time. While there is a finite risk that the cost savings will not meet projections if energy costs drop precipitously in the future, the risk is mitigated by the past history of energy prices and by subscribing only 64% of the city’s capacity at this time. At the work session staff will review the Community Solar Program in Minnesota and the potential SoCore Solar project.