Item 3.16 Solar Energy East WWTF Facility0,
Ot
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MINNESOTA
DEPARTMENT INFORMATION
Request for
City Council Action
ORIGINATING DEPARTMENT
REQUESTOR:
MEETING DATE:
Utilities
Utility Manager Neidermeier
December 14, 2020
PRESENTER(s)
REVIEWED BY:
ITEM #:
Consent
City Administrator/Finance Director Flaherty
City Attorney Kendall
3.16
STRATEGIC VISION
MEETS:
THE CITY OF OTSEGO:
Is a strong organization that is committed to leading the community through innovative
communication.
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Has proactively expanded infrastructure to responsibly provide core services.
Is committed to delivery of quality emergency service responsive to community needs and
expectations in a cost-effective manner.
Is a social community with diverse housing, service options, and employment opportunities.
Is a distinctive, connected community known for its beauty and natural surroundings.
AGENDA ITEM DETAILS
RECOMMENDATION:
City Staff is recommending the City Council approve agreements for capital lease -back of a solar energy
production system for the East WWTF Biosolids Facility.
ARE YOU SEEKING APPROVAL OF A CONTRACT?
IS A PUBLIC HEARING REQUIRED?
Yes
No
BACKGROUND/JUSTIFICATION:
A solar alternate was initially awarded concurrent with the construction of the East WWTF Biosolids Facility
with the understanding that "Green Project Reserve" funding (GPR) would be available to defer a portion
of the capital cost and improve the payback period of the system. The GPR was not available in mid-2020,
and the solar alternate was removed from the construction contract.
A different delivery approach for solar was identified as a capital lease -back option, which requires no
capital investment and is paid over time via reduced electrical utility payments. Executing the agreement in
2020 maintains the favorable terms, as incentives are reduced each year, and the payback if executed in
2021 would be longer. Currently, the City would become full owner with full benefits after year 16.
The informational packet included within the packet identifies estimated electrical utility savings of
$362,589 over the expected 40-year life expectancy of the solar energy production system, which is net of
the power purchase (lease) payments. City staff has obtained references and received positive feedback
from other municipal governments.
The proposal has been discussed multiple times at the Public Works Subcommittee and has received
technical and legal review. Also, a smaller portion of the GPR will now be available (following passage of
the state bonding bill) for the "base" work remaining in the construction contract that configures the
electrical system to allow solar (GPR at 25-percent of $48,000 results in $12,000 loan forgiveness).
SUPPORTING DOCUMENTS ATTACHED:
• Informational Packet from Public Works Subcommittee Meetings
• Solar Array Purchase, Facility Lease, Power Purchase & Put and Call Agreements
o A copy of the agreements will be available at the City Council Meeting.
PORRIRI_F MOTION
PLEASE WORD MOTION AS YOU WOULD LIKE IT TO APPEAR IN THE MINUTES:
Motion to approve the Solar Array Purchase Agreement between the City of Otsego and Ideal Energies, LLC
and to approve the Facility Lease, Power Purchase, and the Put and Call Agreements between the City of
Otsego and Green2 Solar Leasing, LLC.
RLIDGFT INFORMATION
FUNDING: BUDGETED:
Fund 602 — Sanitary Sewer Utility Yes
MEAL ENERGIES
A GREEN 2 COMPANY
Cashflow Summary
[City of Otsego - WTP - Capital Lease vs. Public Funds]
Capital Lease - Solar for Minnesota Non -Profits, Schools & Public Organizations
General Service Rate Plan
Rooftop Ballasted Solar Array - 53.9 kWDC 385 Watt Solar Panels @ 1 O'tilt & 180' az w/ 40 kWAC SolarEdge Inverters
ver. 10. 14.2020 -Valid for 60 Days
C 2020 DEAL Energies, LLC
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Rooftop Ballasted Solar Array -53.9kVVDC385Waft Solar Pana|u@1U°d|t&10O^ozv/4OkVVAC8o|arEdgoInverters
G6}Oer3| Service Rqfp Plan
Solar Survey
Site Electrical Systems Review
System Layout and Electrical Engineering
Structural Engineering & Analytical Testing (review of roof / soil adequacy to support the system)
Rebate Application, Procurement, and Processing Fees, ifany
Utility Interconnection Agreem*nt(n)
Solar Array Equipment
Solar Array Installation
Electrical Connection—oonneotayotem toyour building's electrical awi(uhgeur
System monitoring equipment and software for web based monitoring
Building Permit &Inspection
Electrical Permit &Inspection
Project Management
Training
Start-up
Solar Array Supporting Documentation
Federal Tax Credit Documentation
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IDEAL ENERGIES
A GREEN COMPANY
Utility Bill Savings
Net Metering - w/ Energy and Demand Expense Savings
Rooftop Ballasted Solar Array - 53.9 kWDC 385 Watt Solar Panels @ 10°tilt & 180° az w/ 40 kWAC SolarEdge Inverters
Xcel SolarRewards
General Service Rate Plan
Solar system size (kW DC) 53.90
Year 1 system production (kWh/year) 59290
kWh generated per kW DC of Solar Panels 1100
Annual degradation - reduction in kWh output (% / year) 0.50%
Ten year average increase in utility costs (% / year) 4.00%
Energy (kWh) Expense Savings
Year 1 Energy Savings from utility expense reduction ($) $3,982
Year 1 Energy Savings per kWh ($ / kW/h) $0.0672
Utility Billing Plan General Service Rate Plan
Year 1 Demand Savings from utility expense reduction ($)
Year 1 Demand Savings per kWh ($ / kWh)
Peak AC output available for reducing demand (kW)
Estimated AC output that reduces demand charges (%)
Year 1 average demand reduction realized (kW AC / month)
Year 1 average demand cost ($ / kW)
$1,547
$0.0261
38.80
25.0%
9.7
$13.29
For documentation on the above assumptions, please refer to the support
documents available from your iDEAL sales representative. If you would
like to use different assumptions, please ask.
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IDEAL ENERGIES
A GREEN COMPANY
Financing Summary
Utility Bill Expense Savings w/ your Solar Array
Rooftop Ballasted Solar Array - 53.9 kWDC 385 Watt Solar Panels @ 10°tilt & 180° az w/ 40 kWAC SolarEdge Inverters
Utility Bill
Power Purchase
Expense Reduction
$5,528
$5,721
$5,920
$6,126
$6,339
$6,560
$6,788
$7,024
$7,268
$7,521
$7,783
$8,054
$8,334
$8,624
$8,924
$9,235
$9,556
$9,889
$10,233
$10,589
$10,958
$11,339
$11,733
$12,142
$12,564
Xcel SolarRewards
General Service Rate Plan
Solar Array
Power Purchase Expense
$4,423
$4,577
$4,736
$4,901
$5,071
$5,248
$5,430
$5,619
$5,615
$6,017
$6,227
$6,443
$6,667
$6,900
$7,140
$7,388
Total Annual Energy Expense Savings
■ Lease Terminated Early n Lease Runs full term
Power Purchase Expense
Savings w/ Solar Array
$1,106
$1,144
$1,184
$1,226
$1,268
$1,312
$1,368
$1,406
$1,464
$1,504
$1,667
$1,611
$1,667
$1,725
$1,785
$1,847
$9,656
$9,889
$10,233
$10,689
$10,958
$11,339
$11,733
$12,142
$12,664
10,10
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The orange bars extending
above the dark blue bars
represent the Total Additional
Annual Energy Expense
Savings Achieved when the
Put or Call is used to
terminate the Lease & Power
Purchase Agreements early
..�J IDEAL ENERGIES
R. A GREEN COMPANY
Maximizing our Customer's Financial Outcome using the Put or Call (Example)
Scenarios: Greene Solar Leasing Exercises Put, Customer Exercises Call & Lease Runs Full Term
Rooftop Ballasted Solar Array - 53.9 kWDC 385 Watt Solar Panels @ 10°tilt & 180° az w/ 40 kWAC SolarEdge Inverters
Xcel SolarRewards
General Service Rate Plan
In
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$1,200
$1,200
-$700
-$700
$500
$500
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$1,200
$1,200
-$700
-$700
$500
$500
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$4,800
$2,800
$2,000
Net Cashfiow a Discount Rate of
15%
mmm
note' Green Solar Leasing's Put Option - During months 1 to 3 after
the Put Date, GZSL can require the Customer to purchase its remaining
interest in the Lease and Power Purchase Agreements through the full
term for the Put Price. The Put Price can be for a fixed value and is
provided above.
note 2 Customer's Call Option - If G2SL does not exercise its Put Option
during months 1 to 3, during months 4 to 12, the Customer can require
GZSL to sell its remaining interest in the Lease and Power Purchase
Agreements for the Call Price. The Call Price must be for fair market
value (FMV). Since the Customer owns the Solar Array day one, G2SL's
entire interest in the transaction is the its net cashflow (power purchase
income, less rent and operating expenses) remaining under the Lease
and Power Purchase Agreements if they ran full term. To determine
FMV, a discount is applied to the net remaining cashflow as per the
example above.
note 3 If neither party exercises their Put or Call Options - the Lease & Power Purchase Agreements run full -term unless G2SL and
the Customer mutually agree to terminate them early.
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�J IDEAL ENERGIES
/fy A GREEN COMPANY
Capital Lease - How It Works
Rooftop Ballasted Solar Array - 53.9 kWDC 385 Walt Solar Panels @ 10°tilt & 180° az w/ 40 kWAC SolarEdge Inverters
Xcel SolarRewards
General Service Rate Plan
Client Greene Solar Leasing
1. Is the Fee Title Owner of the solar array
2. Receives annual rent from Green' Solar Leasing
3. Pays Green' Solar Leasing for power generated
from the solar array
4. Insures the solar array
Ownership
Our Client purchases their solar array from Ideal
Energies and immediately owns it outright.
(Client is the fee title owner)
Facility Lease
Under the Facility Lease, Green' Solar Leasing pays
Ideal Energies for the solar array, and becomes the
tax owner so they can leverage tax benefits on the
Client's behalf. The Facility Lease also assigns any
rebates to Green' Solar Leasing to help pay for the
solar array. Immediately after the purchase, the
Client Leases the solar array to Green' Solar Leasing
for annual lease payments, and Green' Solar Leasing
operates and maintains it on the Client's behalf.
1. Pays Purchase Price to Ideal Energies for Client
2. Pays annual rent to Client
3. Receives and uses available tax benefits
4. Receives and uses available Rebates
5. Operates and maintains solar array for Client
6. Bills Client for Power generated from the solar array
Power Purchase
The Client pays Green' Solar Leasing for the energy
generated from the solar array at a discount vs. utility
rates.
Put & Call
If either party elects to exercise their options [Put Option:
Green2 Solar Leasing requires the Client to purchase
Green2 Solar Leasing's remaining interest for $1; or Call
Option: the Client requires Green2 Solar Leasing to sell
its remaining interest to the Client at Fair Market Value]
the Lease and Power Purchase Agreements terminate,
and you will receive free Energy from your Solar Array
thereafter!
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