Revised projections from when the city of Independence first signed up for a community solar farm show that at the current pace, the Power & Light Department would stand to lose about $15.4 million over the course of the city's 25-year solar power purchase agreement with MC Power, instead of breaking even in a decade as initially hoped.
That projection is based on 100 percent participation in the solar farm. Right now, it's at 67 percent. The first three-megawatt phase off Bundschu Road in rural eastern Independence had full participation when construction for the second phase started earlier this year. The 8.4-megawatt second phase, which covers the rest of the Bundschu site and more than half of the former Rockwood Golf Club land, has about 49 percent participation and is growing slowly.
The $15.4 million loss over time comes from what IPL pays for solar power ($81.50 per megawatt hour) compared with the average cost of purchasing alternative power in its place (currently calculated at $28.24) and the cost paid by participating customers ($16.50).
Brent Gerling, distribution engineer for IPL, explained to the Public Utilities Advisory Board on Thursday how forecasts for high escalation in energy market prices originally led staff to project a break-even point after eight to 10 years of solar power. Pending fracking restrictions and probable carbon dioxide taxes contributed to that forecast, he said, and staff also believed it could receive revenue from solar renewable credits.
“We were factoring all that into the process,” Gerling said of the initial evaluation. “What changed? A lot of things.”
Instead, EPA regulations are less likely at this point, and market prices generally have been held down and have a low escalation projection. So city staff can't project a break-even point right now.
Gerling said the city knew the customer participation cost likely would never cover the cost of solar projection – it was kept low to encourage participation.
The city staff report comes just before the master energy plan from Burns & McDonnell is due to be completed and presented to the public next week.
Answering a question from PUAB Member Garland Land, Gerling said the infrastructure at Bundschu limited the capacity below how much the city wanted to expand to solar farm.
“If we had done that evaluation prior to Rockwood, would we have found there was no break even?” Land wondered aloud. “We continued to expand rather than reflecting that the market had changed.”
Utilities Manager Mark Randall said the City Council's decision likely was more based on the desire to increase the city's green energy portfolio. He cautioned that the current projection – like the initial one – is a snapshot, and energy changes in the future could change the monetary calculations, as well.
“When we went into it, certain assumptions were made; some haven't panned out,” Randall said. “The future isn't written yet.”
A PUAB majority recommended that the city hold off on any future proposals for solar energy without updated energy evaluations.
Independence purchased the Rockwood land for $985,000 last November, and MC Power, which had won the bidding process for when the solar farm first started, paid a half-million to lease the solar farm portion at Rockwood. Interconnection costs from the solar farm there were $326,000. Titan Fish LLC which sold the land to Independence, had purchased it for just $550,000 a couple months earlier.
But Tom Van Camp, the City Council member who lives next to the land, said the city could only get down to $650,000 with the owner prior to Titan Fish. Since the golf course closed, city officials have stated they did not want to have low-income housing on the land, and Van Camp said that possibility still existed before the city purchased the land. MC Power's willingness to partner on the solar farm expansion made the land purchase possible, he said.