Solar adds to city's power portfolio – at a cost
Nearly three years ago, a report produced by Independence Power and Light for a Public Utilities Advisory Board meeting showed a projected $15 million loss for the city’s community solar farm over the 25 years of its contract with MC Power.
Some city staff later clarified that the figure is based on a snapshot projected out over a long period, and projections could well change over time. Also, the figure represented part of an overall cost more than a loss, they said, and revenues from existing rates covered that overall cost.
Nearly three years later, the solar farm outlook isn’t much rosier, but IPL Director Jim Nail says that still should not affect electric rates, which a couple years ago were reduced by 6 percent.
According to an IPL memo in earlier this year to the Public Utilities Advisory Board, the net cost in 2020 for the solar farm’s power – after accounting for what that same amount of power would cost purchased from Southwest Power Pool, as well as the subscriber contributions – was $887,000, or $44.74 per megawatt/hour.
The total purchase, at the contracted amount of $81.50 per megawatt/hour, was $1.6 million, and IPL is obligated to buy all power from the solar farm for the duration of the 25-year contract. MC Power owns the solar farm and leases the land for it from the city. The up-front lease payment help offset the city’s cost to buy the land several years ago.
Nail, who was not the department director at the time the contract was drawn up in 2017, said anyone who looked at the report then knew there would be a cost with the community solar farm. At the time of the PUAB memo, the solar farm, with sites on Bundschu Road in rural eastern Independence and at the former Rockwood Golf Club on the west side, was more than 61 percent subscribed. At full subscription, it still would not cover near the total cost of solar power.
“There’s a cost to going green, and the decision was it was worth it to the City Council at the time to supporting green energy,” Nail said. “It’s such a low volume of generation, we don’t count it as a revenue source. We count it as reducing the load to purchase.”
On a perfectly full sunny day, Nail explained, the solar farm would produce about 11 megawatts of energy, “and typically you’re not even going to get that.” To compare, IPL’s peak usage days stretch into the 200s.
“The solar farm for us works like if you had solar panels on your house,” he told the PUAB. “They offset some of our load.”
In short, Nail said, the solar farm should not affect raise or lower electric rates going forward, as IPL is buying a small amount of its power at a higher price than the rest of its power, then selling all of that power (what ratepayers use) at the same price – in a department with an annual budget of about $140 million.
The grassroots citizens group Indy Energy, whose principal members all pay the extra fee for solar power subscriptions, say it’s important for any municipal utility to have renewable energy in its portfolio, but in Independence’s case, Brent Schondelmeyer said, “we pay too much for a good idea, and for too long.”
The commitment to buy all the power at a fixed price for 25 years, he says, turned an asset into a liability.
In general, solar prices have dropped in recent years thanks due to better technology and compare more favorably to other energy sources, and even some non-renewable sources have not risen to be more costly than solar, which a few years ago had been considered a long-term possibility.
Recent estimates from the U.S. Energy Administration show now that in 2026 standalone solar power could be purchased for about $31 per MWh – less than half the price at which Independence is locked in.
When the city decided to build the second portion of the solar farm at the Rockwood site, it simply exercised the contract option to continue the $81 price, instead of checking out alternatives.
“We supported the idea at the time,” Schondelmeyer said of when the solar farm started several years ago on Bundschu Road, “but the economics weren’t thoroughly vetted and thoroughly explored.”
Ultimately, though, about the only way the solar farm might affect electric rates, Nail said, is if the city exercised an option in a couple years to buy the solar farm. Under the contract, that could only happen after a third-party appraisal, and then the city would be considering the long-term cost savings versus a significant one-time investment. The Missouri Public Utility Alliance has started the process of possibly buying out its solar farms with MC Power.
“It’s something we’ll look at going forward,” Nail acknowledged, but right now it’s not at the top of department priorities, as the utility must decide soon how it will replace power from its aging turbines.
The six turbines have a capacity of 93 megawatts, and when called upon represent the city’s lone generation source beyond the solar farm. Most of IPL’s power comes from facilities outside the city. The city has started investigating possible steps to replace the turbines – an investment that will at least be high in the eight-figure dollars if not $100 million.