As the push for a safer environment grows, many municipalities are looking for areas to not only help the environment, but also to save money. The city of Kerman, California contacted Borrego Solar about installing a solar system at its wastewater treatment plant to meet an increased demand in energy. Water Technology was able to catch up with Steve Birndorf, senior project developer at Borrego Solar, to talk about the benefits of going solar.
Water Technology: What challenges were you looking to overcome at the wastewater treatment plant in Kerman, California?
Steve Birndorf: State officials found that the Kerman wastewater treatment plant (WWTP) was at capacity and unable to meet the increased demand from the growing community. The city was faced with two options: Upgrade and expand the WWTP’s capacity and bring the facility up to current state standards, or face a moratorium on all future building permits, which would prevent any new construction, severely limiting the community’s growth. Kerman decided that they had no choice but to spend $6 million to increase the capacity. However, solving one problem created another: The additional equipment of the renovated WWTP required nearly twice the power of the original plant. Faced with this problem, city officials turned to solar as a way of reducing energy costs at the new facility.
Despite the aid of federal and local incentives, and the decrease in material and installation costs over time, the initial upfront investment for a solar energy system was still a considerable hurdle for Kerman as it was trying to achieve long-term savings. Instead of paying the upfront cost, Kerman chose to go the route of a power purchase agreement (PPA) to finance the solar energy project. Under the terms of a PPA, a third-party investor takes on all finance, design, installation and ownership and maintenance (O&M) costs, and the water district, or host customer, agrees to buy the power back at a predetermined, economical rate.
WT: What was the process in helping them with these improvements? What steps were taken during the planning process?
SB: The company first determined whether Kerman would be a good fit for a PPA deal by making sure the WWTP met a few requirements including having strong credit, a good site for solar and a willingness to sign a long-term contract. They then undertook a thorough evaluation of the property in order to ensure that Kerman’s solar system would meet production and installed cost estimates. Then, a site evaluation was scheduled, looking at shading and the site conditions. The next step was to analyze the last 12 months of electricity bills to gauge the usage.
After evaluating all of the variables, the company determined the appropriate PPA rate, and Kerman signed a 20-year PPA to have a 487-kilowatt sun tracking system installed on 3.37 acres of land adjacent to the plant, with Kerman buying power for $12.2 cents per kilowatt-hour. The company paid for the system, so they bear the risk of its performance, oversee its operations and maintenance and file the necessary paperwork to state and federal agencies.
WT: How does installing a solar unit help?
SB: If a property is suitable for a solar energy installation, the power generated can reduce operation costs and protect against rising electricity rates.
Through a PPA, water districts can replace a portion of their utility bill with a bill for the power generated by the system. The remaining energy is still paid to the local utility and, in cases with a tiered rate system, solar can bring a customer into the lower rate schedule, reducing the cost of utility electricity, as well. Installing solar at the Kerman WWTP will offset about 95 percent of the energy consumption on-site.
This financial model allows Kerman to enjoy the immediate cost savings and environmental benefits without paying a dime upfront, while the third-party investor bears all financial risk associated with the system. At the end of the contract, Kerman has the opportunity to renew its contract, purchase the system outright at fair market value or have it removed at no charge.
“We’re excited to have partnered with Borrego Solar to install a solar photovoltaic (PV) system that will reduce the city’s annual electrical costs by nearly 40 percent. Under the Power Purchase Agreement (PPA), we were able to go solar with no upfront investment and keep up with the needs of our growing community," said Luis Patlan, Kerman city manager.
WT: Does solar always make sense for a plant, school, hospital, etc.?
SB: In Kerman’s case, installing solar with the no-money-down PPA financing allowed Kerman to continue to grow and additionally, the energy savings helped to offset half the cost of upgrading the WWTP. In total, Kerman is offsetting its current energy needs with 945,000 kWh of clean energy, cutting the city’s annual electrical costs by nearly 40 percent and saving $62,000 in year one and almost $3 million over the life of the system.
Depending on each site’s circumstances, the cost savings will differ, so it’s important to identify a company with a long track record of installations, commercial-scale solar energy solutions and immediate access to project financing. Finding a company that works with each customer to determine whether solar makes sense and what financing model is best for the circumstances, whether it is a PPA or to a turnkey contract to purchase the system outright, is important.