Photovoltaic System Estimated to Save City $250,000 Annually

ARTICLE | May 2, 2013

The City of Casa Grande broke ground earlier this month on its first ever photovoltaic system, joining a handful of organizations that are leveraging solar energy to reduce utility costs.  Five city facilities are scheduled to be retrofitted with solar-covered parking structures. The photovoltaic system, which will be owned by the City, will provide an annual savings of $250,000.

The combined 1.0 megawatt project consists of over 3400 photovoltaic panels, which will help the City reduce its electricity usage by over one million kilowatt hours per year, which is roughly the amount required to power 114 homes. The resulting carbon dioxide offset of 1.9 million pounds is equivalent to preventing the annual emissions from 158 cars.

"The investment we're making here will definitely pay off in the future in the form of energy savings,” says Mayor Bob Jackson. “We are proud and enthusiastic about this project that will provide a significant reduction in energy costs over the years.”

The City of Casa Grande is purchasing the photovoltaic system under a Guaranteed Energy Cost Savings contract with Ameresco. The $3.3 million dollar project will be paid for directly from the savings generated and incentives provided by Arizona Public Service (APS). Casa Grande’s contract with Ameresco is for 18 years.

According to Ameresco, Casa Grande is one of the first municipalities in the country to purchase a solar system under the Guaranteed Energy Cost Savings program. Under a Guaranteed Energy Cost Savings contract, when a consultant installs a measure to reduce energy usage, they must provide a written guarantee that the measure will reduce the entity’s energy usage by a stated amount.  If the cost savings measure does not reduce energy usage by the stated amount, the consultant is then required to reimburse the entity for any shortfall.

“The true benefits of procuring the panels through a Guaranteed Energy Cost Savings contract are numerous,” says Ben Bitter, senior management analyst for the City. “First, if the panels do not produce the amount of energy required to meet the goals of the financial pro forma, our contractor (Ameresco) would be required to pay us the difference. Secondly, a Guaranteed Energy Cost Savings contract provides budgetary certainty for a large portion of utility costs. By reducing our dependency on a utility provider, we reduce the impact that any rate increases would have on the City’s budget,” explains Bitter.

Traditionally, cities and other government agencies from across the country have obtained solar energy through the use of power purchase agreements (PPA) with third-party providers. Under that financial construct, the systems are owned by a  third-party provider who is able to take advantage of the Investment Tax Credit and Depreciation. The power produced by those systems must be purchased by the city at a predetermined rate for a predetermined term, usually 20 years, as part of the PPA. Upon completion of the PPA agreement, the city would be given an opportunity to purchase the solar panels at Fair Market Value.

“Because the City of Casa Grande will own the system, any overproduction that may occur would result in a direct, positive cash flow to the City,” explains Bitter. “If the production exceeds the conservative expectations of the pro forma, the extra money saved could be used to pay down the project cost faster or be used to further reduce electricity costs within the City.”

Through an established relationship with the contractor, the City was able to build the cost of extended warranty coverage for all components of the project into the project cost. These warranties will ensure that all vital parts of the system will function under manufacturer specifications for a length of time to exceed the length of financing. The first three years of maintenance and operation costs as well as training for staff to maintain the panels was also built into the project costs.

“Due to a ‘perfect storm’ of positivity involving reductions in system cost and historically low interest rates, Ameresco was able to partner with the City and provide them with a tax exempt lease purchase financed project whose cost is entirely funded by the savings generated,” says Todd Becker, senior business developer for Ameresco. “We believe this municipal solar project might be the first of its kind for a city and credit the vision of Casa Grande’s leaders for their foresight and imagination in deciding to move forward and make the project happen.”

Construction at all five city facilities will be completed by the end of the summer.

For more information, contact the City Manager's office at (520) 421-8600.

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