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Published on June 8th, 2015 | by John Farrell

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Why Haven’t Cities Covered Their Buildings in Solar?

June 8th, 2015 by  


Originally posted at ilsr.org

The city of Beaverton, OR, is getting a new solar array that will offset energy use at an underground reservoir, saving taxpayers $95,000 per year, with no upfront cost. Ventura County, CA, has a 1-megawatt solar array on its jail facility that’s cash-flow positive. Denver, CO, has 14 megawatts of solar, with power sold to the city on contract and no upfront cost.

If cities can cut their energy bills and save energy from day one, what’s standing in the way of a PV pave-over of every public building in America with a suitable roof?

ILSR answers this question (and more) in its new report, Public Rooftop Revolution, released on June 4, 2015

The Public Rooftop Solar Opportunity

The potential for rooftop solar PV (on any building) to meet American electricity demands is phenomenal, with enough suitable, sunny rooftops to provide nearly 20% of the power in every state.

The potential for rooftop solar PV (on any building) to meet American electricity demands is phenomenal, with enough suitable, sunny rooftops to provide nearly 20% of the power in every state.

local rooftop solar potential ILSR

Public buildings are in almost every community, many with the flat roofs perfect for solar. For example, K-12 public schools in Minnesota could host enough solar to power nearly 125,000 homes. Minnesota isn’t alone, according to SEIA and the Solar Foundation. In Austin, TX, public buildings could host over 50 MW of solar. In San Francisco, it’s 31 MW. Cities have similarly vast potential. ILSR’s new Public Rooftop Revolution report finds that Minneapolis, MN, could host 18 MW of solar; Kansas City, MO, could install 70 MW; and New York City could have over 400 MW of solar on public buildings.

All told, over 5 gigawatts of solar could quickly be installed on public building rooftops across the 25 states where policy—power purchase agreements—lets cities tap federal tax incentives through third parties and install solar with no upfront cost.

5-gigs-municipal-solar

The solar potential is matched by the solar economic opportunity. Maximizing rooftop solar on schools in Minnesota could cut energy bills for the school system by 30%, saving $110 million per year. In Kansas City, solar on public buildings has cut the city’s electric bill by $166,000 per year. Lancaster, CA, is saving over $400,000 annually. Every dollar saved is a public good, another dollar that can be spent on teachers, or librarians, or police officers. And with solar leasing or power purchase agreements, cities can tap into this energy savings opportunity with very little upfront money.

Note: direct solar ownership typically trumps these third party ownership models, but not when federal incentives are inaccessible to the public sector

Solar also cuts greenhouse gas emissions and creates jobs. For example, maximizing New York City’s solar potential with 410 MW of solar would reduce emissions by 1.78 million metric tons, 3.7% of the city’s total emissions. And maximizing Kansas City’s municipal solar potential of 70 MW could create 1,400 jobs and add $175 million to the local economy.

The Cost Barrier

Cost is the biggest barrier to municipal solar, and perverse federal tax policy puts cities at an immediate disadvantage to the private sector.

The chart below from ILSR illustrates the challenges for tax-exempt entities like cities in financing solar. A city’s best option is to purchase electricity from a third party (a power purchase agreement, or PPA), but that’s only legal in about half of U.S. states. A lease is second best, but usually allows only capture of the tax credit or depreciation. Direct purchase by the city means no federal incentives can be used, thus more costly energy. Private entities that can use federal tax incentives get the lowest solar prices of all. Using cash grants instead of tax credits—as was done during the aftermath of the financial crisis—would put cities on par with private entities in access to incentives.

graphics for public rooftop revolution.007

Although the 3rd party ownership model has arisen to solve the federal incentive design flaw, the power purchase agreement is only legal in about half of U.S. states. The 3rd party model typically means solar is installed on a public building by a solar developer, who then sells the solar electricity directly to the city in lieu of electricity purchases from the incumbent utility.

The states in red in the map below allow such an arrangement. In the remaining (gray colored) states, state law either prohibits or is ambiguous enough to make this deal structure too risky to attempt.

graphics for public rooftop revolution.009

Given that cities in the red states have yet to come close to their full solar potential, what else is a barrier to municipal solar?

What Else Holds Cities Back?

Structural limitations and orientation are potent barrier. Charles Harris, Project Manager for Kansas City, says that over 90% of city properties identified in the city’s solar map are unsuitable for solar and cited insufficient structural integrity and unsuitable surroundings as two primary reasons. In general, about 40% of commercial buildings (similar to municipal buildings) are unsuitable for solar because of structural limitation or shading.

Some cities are intimidated by solar, feeling it requires special technical or legal expertise. Jason Caudle, deputy city manager for Lancaster, CA, suggests that for cities with access to power purchase agreements, it’s relatively simple: “We saw how much it cost to buy it from Company X and we saw how much we were paying for it from Company Y… if it’s lower to buy it from this guy…then buy it from this guy.”

City bureaucracy may also slow solar adoption. A representative of Borrego Solar said of the process to install solar on a city building in Beverly, MA, that, “the approval process involved five city council meetings, three subcommittees and two public meetings.” On the other hand, cities may have many contractors to pick from. In an article for Solar Industry magazine, Tom Tuffey, vice president of Community Energy Solar LLC in Pennsylvania said that “in some cases, we have had municipals with up to 40 solar developers that have approached them.”

One other policy presents both boon and bane: net metering. Net metering, allowed in 44 states, is what lets cities use on-site solar to offset their energy purchases from the electric utility. But cities have many buildings, and the ones with the greatest energy use aren’t always the ones with the sunniest rooftop. Aggregate net metering lets cities offset energy use at all meters/buildings they own with solar at any meter/building, but the policy is only available in 16 states for municipal customers, as shown below.

aggregate net metering by state ILSR 2015

Virtual net metering goes a step further, allowing cities to construct solar facilities on sites other than their own property and still use it to offset their building energy consumption. This policy is only available in 11 states, and many times only available to local governments.

virtual net metering policies feb 2014.001

Summary

Only a few cities have realized the advantages of siting solar energy generation on their buildings. The most likely reason is the only-recent affordability of solar, but also that solar is a new entrant in the competition for a city’s capital and/or operating budget.

For many cities, these barriers are easily overcome. Third party ownership allows them to have solar installed on public property at zero upfront cost and often with immediate savings to the city’s energy budget. Savings can be large enough, especially over time, to free up additional operating or debt service funds. It’s a gift that keeps giving, since many third party arrangements allow the city to assume ownership of the solar arrays at minimal cost after 15-20 years, allowing for many more years of energy savings.

Cities with this simple solar option and that have commitments to reduce greenhouse gas emissions should be especially eager to maximize their solar potential, since the savings are to the “triple bottom line”––financial, environmental, and social.

Not only can city-installed solar reduce environmental and financial impacts on the city, but it creates local jobs and generates experience for solar installers, and can serve as an example for private market solar development. There are several examples of cities with substantial municipal solar installations providing much easier permitting and inspection requirements for solar development.

Barriers remain to city-installed solar. Cities in half of U.S. states still lack access to the power purchase arrangement that minimizes their financial risk. Net metering rules in most states require cities to match their solar installations with on-site building load, limiting the utility of their many rooftops to those that are suitable, sunny, and serve significant on-site energy use. Many cities lack the internal expertise to pursue solar.

Cities have a unique opportunity to cut costs and emissions, boost the economy, and stimulate their solar market with investments in solar on municipal buildings. What are they waiting for?

Read more in ILSR’s new report, Public Rooftop Revolution, released on June 4, 2015

Photo Credit: Wikipedia user Z22

This article originally posted at ilsr.org. For timely updates, follow John Farrell on Twitter or get the Democratic Energy weekly update.

 
 





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About the Author

directs the Democratic Energy program at ILSR and he focuses on energy policy developments that best expand the benefits of local ownership and dispersed generation of renewable energy. His seminal paper, Democratizing the Electricity System, describes how to blast the roadblocks to distributed renewable energy generation, and how such small-scale renewable energy projects are the key to the biggest strides in renewable energy development.   Farrell also authored the landmark report Energy Self-Reliant States, which serves as the definitive energy atlas for the United States, detailing the state-by-state renewable electricity generation potential. Farrell regularly provides discussion and analysis of distributed renewable energy policy on his blog, Energy Self-Reliant States (energyselfreliantstates.org), and articles are regularly syndicated on Grist and Renewable Energy World.   John Farrell can also be found on Twitter @johnffarrell, or at jfarrell@ilsr.org.



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