Tapping into Solar Power

With the tremendous cost associated with the treatment and distribution of water, many water districts are going solar for protection from rising electricity costs.

However, while solar electric installations generate significant long-term savings, and material and installation costs have plummeted recently, the initial investment can still be too much for many water districts, big and small. As an alternative to up-front purchases, many organizations are opting for a Power Purchase Agreement (PPA) to finance solar energy projects. Through a PPA, a third-party investor takes on all finance, design, installation and ownership and maintenance (O&M) costs, and the water district agrees to buy the power back, at a pre-determined and reduced rate. Water districts enjoy the immediate cost-savings and environmental benefits, without paying a dime upfront, while third-party investors bear all financial risk associated with the system. At the end of the contract, the water district has the opportunity to renew the contract or purchase the system outright.

For the San Diego County Water Authority (SDCWA), a PPA was the ideal solution to going solar. The SDCWA just last month flipped the switch on three solar electricity systems at its Kearny Mesa headquarters, an operations center in Escondido and the Twin Oaks Valley Water Treatment Plant north of San Marcos.

SDCWA is a public agency serving the San Diego region as a wholesale supplier of water from the Colorado River and Northern California. The water authority works through its 24 member agencies to provide a safe, reliable water supply to support the region?s $186 billion economy and the quality of life of 3.1 million residents.

SDCWA entered into a contract with San Diego-based Borrego Solar, a leading financier, designer and installer of solar electric systems, with a strong track record working with water districts. SDCWA chose Borrego Solar because it allowed it to work with one organization for both the financing and the solar installation. Many PPA providers don?t have solar expertise in-house, while many solar installers need to seek third-party investors for financing. Dealing with multiple organizations often creates unnecessary headaches, delays, additional professional services, and errors for the organization looking to go solar. Borrego Solar?s single source was appealing to SDCWA, as was the company?s strong track record with water districts.

The Borrego Solar team financed, designed and installed the three systems, which will save SDCWA more than $1.7 million in energy costs. As part of the agreement, Borrego Solar will continue to maintain, operate and repair the systems as needed, and sell the clean renewable power they produce back to SDCWA at a set rate with a pre-determined escalator over the course of the 20-year PPA term.

?Entering into a PPA contract made the most sense for us, as we wanted to reduce costs and our carbon footprint, but the upfront costs were too high,? said San Diego County Water Authority Board Chair Michael T. Hogan. ?Borrego has made a terrific partner for us. It was invaluable for us to be working with a company that understands water districts, and could also handle both the financing and solar expertise in-house. Only dealing with one company improved and streamlined the process significantly.?

A very popular arrangement for municipalities and utilities, a PPA was an ideal option for SDCWA, but the process by which the PPA was secured was unique. As with many water districts, SDCWA was unable to allocate the independent resources at each site to manage and administer a formal public procurement, as their projects were too small on their own, in order to secure a PPA rate that would make the deal economically feasible for investors.

So in order to streamline the vendor selection process, and ensure better buying power, the district decided to issue a single request for proposals, incorporating the site specifications and energy consumption from 10 different member water districts and treatment facilities across San Diego County. By administering the public procurement process on behalf of itself and the other districts, SDCWA was able negotiate the best possible price per kilowatt-hour (PPA rate), and select a single preferred vendor. Once a contractor was selected, each of the individual water districts quickly signed PPA contracts and moved on to the construction phase of installing solar power systems on their water tanks, operation centers and storage facilities.

Without the backing of the lager collective, many of the individual water districts would have lacked the resources necessary to properly vet and contract a solar provider. SDCWA installed over a megawatt of solar on top of several water storage structures at its Twin Oaks Valley Water Treatment Plant and two smaller energy systems on the parking lot and roof of its Kearny Mesa headquarters and its Fred A. Heilbron Operation Center in Escondido. Additionally, two membership water agencies (the Helix Water District and the Vista Irrigation District), were able to quickly contract with Borrego Solar for another half megawatt of PV, knowing feasibility studies had already been performed on their sites, and that the pricing and capabilities of the firm had been properly scrutinized.? ?

?SDCWA made a savvy move by combining projects into one procurement process,? said Borrego Solar Senior Project Developer David Potovsky. ?The overhead and costs associated with moving a PPA forward were mitigated, and helped them drive projects forward that wouldn?t have penciled alone. It?s a great option for districts with smaller facilities.?

What Other Financing Is There?
PPAs have become the most popular way for larger public and private entities with investment grade credit to go solar for no money upfront. Additionally, the investment community has progressed to the point where it is comfortable with the tax equity and debt structures of these deals, which has made access to financing easier than it has been in the past. But for some customers, ownership in the solar energy asset is a big concern. That?s why we?re seeing a rise in the appearance of Municipal General Obligation Bonds (GO Bonds).

Municipal GO Bonds are considered to be more secure than revenue bonds, because they?re backed by the taxing power of the municipality. Every state and many local governments offer GO Bonds, the issuance of which is voted on during regularly scheduled elections. The ballot language for the bond measure must clearly state what the money is being raised for, and if it passes by a minimum of 55percent of the vote, taxes (property, income, sales, and others) for the residents in the jurisdiction who voted on it, can be raised to pay back the principal and interest to the bondholders. The money from GO Bonds can be used to pay for large capital projects: buildings, facilities, renewable energy projects, renovations, etc.; but they can?t be used for anything else like the salaries of local and state employees.

The key difference between GO Bonds and PPAs is that residents pay back the bond rather than the agency that?s benefiting from the solar installation. That means 100 percent of the energy savings and rebates (on the commercial scale this is often in the millions) go directly to the host?s general fund. Operations and maintenance costs can also be included in the bond, eliminating any long-term costs associated with going solar. The main drawbacks to going the GO Bond route are the uncertainty of it passing with more than 55percent of the vote, and the lengthy development cycle the process has to go through.

Whether you?ve looked into solar in the past or are considering it for the first time today, public and private water agencies find themselves at the perfect intersection of a 30 percent decline in PV material costs and an increased interest from the investment community offering a variety of solar financing solutions that make going solar more feasible than ever before.? ?

Steve Birndorf is a Project Developer with Borrego Solar.

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Tapping into Solar Power

With the tremendous cost associated with the treatment and distribution of water, many water districts are going solar for protection from rising electricity costs.

However, while solar electric installations generate significant long-term savings, and material and installation costs have plummeted recently, the initial investment can still be too much for many water districts, big and small. As an alternative to up-front purchases, many organizations are opting for a Power Purchase Agreement (PPA) to finance solar energy projects. Through a PPA, a third-party investor takes on all finance, design, installation and ownership and maintenance (O&M) costs, and the water district agrees to buy the power back, at a pre-determined and reduced rate. Water districts enjoy the immediate cost-savings and environmental benefits, without paying a dime upfront, while third-party investors bear all financial risk associated with the system. At the end of the contract, the water district has the opportunity to renew the contract or purchase the system outright.

For the San Diego County Water Authority (SDCWA), a PPA was the ideal solution to going solar. The SDCWA just last month flipped the switch on three solar electricity systems at its Kearny Mesa headquarters, an operations center in Escondido and the Twin Oaks Valley Water Treatment Plant north of San Marcos.

SDCWA is a public agency serving the San Diego region as a wholesale supplier of water from the Colorado River and Northern California. The water authority works through its 24 member agencies to provide a safe, reliable water supply to support the region?s $186 billion economy and the quality of life of 3.1 million residents.
SDCWA entered into a contract with San Diego-based Borrego Solar, a leading financier, designer and installer of solar electric systems, with a strong track record working with water districts. SDCWA chose Borrego Solar because it allowed it to work with one organization for both the financing and the solar installation. Many PPA providers don?t have solar expertise in-house, while many solar installers need to seek third-party investors for financing. Dealing with multiple organizations often creates unnecessary headaches, delays, additional professional services, and errors for the organization looking to go solar. Borrego Solar?s single source was appealing to SDCWA, as was the company?s strong track record with water districts.

The Borrego Solar team financed, designed and installed the three systems, which will save SDCWA more than $1.7 million in energy costs. As part of the agreement, Borrego Solar will continue to maintain, operate and repair the systems as needed, and sell the clean renewable power they produce back to SDCWA at a set rate with a pre-determined escalator over the course of the 20-year PPA term.

?Entering into a PPA contract made the most sense for us, as we wanted to reduce costs and our carbon footprint, but the upfront costs were too high,? said SDCWA Board Chair Michael T. Hogan. ?Borrego has made a terrific partner for us. It was invaluable for us to be working with a company that understands water districts, and could also handle both the financing and solar expertise in-house. Only dealing with one company improved and streamlined the process significantly.?

A very popular arrangement for municipalities and utilities, a PPA was an ideal option for SDCWA, but the process by which the PPA was secured was unique. As with many water districts, SDCWA was unable to allocate the independent resources at each site to manage and administer a formal public procurement, as its projects were too small on their own, in order to secure a PPA rate that would make the deal economically feasible for investors.

So in order to streamline the vendor selection process, and ensure better buying power, the district decided to issue a single request for proposals, incorporating the site specifications and energy consumption from 10 different member water districts and treatment facilities across San Diego County. By administering the public procurement process on behalf of itself and the other districts, SDCWA was able to negotiate the best possible price per kilowatt-hour (PPA rate), and select a single preferred vendor. Once a contractor was selected, each of the individual water districts quickly signed PPA contracts and moved on to the construction phase of installing solar power systems on their water tanks, operation centers and storage facilities.

Without the backing of the lager collective, many of the individual water districts would have lacked the resources necessary to properly vet and contract a solar provider. SDCWA installed over a megawatt of solar on top of several water storage structures at its Twin Oaks Valley Water Treatment Plant and two smaller energy systems on the parking lot and roof of its Kearny Mesa headquarters and its Fred A. Heilbron Operation Center in Escondido. Additionally, two membership water agencies (the Helix Water District and the Vista Irrigation District), were able to quickly contract with Borrego Solar for another half megawatt of PV, knowing feasibility studies had already been performed on their sites, and that the pricing and capabilities of the firm had been properly scrutinized.??

?SDCWA made a savvy move by combining projects into one procurement process,? said Borrego Solar Senior Project Developer David Potovsky. ?The overhead and costs associated with moving a PPA forward were mitigated, and helped them drive projects forward that wouldn?t have penciled alone. It?s a great option for districts with smaller facilities.?

What Other Financing Is There?

PPAs have become the most popular way for larger public and private entities with investment grade credit to go solar for no money upfront. Additionally, the investment community has progressed to the point where it is comfortable with the tax equity and debt structures of these deals, which has made access to financing easier than it has been in the past. But for some customers, ownership in the solar energy asset is a big concern. That?s why we?re seeing a rise in the appearance of Municipal General Obligation Bonds (GO Bonds).

Municipal GO Bonds are considered to be more secure than revenue bonds, because they?re backed by the taxing power of the municipality. Every state and many local governments offer GO Bonds, the issuance of which is voted on during regularly scheduled elections. The ballot language for the bond measure must clearly state what the money is being raised for, and if it passes by a minimum of 55 percent of the vote, taxes (property, income, sales and others) for the residents in the jurisdiction who voted on it, can be raised to pay back the principal and interest to the bondholders. The money from GO Bonds can be used to pay for large capital projects ? buildings, facilities, renewable energy projects, renovations, etc. ? but they can?t be used for anything else like the salaries of local and state employees.

The key difference between GO Bonds and PPAs is that residents pay back the bond rather than the agency that?s benefiting from the solar installation. That means 100 percent of the energy savings and rebates (on the commercial scale this is often in the millions) go directly to the host?s general fund. Operations and maintenance costs can also be included in the bond, eliminating any long-term costs associated with going solar. The main drawbacks to going the GO Bond route are the uncertainty of it passing with more than 55 percent of the vote, and the lengthy development cycle the process has to go through.

Whether you?ve looked into solar in the past or are considering it for the first time today, public and private water agencies find themselves at the perfect intersection of a 30 percent decline in PV material costs and an increased interest from the investment community offering a variety of solar financing solutions that make going solar more feasible than ever before.? ?

Steve Birndorf is a Project Developer with Borrego Solar.

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