Tie vote jeopardizes HEA solar project

A Homer Electric Association plan to build Alaska’s highest-capacity solar farm near HEA’s Anchor Point substation is in limbo after the cooperative’s eight directors tied in a vote to award a contract for its construction at their March 12 meeting.

Had those plans been approved, HEA could have been drawing power from the 975 kilowatt capacity solar installation by July, according to the presentation at that meeting by HEA Director of Power, Fuels and Dispatch Larry Jorgensen. As it is, four board members approved the project, and four didn’t.

The tie vote — meaning no action will be taken — wouldn’t have happened under normal circumstances. The HEA board usually has nine members, but the February resignation of board member Don Stead will leave it with eight until May, when Anchor Point resident Roy Champagne — an unopposed candidate in the ongoing HEA directorship election — takes the seat.

Some HEA directors said the solar proposal may be back on the board’s agenda after the ninth seat is filled. Owner Chester Dyson of Lime Solar — the company that would have built, owned, and managed the solar facility and sold the power to HEA — said his company’s offer would stand for 90 days.

HEA has a goal of reaching 18 percent renewable power by 2022. Presently, about 10 percent of its power is renewable, coming from the state-owned Bradley Lake Hydroelectric Plant on the south side of Kachemak Bay, while the rest is fueled by Cook Inlet natural gas. HEA Director and renewable energy advocate Jim Levine of Homer proposed a solar project during his first term on the board around 2011. Since then, HEA’s engineers have been considering various designs, including a 29.2 kilowatt-capacity installation presented in November 2016, and another that could have used rotating panels that follow the sun.

The 975 kilowatt project would have had the highest capacity of planned or existing solar farms in Alaska, with nearly twice the capacity of the 500 kilowatt system that Chugach Electric Association plans to begin building in late summer or early fall, and of the 563 kilowatt system that Fairbanks’ Golden Valley Electric expects to have online in October.

A bet on the future

The solar farm would have been built, owned and maintained by the Anchorage-based company Lime Solar under a “power purchase agreement” with HEA, in which the utility would commit to buying solar output from Lime for 20 years, with the option of buying the project every five years. Lime’s bid set initial prices at around 13.8 cents per kilowatt-hour, escalating over the 20 years to 15.2 cents per kilowatt-hour — greater than the present per-unit cost of gas-fired power, Jorgensen said.

“You’re paying more, but it’s a bet on the future,” Jorgensen said.

Potential savings on solar energy have to be calculated against a moving target: the price of Cook Inlet natural gas, which accounts for roughly a quarter of a member’s power bill.

On that bill, the cost of gas is included in a fee called “cost of power adjustment,” or COPA, which is presently around 7 cents per killowatt-hour, set to drop in April to 6.7 cents due to a recent fall in spot-market gas prices. The cost of purchasing Lime’s solar power would add about a tenth of a cent to this fee, said HEA finance director Emily Hutchison.

“It’s very minimal impact,” Hutchison said. “If you look at our overall generation portfolio, one megawatt is a blip on the system.”

While Lime, as the owner, would pay for the project’s construction and maintenance, HEA would spend an estimated $648,000 to connect the solar farm to its grid — a cost Jorgensen said was included in the per-kilowatt-hour cost.

Levine favored the bet on the future, saying gas prices are unlikely to stay at their present levels for the 20-year life of the solar project. Before 2037, he predicted, gas prices would likely climb above the cost of solar.

“At that point you’re saving money,” Levine said. “It’s kind of like when Bradley Lake was built. When Bradley Lake was first built, everybody thought they were crazy. They were buying a pig in a poke and they should never do it, and now Bradley Lake is the cheapest power we have on the peninsula.”

In the late 1980s the state-owned Alaska Energy Authority took $328 million in bonds and legislative appropriations to construct the Bradley Lake plant, which now generates some of south central Alaska’s cheapest electricity at around 4 cents per kilowatt.

Community-funded alternatives

Buying power from a contractor-owned solar facility is a departure from the “community solar” financial model Levine originally proposed for the project. That model would finance the solar facility by selling shares of its cost to HEA members interested in renewable energy, whose proportional share of the project’s output would then be credited against their power bills, making participation in both the project’s costs and its potential savings entirely voluntary.

Chugach Electric Association is funding its solar project with this model. Chugach members wanting to support renewables can buy one of the planned solar farm’s 500 shares and receive 1/500th of its output. Though that output would vary with sun exposure, Chugach Project Manager Sean Skaling estimated that a share’s worth of energy might provide roughly 17 percent of an average home’s annual use — varying throughout the year from about 44 percent in the long days of June to less than 1 percent in January.

Unlike HEA, Chugach plans to own its solar installation rather than buy power from an idenpendent contractor.

HEA General Manager Brad Janorschke said the financial mechanism for HEA’s purchases from Lime hadn’t yet been determined, and could potentially be made under a voluntary share-holder system.

HEA Director Ed Oberts said that “unless fuel prices skyrocket” above solar’s per-kilowatt-hour cost, the contractor-owned project undercuts the benefits to HEA members of owning shares in the project.

“If we get lucky and have a really nice sunny summer, the extra power doesn’t save the members that bought into it anything,” Oberts said. “If anything, it’s gone up because it produced more power at 17 cents (per kilowatt-hour)… What are the benefits to that member? They could say, ‘We’re helping to produce green energy.’ But that’s really the only benefit.”

Without the member-funding mechanism, Oberts said he wouldn’t support the project.

Janorschke said the HEA administration had leaned away from a self-owned, member-funded solar project like Chugach’s because other electrical co-op managers he’d talked to said their experiences have been mixed.

“Some co-ops have extremely successful and sold all of (their solar installation’s capacity) and just keep building,” Janorschke said. “Others have sold very little.”

Chugach plans to start offering shares of the solar project to its members in May, and to begin construction after 80 percent of the shares are sold. Though the Regulatory Commission of Alaska will approve a final cost, the present estimate is about $24 per share per month, Skaling wrote. As with HEA’s project the cost will exceed the savings, at least initially. In the project’s first year, a share is expected to generate about $20 in value in per month.

Of the 700 Chugach members that the cooperative surveyed in August 2017, 60 percent said they’d be willing to pay more for solar power, and 63 percent favored the community-solar project. More than 550 people are signed up for updates on the project, wrote Chugach spokesperson Julie Hasquet.

Janorschke said managers of other electrical co-ops doing community solar projects have found that their surveys overestimate the number of members willing to raise their bills for renewable power.

“One common theme I’ve heard is, ‘Don’t rely on surveys,’” Janorschke said. “Those I’ve talked to have said repeatedly, and they’ve demonstrated, that surveys have been extremely optimistic, and reality is nowhere close to what they’ve gotten back in surveys.”

The vote

All eight of the HEA directors voiced support for renewable power, but the specifics of the arrangement turned some away.

Oberts and directors Dan Furlong and Kelly Bookey said the lack of a clear financial structure moved their votes against the project. Director Dave Carey moved to postpone the vote until HEA’s April meeting, but there was no second. Carey also voted against.

Levine and HEA Directors David Thomas, Bill Fry and Dan Chay voted in favor.

Directors differed on their perceptions of how HEA’s membership would view the solar project, though many shared Furlong’s opinion that sponsoring Alaska’s biggest solar farm “could be a public relations bonanza or a public relations nightmare.” While a vocal segment of HEA members have advocated a vigorous pursuit of renewable energy, rate increases of any sort have always been unpopular. Oberts said he wouldn’t “want to go to the annual meeting and be up in front and explain this to our membership.”

“I know while 20 percent are going to love it, 80 percent are going to hate it — that we’re investing human resources, cash, and a long-term contract on something that isn’t going to pay back, it doesn’t make economic sense,” Oberts said.

Levine differed.

“There’s probably 30 percent that would really love it, maybe 10 or 15 percent that are really going to hate it, and there’s whatever’s left over who probably don’t really care,” he said.

In addition to the Lime Solar power purchase proposal, the HEA directors also recieved one from Denver, Colorado-based Nikola Power, which would have sold the utility power at 17.6 cents per kilowatt-hour, escalating to 30.8 cents per kilowatt hour over 20 years. The cost escalations are based on the desired profits and terms of the financing that Lime and Nikola would be able to get for construction, Jorgensen said.

Reach Ben Boettger at bboettger@peninsulaclarion.com.

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