Iowa court ruling lets public sector tap into solar

Source: By Rick Smith, The Gazette • Posted: Wednesday, March 11, 2015

Cedar Rapids, Linn, Johnson, Marion, and the University of Iowa all interested

Tyler Olson stands amid solar panels on the roof of Paulson Electric in Cedar Rapids on Thursday, March 5, 2015. Former State Rep. Olson is heading up the company’s new associated business, SiteGen Solar. (Adam Wesley/The Gazette)
CEDAR RAPIDS — Tax credits to cover 30 percent of the upfront cost haven’t done much for local elected officials in Iowa eager to try solar energy for public buildings as a way to save on electric bills and to green up their environmental credentials.

Until now.

An Iowa Supreme Court ruling last July changed the playing field for the use of solar energy in the public sector and not-for-profit sector, and the cities of Cedar Rapids and Marion and Johnson and Linn counties are dipping their toes into the renewable energy source. So, too, is the University of Iowa.

The city of Dubuque has been the pioneer, and a solar array installed by Eagle Point Solar of Dubuque on the city’s Municipal Services Center in 2012 prompted the litigation that made its way to the Iowa Supreme Court.

“I took on the big energy conglomerates on an issue that they really cared about, and took it to the finish line and won,” said Barry Shear, president of Eagle Point Solar in Dubuque.

“I had to make the point that the position that the utilities were taking regarding what constitutes a public utility, was, in fact, preventing municipalities, schools and universities, churches and any other non-taxed entity from adopting solar. That’s what they were really doing.”

The court sided with Shear and with solar companies, saying they were not public utilities to be regulated by the state of Iowa at some cost to the companies and as if they were big utilities such as Alliant Energy and MidAmerican Energy.

This opened the way for solar companies to pursue power purchase agreements, or PPAs, with the public-sector and not-for-profit sector in Iowa. These are arrangements in which the company installs, owns and maintains the solar array for a number of years and so qualifies for tax credits to help pay upfront costs. The public and not-for-profit sectors don’t qualify for tax credits because they don’t pay income taxes.

In turn, the government entity or not-for-profit purchases the electricity for an initial period, buying the equipment at a used-car-like price at the end of the period. It then can generate electricity at little or no cost for the rest of the life of the equipment.

The arrival of this new era, though, does not mean that there are not still some sticking points between solar companies — SiteGen Solar in Cedar Rapids, Moxie Solar in North Liberty and Eagle Point Solar in Dubuque among them — and the big public utilities related to rules and rates that are part of connecting to the public utility grid.

In that regard, the Iowa Utilities Board is in a period of notice of inquiry, in which it has accepted and is reviewing comments from the stakeholders and the public.

Sufficiently changed is Iowa’s solar landscape for the public and not-for-profit sectors that Tyler Olson — former state legislator and recent Democratic candidate for governor who is vice president of Paulson Electric in Cedar Rapids — has decided to launch a new endeavor, SiteGen Solar, where he is president. It now makes sense, Olson said, for the public sector to look to include solar as a component of an overall energy strategy.

“Having been a public official, I understand the responsibilities and financial accountability (that public officials face), and I would not be presenting this to public leaders if I didn’t think there was a long-term opportunity for cost savings,” Olson said.

“So I think you’re going to see more of it. The city of Dubuque went first, and now it’s going to grow.”

Both Linn County and the city of Cedar Rapids are pushing ahead with plans to seek proposals from solar power companies with the intent to install solar arrays on one or some of their public buildings via PPAs.

Linn County Supervisor Ben Rogers said he is “confident” that Linn County will find it financially and environmentally sensible to install some solar energy, and he said he county’s new Community Services Building with its large, south-facing roof is a good candidate for a solar array.

He, like officials in Cedar Rapids, Marion, Johnson County and the UI, said the legal ability in Iowa to use power purchase agreements with solar companies has opened up the prospects for the public-sector use of solar for the first time.

“In terms of energy, we’ve been kind of at the mercy of electric and gas rates. This is a way for us to be at the leading edge of greater energy efficiency for the long term,” Rogers said.

Cedar Rapids City Council member Ralph Russell, retired former president and chief executive officer at engineering company HR Green Co., said the city is in the process of seeking proposals for solar as part of a power purchase agreement. The city’s new bus maintenance facility might be a good candidate for a first project, he said.

Russell, who headed up HR Green’s renewable energy unit as he moved toward retirement in 2013, said the trend lines are moving in a favorable direction for solar as electric rates are projected to increase 2.5 to 4 percent a year, while the efficiency of solar panels has increased and their cost has declined. Putting a solar array in place today costs half or less than half as much as it did just five or six years ago.

Over a 25-year period, the savings to the city will matter, he said.

Russell said, too, that the environmental benefit is indisputable.

“To me, solar and wind are really very good clean renewables because you’re not combusting fuel. You’re not going to damage the environment. There’s no negative impact,” he said.

Eric Foresman, energy and utilities system engineer at the UI, said the university estimates it will save $1.4 million in electricity costs over 25 years as it prepares to install solar arrays on five university buildings, including the main library, this year as part of PPA with a private solar company.

The company will own and operate the equipment for 10 years and the university will buy and operate it for the life of the equipment, which is expected to be another 15 years.

“It’s a significant savings over 25 years. It’s a good deal for taxpayers,” Foresman said.

Beyond that, he said solar is a renewable energy source with no greenhouse emissions, a feature that studies have shown can work to as a recruiting tool to get students and faculty interested in the university, he said.

Two solar project are farther along than ones in Linn County, Cedar Rapids and Marion — which plans to install a solar array at its proposed new Public Services Department building — and a little farther along than the UI’s.

Kirkwood Community College is installing a solar array designed by SiteGen Solar on its new building now under construction just east of the Oakdale campus in Coralville. Meanwhile, Johnson County has awarded a contract to Moxie Solar to install an array at the county’s Secondary Roads campus.

Johnson County’s installation, now in final design, is a case in point that shows the complications that come with connecting a solar array to the public utility grid under current Iowa and federal rules.

According to officials at both Alliant Energy and MidAmerican Energy as well as SiteGen Solar’s Olson, the public utilities must establish net-metering connections with power users who own solar equipment, which provides the users with credits for electricity generated by solar that the user can’t use on site and returns to the utility grid.

However, net-metering agreements are not permitted in instances in which a third party other than the user owns the equipment — which is the case with public entities using power purchase agreements with solar companies.

In the third-party arrangements, Dave Caris, vice president for corporate communications at MidAmerican, said the rules require the utility to pay only “avoided costs” for any electricity that comes back to the grid. This amount is much lower than the rate than a net-metering agreement provides, he said.

As a result, SiteGen Solar’s Olson said solar arrays for public-sector entities and not-for-profits are designed to make sure the cost outlay for the equipment is such that the array rarely, if ever, sends power back to the grid. Otherwise, the system is being paid well below the cost to produce the solar electricity, he said.

With that in mind, Josh Busard, assistant planner for Johnson County’s Planning and Zoning Department, said Johnson County now expects to scale back its solar array so it produces 84 kilowatts, down from 140 kilowatts.

Alliant spokesman Justin Foss and MidAmerican’s Caris said their utilities support solar energy, and Foss said Alliant has more than 1,000 interconnection agreements with customers for solar, wind and other energy generation systems.

Alliant is investing in solar equipment at Indian Creek Nature Center’s new facility and it is installing solar equipment at Alliant’s headquarters building in Madison, Wis., Foss said.

“The price (for solar) has dropped, and it is becoming clear that it is a competitive source of energy,” Foss said. The question is how much solar makes sense, he said.

Even so, he said care needs to be taken in negotiations to connect producers of electricity to the public grid, which has been paid for and sized in a way to handle a certain amount of power, he said.

In response, SiteGen’s Olson said the existing public grid can handle much more solar-generated electricity by someone other than the public utilities.

“We are so far from hitting any kind of level where the public infrastructure would be strained,” Olson said.

Don Tormey, communications manager for the Iowa Utilities Board, said the board’s staff continues to work on issues around net metering and interconnection.

Shear of Dubuque and Olson said the time is now for public-sector and not-for-profit-sector solar projects because the tax-credit support for them drops from 30 percent to 10 percent by the end of 2016 unless federal law changes.

Cedar Rapids’s Russell said the day may not be far off when the cost of electricity from public utilities rises and the price to produce it by solar declines to the point where tax credits aren’t needed to make projects work.

“Just look at the trends. More and more it’s going to turn in solar’s favor. It’s just the reality of the energy market,” Russell said.