Saving Bankrupt Cities With Solar And Smart Accounting

Editor’s Note: EarthTechling is proud to repost this article courtesy of Greentech Media. Author credit goes to Herman Trabish.

Municipalities and county and local agencies all over the U.S. are beginning to discover solar can generate revenues. The City of Lancaster is putting teachers in classrooms and cops on the streets with money generated by its investment in solar. For cities facing the strains of these tough economic times, the news is even better: No investment capital is necessary.

“The asset municipalities and agencies have purchasing power,” Borrego Solar’s CFO recently told GTM. “They can monetize that purchasing power. Through entering an agreement with us, they get cheaper power and it is a way for them to make money on the first day.”

Budget and finance officers in those agencies who do the calculations on infrastructure investments, explained The Solar Foundation (TSF) Executive Director Andrea Luecke, “don’t know what goes into pricing solar and they don’t know there are incentives and benefits they can factor in to reduce costs.”

TSF, funded by the U.S. Department of Energy (DOE) SunShot program, is leading an outreach effort to the people “who crunch the numbers,” Luecke said. “The big mistake they make,” she explained, “is doing simple payback calculations.” Solar, she said, “never looks good in terms of simple payback calculations. No local government wants to see those big numbers. They want quick, easy cost-reduction infrastructure projects that have fast and simple payback.”

TSF wants the number crunchers to substitute a net present value (NPV) method to calculate the valuation of solar, as well as to consider third-party ownership (TPO) opportunities. TSF’s NPV cost-benefit analysis brings greater dimension to solar’s costs, benefits and opportunities for public agency budget and finance officers.

Costs include equipment costs, soft costs (i.e., non-hardware costs), and operations and maintenance (O&M) costs.

Benefits include 25 years of fixed price, peak period electricity, avoided electricity costs, solar renewable energy credit (SREC) revenues and the future value of present dollars.

Opportunities include the federal investment tax credit, depreciation, SRECs and other state and local incentive programs, as well as the savings and revenues available through TPO finance models.

Even if they are not facing bankruptcy, a lot of local governments, Luecke said, “are laying off and furloughing employees and delaying infrastructure projects.”

Municipalities facing severe financial challenges, Luecke said, “should first reduce energy consumption. Energy cost, fuel cost, electricity cost — these are the number-one or number-two costs for almost every local government across the country.” Solar offers the opportunity to reduce that budget line.

Public agencies have the option of direct solar ownership, though they may need to float ageneral obligation bond or look into low interest loans such as Qualified Energy Conservation Bonds (QECBs).

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