In response to numerous requests from RCSC Members for an update on the photovoltaic solar project, RCSC General Manager Jan Ek is pleased to present the following report on the current status of this project, which is proving to be a very good partnership which was published in the April 2016 SunViews newsletter.
For those that are not familiar, here’s a quick summary of how RCSC came to lease photovoltaic (“PV”) solar systems. As a non-profit organization, RCSC was not eligible for federal or state tax credits, a needed incentive for the purchase of PV solar. An eligible leasing company purchased and installed the PV solar systems at RCSC, and RCSC leases the PV solar at ten locations with the initial lease cost of $578,283 per year (15 year lease with increasing lease payments every five years). In addition, RCSC placed bids for 17 PV solar projects, receiving approval for 14 of them at 10 locations with the APS Renewable Energy Incentive Program. This needed incentive was projected to provide a rebate direct to RSCS of approximately $185,000 per year for 20 years. The estimated production of electricity was estimated to save RCSC an average of $480,000 per year. The estimate APS rebate plus the electricity production savings less the solar lease cost nets RCSC a savings of $86,717 per year before insurance (current cost of $12,386 per year) and any repairs and maintenance.
So that was the plan, what has happened so far? Well to start, repairs and maintenance have been almost non-existent, the only issue we have had was covered under warranty. The systems were installed and activated in 2013. All systems have been online, functioning and producing electricity, as of September 2013. It was expected that there would be some costs not covered by electricity production and rebates initially, and that proved to be the case. In 2013, the PV solar produced electricity with a value of $202,873.59 and APS rebates of $78,216.61. With a total solar rent and lease expense of $332,711.51, there was a net cost to RCSC of $51,621.31 in 2013.
The weather obviously makes a considerable difference in the amount of energy used and produced, which is evident in the comparisons between 2014 and 2015. Nonetheless, these first full two years of PV solar production provides good information as to whether our projections were sound.
In 2014 the PV solar produced 3,951,496 kWh of electricity at value of $479,356.95 for the year. RCSC received $189,211.01 in APS rebates for a total savings of $668,567.96. The solar lease cost RCSC $578,283.00, for a net savings to RCSC of $90,284.96.
In 2015 the PV solar produced 3,783,354 kWh of electricity at a value of $483,182.61 for the year. RCSC received $181,404.78 in APS rebates for a total savings of $664,587.39. The solar lease cost remained the same at $578,283.00, for a net savings to RCSC of $86,304.39.
As electricity costs rise, the savings extended to RCSC with the production of electricity by the PV solar systems will also increase. But that is not the only place where RCSC can increase its rewards from PV solar.
On February 1, 2019, RCSC will have the option to buy out the lease for the PV solar systems for a projected amount of $5,545,215.68. So why would RCSC consider this option? Simple, it provides a significant savings. If RCSC continued to pay off its 15-year lease and following five-year Solar Services Agreement to the owner of the PV solar systems, it would pay a total of $2,497,720 more than if it takes the one time 66-month option to buy out of the lease and eliminate the Solar Services Agreement.
The Solar Lease Buy-Out is currently projected to be paid out of the Preservation & Improvement Fund in 2019. The roughly $600,000 that is currently included in utility expenses for the solar lease annually will end. Hence why the $748,098 prior years carry forward excess used to balance the 2016 budget was prudent, as it allowed the RCSC Board not to increase the annual property assessments any more than they had to with the anticipation of this $600,000 decrease in operating expenses forthcoming in 2019.
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