15 Shasta Lane, Walnut Creek, CA 94597 Office: 925-946-9090 Cell: 925-899-2578 Email: [email protected] Marysville Photovoltaic Power Generation (Solar Project) Historical and Projected Performance Report
June 2022
Executive Summary
The purpose of this report is to analyze the performance of the City’s three solar installations over the first three years of operation, and to project the investment value forward based on actual performance combined with escalating PG&E energy costs.
The solar project has exceeded initial projections done by OpTerra Energy Services, the company that installed the system. The panels have generated more electricity than expected, and PG&E electricity prices are escalating at a much higher rate than the five percent used in modeling. The result is that beginning in 2022, the solar project is projected to provide an average net positive cash flow of $39,000 per year over the next 16 years through 2038, which is the year bond financing is paid off.
Background
The Marysville Solar Project was installed by OpTerra Energy Services (now Engie Services U.S.) in 2017 and 2018. The project consists of solar panels installed over the parking lot at City Hall, and on the roofs at Public Works and the Fire Department. The system became operational in August 2018. Peak design output for the individual locations is:
City Hall 149 kW
Fire Department 35
Public Works 21
Total Peak Output 205 kW
Each system is purposely designed to generate less power than the total annual requirement of each location.
This is strategic to fully benefit from PG&E’s Net Energy Metering Program (NEM2) based on the following program rules.
1. Excess solar power generated during peak-periods is credited at PG&E’s peak rates.
2. Energy purchased from PG&E at night is billed at PG&E’s off-peak rates.
3. Charges and credits are netted across each 12-month period.
4. Solar-generated power exceeding each facility’s 12-month requirement has no value.
The combination of 1 and 2 above means that the value of excess solar power generated during the day buys more electricity from PG&E when the panels are not generating at night. For example, based on PG&E’s current A-6 Rate Schedule, peak power is presently $0.45 per kWh (rounded). Off-Peak power is $0.30 per kWh. Therefore, one excess daytime kWh generated from the panels will buy $0.45/$0.30 = 1.5 kWh at night.
The financial advisor for the project was Wulff, Hansen & Company, responsible for structuring overall financing, coordinating private placement with Western Alliance Business Trust, and qualification of the bond issuance under the Clean Renewable Energy Bond (CREB) program administered by the Internal Revenue Service. The benefit of the CREBs are ongoing federal payments to the city proportional to the 2 of 7
amount of interest paid annually for debt service shown in detail in Table 1. The total amount of the bonds is $1,204,669 (Series A and B). Payments for the bonds are amortized over a 20-year term.
The contract with OpTerra (Engie) includes five years of annual performance guarantee and ongoing annual maintenance. After successful performance the first three years, the performance guarantee was terminated for the remaining two years, saving approximately $28,000 in premium costs. Annual maintenance costs are approximately $9,000 per year, presently still under contract with Engie. Contracting with a local company for maintenance can potentially create more accountability now that the system is operating beyond the performance guarantee from Engie.
After each year of operation, PG&E provides a “true-up” statement, showing the net benefit of solargenerated power during the preceding 12 months for each location. This analysis is based on the three performance reports provide by Engie, combined with three true-up reports from PG&E. Further, this analysis includes projected cost increases from PG&E.
Comparison to Engie First-Year Electricity Projection
The OpTerra contract includes a projection of the first-year electricity to be generated from the panels.
Solar-generated power during the first year exceeded the Engie contract projection overall by ten percent as detailed in the table below.
Location
Engie Contract
Projected firstyear kWhActual kWh Difference
City Hall 199,044 224,030 13%
Fire Department 47,755 47,104 -1%
Public Works 26,304 29,051 10%
Totals 273,103 300,185 10%
Solar-Generated Electricity Value Compared to Additional Purchases from PG&E The following three comparisons illustrate the value of electricity generated from solar versus the cost of additional power purchased from PG&E for each of the first three years of operation. Though these comparisons show the comparative value of electricity, they do not represent the economic performance of the panels. That is in the next section.
During the first two years of operation, City Hall had net credits of $2,364 and $1,635, shown as $0 in the comparison because those credits cannot be carried forward. During the third year, City Hall purchased a minimum amount of power from PG&E. This indicates the number of panels installed at City Hall is optimal to cover existing annual electricity requirements. Interestingly, this also diminishes the value of energy conservation done at City Hall because if demand is reduced any further, excess annual electricity generated from the panels has no value.
For Public Works and especially for the Fire Department, additional power was purchased from PG&E all three years. Even so, it is important to understand that the investment value of the City’s solar installations is independent of the amount of power purchased from PG&E. The investment value is primarily dependent on the cost and the performance of the panels measured against the displaced PG&E power from the solargenerated electricity, discussed in the next section. However, where significant purchases are occurring from PG&E, such as at the Fire Department, potentially more panels could have been installed. 3 of 7
$9,892
$11,750
$13,720
$7,815 $8,485 $9,310
2018-19 2019-20 2020-21
Fire Department
Value of Solar Generated Additional PG&E Purchases
$8,134 $8,100 $8,700
$2,558 $2,342
$3,145
2018-19 2019-20 2020-21
Public Works
Value of Solar Generated Additional PG&E Purchases
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Economic Performance
Although the economic analysis supporting the bond finance in 2017 showed the project as essentially breakeven over the first 20 years, the expected results are now projected to be much better for the following two reasons.
• The beginning production from the panels is ten percent greater than the beginning projection estimated by Engie (as shown above).
• PG&E rates are escalating much faster than the five percent per year value used by Engie.
The graph below from Table 1 illustrates the cumulative benefit of the solar project over its expected 25- year life. Though cashflow during the first year was negative, it is positive every year thereafter. In 2022, the system is breakeven, followed by annual gains averaging $39,000 per year through the 20th year in 2038 when the bonds are paid off. Assuming the system continues to perform during years 21 through 25, the projected benefit is much higher each year without the burden of bond payments. The total projected benefit over 25 years is $1.8 million.
The detail of Table 1 shows annual costs versus projected annual benefit. The key element is the increased projected value of solar-generated power. The detail for the value of generated power is shown in Table 2.
The average values of generated power at $0.31 per kWh for City Hall and Fire, and $0.33 per kWh for Public Works for 2022 have been confirmed with PG&E billing statements and PG&E posted rate schedules. Over the next five years, for 2022 through 2026, PG&E rates are projected to increase 10 percent 5 of 7
per year in the model. This is conservative compared to press releases from PG&E announcing increases of 22 percent per year.
The bond payments shown in Table 1 are from the established payment schedule and will not change. The CREBs refunds may vary slightly based on the federal government’s sequestration adjustments.
Table 1 includes production decline from the panels of 0.5 percent per year as used in the Engie contract.
Additionally, the cost of the performance guarantee is included in the first three years, and the cost of annual maintenance escalated at three percent per year over the life of the panels. City staff’s intention is to investigate lower cost annual maintenance than that provided by Engie. The role of maintenance is straightforward to clean the panels, confirm they are generating properly, and make any necessary repairs.
Conclusion
The City of Marysville’s solar project is working properly and is exceeding its projected value. It is a valuable asset to the city helping the environment by generating electrical power from the sun and reducing the cost of electricity that would otherwise be purchased from PG&E. Looking forward, it is important to monitor the system for proper operation for continued maximum benefit. Contracting with a local company for maintenance can potentially create more accountability now that the system is operating beyond the performance guarantee from Engie.
Prepared by:
Dan Bergmann
Principal Consultant
IGService
Submitted June 1, 2022
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Bond
Payments*
Cost of
Savings
Guarantee
Cost of Annual
Maint.**
Total
Expenses
Federal CREBs
Refunds
Value of
Generated
Solar Power
Total Annual Benefit Cumulative Benefit
0 2018 ($66,039) ($12,618) ($7,943) ($86,600) $13,875 - $13,875 ($72,725) ($72,725) 1 2019 ($67,538) ($12,997) ($8,181) ($88,716) $27,751 $65,072 $92,823 $4,108 ($68,617) 2 2020 ($69,539) ($13,386) ($8,427) ($91,352) $27,751 $74,850 $102,601 $11,249 ($57,369) 3 2021 ($73,433) ended ($8,680) ($82,113) $27,751 $86,540 $114,291 $32,178 ($25,190) 4 2022 ($76,100) - ($8,940) ($85,040) $27,751 $93,016 $120,767 $35,727 $10,537 5 2023 ($91,615) - ($9,208) ($100,823) $27,751 $101,806 $129,557 $28,734 $39,271 6 2024 ($105,274) - ($9,484) ($114,758) $27,751 $111,427 $139,178 $24,419 $63,690 7 2025 ($109,125) - ($9,769) ($118,894) $27,751 $121,957 $149,708 $30,814 $94,504 8 2026 ($111,610) - ($10,062) ($121,672) $27,751 $133,481 $161,232 $39,560 $134,064 9 2027 ($114,786) - ($10,364) ($125,150) $25,620 $138,127 $163,747 $38,597 $172,661 10 2028 ($117,626) - ($10,675) ($128,301) $24,466 $142,933 $167,399 $39,099 $211,76011 2029 ($121,130) - ($10,995) ($132,125) $23,789 $147,907 $171,696 $39,571 $251,33112 2030 ($122,242) - ($11,325) ($133,567) $22,334 $153,055 $175,389 $41,822 $293,15313 2031 ($122,297) - ($11,665) ($133,962) $20,755 $158,381 $179,136 $45,174 $338,32714 2032 ($128,019) - ($12,015) ($140,034) $19,116 $163,893 $183,009 $42,975 $381,30215 2033 ($127,443) - ($12,375) ($139,818) $17,064 $169,596 $186,660 $46,842 $428,14416 2034 ($133,343) - ($12,746) ($146,089) $14,575 $175,498 $190,073 $43,984 $472,12817 2035 ($136,711) - ($13,129) ($149,840) $11,873 $181,605 $193,478 $43,639 $515,76718 2036 ($137,247) - ($13,522) ($150,769) $8,894 $187,925 $196,819 $46,050 $561,817 19 2037 ($143,393) - ($13,928) ($157,321) $5,695 $194,465 $200,160 $42,839 $604,655 20 2038 ($15,806) - ($14,346) ($30,152) $2,226 $201,232 $203,458 $173,306 $777,962 21 2039 - - ($14,776) ($14,776) - $208,235 $208,235 $193,459 $971,42122 2040 - - ($15,220) ($15,220) - $215,482 $215,482 $200,262 $1,171,68323 2041 - - ($15,676) ($15,676) - $222,981 $222,981 $207,304 $1,378,98724 2042 - - ($16,146) ($16,146) - $230,740 $230,740 $214,594 $1,593,58125 2043 - - ($16,631) ($16,631) - $238,770 $238,770 $222,139 $1,815,720 ($2,190,316) $1,815,720
* First bond payment (interest only) was March 2018.** 3% Escalation Table 1
Expenses Refunds and Power Value Benefit
City of Marysville Solar Program: Historical and Projected Performance Results Year
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Panel
Decline
City Hall
kWh Fire kWh PW kWh Total kWH PG&E Escalation City Hall Rate Fire Rate PW Rate City Hall & Police Fire Dept Public Works Total * 2018 - - - -
1 2019 Actual 224,030 47,104 29,051 300,185 $0.21 $0.21 $0.28 $47,046 $9,892 $8,134 $65,072 2 2020 Actual 220,000 47,000 27,000 294,000 $0.25 $0.25 $0.30 $55,000 $11,750 $8,100 $74,850 3 2021 Actual 229,000 49,000 29,000 307,000 $0.28 $0.28 $0.30 $64,120 $13,720 $8,700 $86,540 4 2022 224,000 48,000 28,000 300,000 10% $0.31 $0.31 $0.33 $68,992 $14,784 $9,240 $93,016 5 2023 0.9950 222,880 47,760 27,860 298,500 10% $0.34 $0.34 $0.36 $75,512 $16,181 $10,113 $101,8066 2024 0.9950 221,766 47,521 27,721 297,008 10% $0.37 $0.37 $0.40 $82,648 $17,710 $11,069 $111,4277 2025 0.9950 220,657 47,284 27,582 295,522 10% $0.41 $0.41 $0.44 $90,458 $19,384 $12,115 $121,9578 2026 0.9950 219,553 47,047 27,444 294,045 10% $0.45 $0.45 $0.48 $99,006 $21,216 $13,260 $133,4819 2027 0.9950 218,456 46,812 27,307 292,575 4% $0.47 $0.47 $0.50 $102,451 $21,954 $13,721 $138,127 10 2028 0.9950 217,363 46,578 27,170 291,112 4% $0.49 $0.49 $0.52 $106,017 $22,718 $14,199 $142,933 11 2029 0.9950 216,277 46,345 27,035 289,656 4% $0.51 $0.51 $0.54 $109,706 $23,508 $14,693 $147,907 12 2030 0.9950 215,195 46,113 26,899 288,208 4% $0.53 $0.53 $0.57 $113,524 $24,327 $15,204 $153,055 13 2031 0.9950 214,119 45,883 26,765 286,767 4% $0.55 $0.55 $0.59 $117,475 $25,173 $15,733 $158,381 14 2032 0.9950 213,049 45,653 26,631 285,333 4% $0.57 $0.57 $0.61 $121,563 $26,049 $16,281 $163,893 15 2033 0.9950 211,983 45,425 26,498 283,906 4% $0.59 $0.59 $0.64 $125,793 $26,956 $16,847 $169,596 16 2034 0.9950 210,924 45,198 26,365 282,487 4% $0.62 $0.62 $0.66 $130,171 $27,894 $17,434 $175,498 17 2035 0.9950 209,869 44,972 26,234 281,074 4% $0.64 $0.64 $0.69 $134,701 $28,864 $18,040 $181,605 18 2036 0.9950 208,820 44,747 26,102 279,669 4% $0.67 $0.67 $0.72 $139,388 $29,869 $18,668 $187,925 19 2037 0.9950 207,775 44,523 25,972 278,271 4% $0.69 $0.69 $0.74 $144,239 $30,908 $19,318 $194,465 20 2038 0.9950 206,737 44,301 25,842 276,879 4% $0.72 $0.72 $0.77 $149,258 $31,984 $19,990 $201,232 21 2039 0.9950 205,703 44,079 25,713 275,495 4% $0.75 $0.75 $0.80 $154,453 $33,097 $20,686 $208,235 22 2040 0.9950 204,674 43,859 25,584 274,117 4% $0.78 $0.78 $0.84 $159,828 $34,249 $21,405 $215,482 23 2041 0.9950 203,651 43,640 25,456 272,747 4% $0.81 $0.81 $0.87 $165,390 $35,441 $22,150 $222,981 24 2042 0.9950 202,633 43,421 25,329 271,383 4% $0.84 $0.84 $0.90 $171,145 $36,674 $22,921 $230,740 25 2043 0.9950 201,620 43,204 25,202 270,026 4% $0.88 $0.88 $0.94 $177,101 $37,950 $23,719 $238,770 7,165,966 $3,918,974
Table 2
Fiscal Year
Value of Generated Power Average Rate of Generated Power kWh Generated