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Five years ago, the City of Monona (Dane County) passed a resolution committing itself to greatly expand its own use of renewable energy by 2025. As of October 2013, Monona now hosts the largest solar electric project serving a Wisconsin municipality. The city contracted with a third party, Colorado-based Falcon Energy Systems, which installed, owns, and maintains the 156 kilowatt solar electric system, supplying renewable energy directly to four city-owned buildings (City Hall, Public Library, Public Works Garage, and the Public Works Department’s Well #3). All told, the solar arrays will produce more than 220,000 kWh of clean energy per year, providing up to 30 percent of the four buildings’ combined electricity needs.
The city will receive a stream of renewable energy credits along with the electrical output under its solar service partnership agreement with Falcon Energy Systems. The solar generating arrays were manufactured by tenKsolar of Bloomington, Minnesota; Madison-based Full Spectrum Solar installed and will service the equipment. The project team was assembled by Solar Connections LLC, a Madison consulting group.
The project will reduce CO2 emissions by an estimated 2,200 tons per year.
Previously the city paid about 18 cents per kWh during peak use. Now that the solar panels have been installed, the city will pay approximately 9 cents per kWh during peak use.
The city will also save over $250,000 on its energy bills over the next 20 years, although the system is expected to last much longer with minimal maintenance.
The Importance of Third-Party Ownership
The solar energy agreement with Falcon Energy Services is a six-year agreement. In the seventh year, the city may choose to renew the agreement, cancel the agreement, or purchase the solar arrays. While the agreement is in place, Falcon Energy Services will receive federal tax benefits for investing in solar energy and pass a portion of the refund on to the City of Monona.
The project is the first time a municipal government in Wisconsin has worked with a third party that owns, installs, and maintains a solar system for the city in exchange for a share of the renewable energy credits earned by the system. The city took a risk, not knowing whether the system would infringe on Wisconsin’s utility service territory law, which allows only regulated utilities to sell power to retail customers. Madison Gas & Electric, the local utility, chose not to challenge the project since all the power will be used within the city’s property. The project is estimated to save the equivalent of 220,000 kWh a year, almost all of which is during peak time periods when power is more expensive.
This third-party ownership arrangement is the key driver in about 60 percent of all solar systems that were installed nationwide in 2012, but until now they have not caught on in Wisconsin because of the ambiguity of Wisconsin’s utility law. Third-party owners that can utilize the federal tax credits can save about 50 percent of the installed cost of a system. Governments and other nonprofit organizations cannot take advantage of the tax credits as they do not pay taxes, but the third-party arrangement allows the owner to share the tax credits with the nonprofit entities.
The implications of Monona’s initiative are significant, given that 140 Wisconsin communities have passed similar resolutions to use renewable, low-carbon energy in their municipal facilities and are looking for cost-effective ways to implement the resolutions. Third-party ownership allows a win-win for communities and other nonprofits that cannot take direct advantage of the federal tax credits; they can achieve their climate and energy objectives and save money at the same time. In addition, there are no capital expenditures on the part of the municipality and no technology risks, as those risks are shifted to the third-party investor.
“With this action, Monona joins the growing circle of Wisconsin businesses, communities, and individuals committed to serving themselves with renewable energy produced on-site,” said Michael Vickerman, program and policy director of RENEW Wisconsin, a statewide renewable energy advocacy organization. “Through their actions, forward-thinking entities like Monona will reduce Wisconsin’s dependence on imported fossil fuels in a way that creates jobs and invigorates the local economy.
