Solar Project Challenges other Investment Options

When you are responsible for the finances of a California city, and are investing its money, one thing is always for certain; investments will have low risk. State and local government codes restrict the type and duration of investments that cities can make, with safety of public funds the priority. However, these limitations usually result in low rates of return.

But, investing in the market is not the only way to help cities make the best use of available cash. The Director of Finance for the City of San Carlos, Richard Averett, opted to review a proposal to install an RWE Schott Solar photovoltaic (PV) system on the city’s corporation yard as an investment rather than as a purchase with a payback period. The result? The city now has a 60kW system, installed by EMCOR Energy & Technologies of San Francisco, that returns its cost, plus interest and a little more than $100,000 over the life of the installation, beating out a comparable 25-year cash investment using a 4.5 percent rate of return, according to RWE. In addition, the system has returned some public recognition in the form of an award from The Public Technology Institute (PTI) at its annual Congress for Technology Leadership event. Federal- and state-tax incentive programs, coupled with California’s rebate program for reducing the upfront cost of a PV system, have driven the PV market in California for a number of years. However, entities such as public schools or municipalities do not benefit from the tax savings and cannot depreciate capitol expenditures, which for the commercial market helps reduce a PV system’s payback period considerably. Yet, for cities like San Carlos, there are some things they can count on generally not considered in a commercial PV evaluation, being around longer than the investment and banking on its return for at least the next 25 years and beyond. “If you look at this PV system from a purely financial, investment point of view, it makes good sense. The rate of return is better than we could get investing in U.S. Treasuries or government-run investment pools, considering the avoided electric usage costs for the buildings fitted with the PV systems,” said Averett. We expect monthly electricity bills to net out to zero. If energy costs continue to rise faster than normal, we’ll see an even greater return on our investment.” The 60kW system consists of two arrays, one rated at 45 kW and the other at 15 kW. Both systems sit on flat roofs at the City’s corporation yard, using the RWE non-penetrating SunRoof FS mounting system. The electricity developed by the two systems is fed into two separate inverters that combine the energy at a netmeter, which sends excess energy back into the grid for use later when the system is not producing electricity. Over the course of a year, the systems are expected to save between $14,000 and $14,500 per year (at today’s utility rates), effectively zeroing-out the electricity bill for the two buildings. PTI recognized the City of San Carlos for its “Photovoltaic Generation Project at the City Corporation Yard” at its 2005 Congress for Technology Leadership, an annual event bringing together local government technology leaders and practitioners. San Carlos received the Honorable Mention award in the small government, energy and environment category. Presentation of the award will be May 9. The City of San Carlos, California is located 23 miles south of San Francisco and 23 miles north of San Jose. The municipality of San Carlos covers 4.83 square miles with a population of more than 28,000.
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