2019-137 Solar Energy Installation at Water and Wastewater FacilitiesDate: July 5, 2019 Report No. 2019-137
INFORMAL STAFF REPORT TO MAYOR AND CITY COUNCIL SUBJECT: Solar Energy Installation at Water and Wastewater Facilities
BACKGROUND: City Council requested that staff provide a report of the potential savings or costs to the City associated with the installation of solar panels to meet the electric demands of the water and wastewater facilities.
DISCUSSION: Contained within the proposed budgets for water and wastewater is a significant expenditure for
electric power from DME. Both the water and wastewater utilities pay DME the Renewable Cost
Adjustment (RCA) of $0.004/kwh to ensure that all electric energy used by the facilities is
renewable. The budgeted amounts of electric energy for fiscal year 2019/2020 are $1,410,789 for
the water utility and $1,221,000 for the wastewater utility. When DME achieves the goal of the
Renewable Denton plan sometime in 2021 or 2022, there will be no need for customers to pay the
RCA as all energy will be renewable. This reduction in cost will save water and wastewater
approximately $111,793 per year based upon historical demand.
DME personnel met with water and wastewater to discuss the type of analysis needed to evaluate
the economic feasibility of installing solar panels at the major facilities of each utility. The
economic screening analysis performed by DME that is provided herein is intended to provide a
very high-level assessment of the economic feasibility of such a program. The screening analysis
does not include any discussion of the physical requirements necessary to install solar panels and
ancillary equipment such as the number of acres required per facility, the structural ability of
existing roof systems to carry the load of the solar panels, sufficient land for construction lay-
down, the impact of installation on operation of the facilities, the interconnection requirements for
integrating the solar generation systems with the DME distribution grid, etc. That level of analysis
will be required if the Council decides to pursue this approach. The screening analysis utilizes
public information provided by the Department of Energy’s National Renewable Energy
Laboratory (NREL) on the capital, maintenance and operating costs for rooftop solar installations.
The costs provided by NREL do not include the cost of land acquisition or structural improvements
on existing buildings to meet local building codes.
Analytical Approach: DME obtained multiple years of actual electrical demand for each meter at
a water or wastewater utility facility. This meter data was then filtered and segregated to hours that
Date: July 5, 2019 Report No. 2019-137
a solar generation facility could provide energy and hours in which DME would be required to
provide energy. Generally the daylight hourly demand of the facilities were modeled to be met
with solar arrays sized to meet the peak demand of the facility. Energy required during non-solar
generation periods was modeled to be supplied by DME using current rates and adjusted for
removal of the RCA in 2022.
To monetize the value of the Investment Tax Credits available to solar generation facilities and
achieve the lowest cost of energy, DME assumed the solar arrays and associated equipment would
be owned by a third party and the water or wastewater utility would enter into a 20-year Power
Purchase Agreement (PPA). The financial model used assumed that the projects would be 80%
debt financed and achieved a pre-tax internal rate of return to the owner of 21%. The cash flows
required to support this debt and equity return were used to price the solar energy. The result of
this deal structure is that the City would not have to issue bonds or take on incremental debt to
support the installation of the solar panels. The effective price of the PPA was calculated at
$0.18/kWh as compared to the all-in rate for DME of $.09164/kWh. The results of the analysis
including the net present value to city for the water and wastewater systems are presented in the
table below:
Denton Wastewater System
Capacity Factor 17%
Size of Solar (kW)1604.88
Solar Cost ($/kWh)(0.18)$
# of Acres 2.43
NPV No Solar Cost (7,254,985.18)$
NPV Solar Cost (11,714,586.01)$
Delta (Additional Cost)4,459,600.83$
% Renewable 22%
Denton Water System
Capacity Factor 17%
Size of Solar (kW)2139.00
Solar Cost ($/kWh)(0.18)$
# of Acres 3.24
NPV No Solar Cost (9,574,610.55)$
NPV Solar Cost (15,518,417.53)$
Delta (Additional Cost)5,943,806.98$
% Renewable 22%
Date: July 5, 2019 Report No. 2019-137
CONCLUSION:
Because DME will provide 100% renewable energy to the water and wastewater utilities of the
City of Denton at a current cost of approximately $0.09164/kWh and that price will drop to
$0.091264 when DME achieves the Renewable Denton Plan, the construction of solar panels at
water and wastewater facilities that are estimated to produce energy at the rate of $0.18/kWh only
increases the cost of water and wastewater operations. The screening analysis definitively
demonstrates that the net present value of the incremental costs that would have to be recovered
from citizens and customers of these utilities is in excess of $10 million. The average annual
increased energy cost for these combined utilities is estimated at over $851,000 per year were such
systems installed.
STAFF CONTACT:
Terry Naulty
Asst. General Manager DME
Terry.naulty@cityofdenton.com
(940) 349-7565
REQUESTOR: Council Member Briggs
PARTICIPATING DEPARTMENTS: DME, Utilities Administration
STAFF TIME TO COMPLETE REPORT : 41 hours