solar service agreement

A Pima County Solar Plan Could Save Money

An Op-Ed by Pima County Administrator Chuck Huckelberry in the Arizona Daily Star last Sunday urges the Arizona Corporation Commission (ACC) to “allow Pima County and other large organizations to build solar-energy plants that would, in effect, supply much of their own electricity.” Mr. Huckelberry estimated that such a program would save the County $60 million over 20 years.

A change in regulations by the ACC is necessary to make possible off-site generation: “Large power users who support clean, renewable energy and are willing to install solar facilities on land that is not directly adjacent to the buildings where the power will be used should be allowed to do so. At present, this is not allowed. Many potential users are located in congested areas (such as downtown Tucson) where land is extremely limited or not available for a solar installation.”

I had some questions about the cost to the taxpayers about this plan so I asked Mr. Huckelberry via email. Here is the response from Tedra Fox, Sustainability Manager, Pima County Administrator’s Office:

The County will install solar farms totaling 50 MW on County-owned land by contracting with one or more private solar development companies through an arrangement called a “Solar Service Agreement” (also called a “Power Purchase Agreement”).

Under a Solar Service Agreement, the private solar developer pays for the construction, operation and maintenance of the solar farm. The County pays only for the actual amount of solar energy produced by the farm. The County pays no upfront capital costs, and no bond elections are necessary.

The $60 million savings is based on the cost savings we projected for our existing 1 MW solar photovoltaic array at the Roger Road Wastewater Reclamation Facility. The private developer of that facility expects it to produce more than 2 million kilowatt hours (kWh) of energy annually, and more than 40 million kWh of energy over the next 20 years. We have locked into a fixed rate of $0.0959 per kWh for the entire 20-year contract term.

By contrast, our current TEP municipal service rate is $0.1029. We estimate that rate could increase by roughly 2.4% a year, based on the annual increase in consumer energy prices projected by the U.S. Energy Information Administration’s Annual Energy Outlook 2010 with Projections to 2035 report. That particular projection is the “reference” projection, which assumes no changes in current laws. We acknowledge that energy rate forecasts vary and actual energy prices are subject to a variety of influences, so that is why our estimate is an approximation.

The difference between the fixed rate per kWh we will pay for the next 20 years at the Roger Road Solar Facility, and the amount of money we otherwise would pay for conventional electricity over the next 20 years, is roughly $1.2 million given the factors and assumptions above. We multiplied that savings for 1 MW by 50 MW, which is the total County energy load, to yield an approximate savings of $60 million over 20 years for a 50 MW installation. Please note that while solar energy prices continue to come down, we did not factor this into our projection.


If the County gains permission for this plan and builds the solar arrays, it could then feed the electricity into TEP’s grid and be credited for that amount. The County expects ACC to discuss the proposal today.