City exploring buying electricity from business rooftops

February 4, 2010

Looking to spread rooftop solar, Austin Energy broadening focus.

By Marty Toohey
Austin American-Statesman Staff

Austin Energy, grappling with how to expand solar power amid current budget constraints and long-term financial concerns, is considering a new approach: buying electricity generated on the rooftops of big businesses.

The Austin City Council will vote on a measure today that would take a small step in that direction.

Austin Energy wants the authority to stop large one-time rebate payments that help businesses cover the cost of installing solar panels. Instead, the city would spread those payments over 10 years and monitor the output of each array, reducing payments for systems that produce below expected levels.

Officials hope that in perhaps five years, commercial rooftops can produce enough electricity to make arrays a worthwhile investment with minimal or no city incentives.

The shift is significant because Austin’s solar efforts to date have focused on getting homes or businesses to generate their own power.

As more homeowners generate their own electricity under the current model, however, Austin Energy could face a drop in revenue needed to keep its electrical grid functioning, officials say.

That possibility is years, if not decades, away, but the city should begin efforts now to avert it, said Karl Rabago , an Austin Energy vice president.

But the utility’s new approach is due as much to immediate budget constraints as long-term planning. Austin Energy’s solar rebate program had become so popular that the utility says it cannot afford to continue offering one-time rebate checks to businesses.

"We never like to waste a crisis," Rabago said. "We hope to learn the issues around this approach \u2026 so we’re in a better position to know" whether looking to big businesses as electricity producers is technically and economically feasible.

Austin Energy executives say they are pursuing solar power because, while it is now more expensive than other sources, prices are expected to drop while those of conventional sources will rise, making solar a potentially useful supplement, available on the hot afternoons when air conditioners are running on high and electricity is needed most.

Austin Energy wants to add solar power as part of a plan to reduce its dependence on coal over the next decade.

The approximately 800 rooftop solar arrays in Austin generate a negligible amount of the city’s power.

But Austin Energy is proposing that the city get 3 percent of its electricity from solar power by 2020. The utility recently concluded there is enough rooftop potential in Austin to power the entire city on even the hottest summer afternoons.

Roger Duncan, Austin Energy’s general manager, says that future is probably decades away but should guide today’s policies.

In March, the City Council approved Austin’s first large-scale solar project, voting to spend $10 million annually for 25 years to buy power from a massive solar array to be built in Webberville, just east of Austin.

The deal drew applause at City Hall from environmental activists and those pushing for Austin to establish itself as a hub for the solar industry. But it also drew criticism from some large businesses who questioned the expense for a plant that will add just 1 percent to the city’s electric-generating capacity.

In September , Austin Energy irritated solar advocates by announcing that it was curtailing its solar-rebate program. Rabago said the program had gotten so popular that the utility was close to spending its entire $4 million budget less than a month into the fiscal year.

When the utility announced it would stretch the dollars by reducing the one-time rebates to homeowners, several said the city had misled them about its intentions. A group of them filed a lawsuit in late January in state District Court.

Scott Kidd, the homeowners’ attorney, said the city undermined months of work by the homeowners.

Tal Tversky, one of his clients, calculated that a solar array would have paid for itself in about seven years (a good deal) but now would take about 12 years to pay for itself (too long to make financial sense).

"The city made an offer to the public and said if you do certain things, you’re entitled to a rebate," Kidd said. "They made, it appears to me, an unequivocal offer, and from our standpoint, a deal’s a deal, and they should have to honor it."

Rabago said the city never promised to honor every application it received and had made no obligations until it gave final approval, which Kidd’s clients had not secured. Austin Energy is still planning reductions in the residential portion of the rebate program.

A task force appointed by Mayor Lee Leffingwell to study Austin Energy’s long-term plans recommended the utility explore buying electricity directly from private owners of rooftop solar arrays.

To test the idea, Austin Energy wants to begin offering 10-year contracts to a limited number of businesses.

The city would calculate how much it would have to pay a business each month for a solar array to pay for itself after a decade, assuming the array operates at optimal output.

If the price of solar technology drops, the city would reduce the incentive in subsequent contracts. Eventually, as the cost of solar technology continues to drop, the utility hopes it can pay market rates for that privately generated power.

The city plans to spend up to $100,000 this year on perhaps 23 arrays and hopes to keep signing up businesses over the next five years.

Utilities and state governments in 26 states have adopted some variation on that setup, according to the federally funded Database of State Incentives for Renewables and Efficiency.

"It’s certainly the direction the industry should and is moving," said Alex Tynberg , a spokesman for Austin-based Meridian Solar.

mtoohey(at)statesman.com; 445-3673

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