TC to consider solar energy offer

Heritage Sustainable Energy wants to expand its solar array on M-72 near Bugai Road in Traverse City.

TRAVERSE CITY — The owner of a solar array in Elmwood Township no longer has zoning woes blocking expansion plans.

But some Traverse City Light & Power board members weren't keen on paying a premium for more clean energy, even if it helps Traverse City meet its self-set renewables goal.

Utility Executive Director Tim Arends said at a recent meeting that the city agreed to buy 1.2 megawatts from Heritage Sustainable Energy's solar array at 11.25 cents per kilowatt-hour for 20 years. The city pays the utility the difference between that rate and city-owned TCL&P's avoided costs — that's what the utility doesn't pay from having an on-grid producer versus market-bought energy.

That worked out to an extra 0.2 cents per kilowatt-hour in July 2017, when city commissioners inked the deal.

Heritage Sustainable Energy's plans to expand the array were held up by Elmwood Township's rewrite of its zoning ordinance. The resulting rules didn't allow for large-scale solar as a use. But township trustees since changed the rules and the company is working on a use permit application, company founder and CEO Marty Lagina said later.

Arends said the contract with Heritage Sustainable Energy obligates the utility to buy the power if the company expands that array. TCL&P has the option of paying 9.95 cents per kilowatt-hour for the term of the contract, or market rate — roughly half the cost, he said.

Lagina said later that he couldn't feasibly build his planned two-megawatt expansion for those prices because they're unpredictable.

"I think that the price is going to go up, but I have to build it today, so as a small developer I can't do that, it's not feasible, it's not bankable and you can't get a loan against that sort of thing," he said.

City leaders in December 2016 agreed to pursue powering 100 percent of municipal operations through renewables, both through using less electricity and by buying clean power.

A few utility board members voiced reservations for buying even more electricity at a higher rate. City Manager Marty Colburn said he proposed alternatives for meeting the city's renewable energy goal. Two more megawatts wouldn't get the city that much closer to its goal and comes at an added cost, he said.

"The first one we bought, I think, was more sending a clear message that the city commission was very dedicated to this goal," he said. "Beyond that, though, we have to be very careful in terms of costs and the values it costs for these additional megawatts."

Ross Hammersley, a utility board member, said he wanted to know if the renewable energy credits that would come with the extra power would be worth the added cost to the city.

Board member and city commissioner Tim Werner said he was skeptical of the original deal and still believes the city should seek bids for any future green energy buys.

Sam Hogg, Spartan Renewable Energy's business origination director, told the utility board they should consider buying clean power from utility-scale projects. Smaller ones don't "move the market" on equipment costs or meaningfully cut back carbon emissions, he asserted.

Lagina said his offer is for a fixed rate, meaning the electricity could be more expensive now but below market cost in the future if prices rise enough.

Plus, the array is on the utility's grid, meaning there's no transmission costs and inefficiencies, and no risk of regulators shunting the power elsewhere in an emergency, Lagina said. And the offer is on the table now, as opposed to hypothetical future ones, he said.

"If they can get a better deal on their system, they should take it," he said. "That's their job, but where are they?"

Arends said the utility board has 45 days to decide, so they'll revisit the question in March. He'll have updated figures and answers to some early questions for them by then.

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