TRAVERSE CITY — Solar panels could be taking in the rays and sending out the volts just west of town by summer’s end if Traverse City Light & Power and Heritage Sustainable Energy can finalize a power purchase agreement.

The city also could be closer to a goal of powering all municipal operations with clean energy by 2020.

TCL&P board members voted 6-0 to authorize utility staff to negotiate a deal to buy the output from the company’s planned megawatt-capacity solar array destined for land it owns near its wind turbine at M-72 and Bugai Road; board Chairman Jan Geht recused himself because he and his firm have represented the company legally.

The company offered lower costs per kilowatt-hour than when utility Executive Director Tim Arends originally brought the offer to board members, he said. Heritage Sustainable Energy is now offering a 20-year fixed rate of 11.25 cents per kilowatt-hour. That’s a penny less per two kilowatt-hours than the previous offer.

There’s room at the project site to build three more megawatts of solar capacity, and the utility could opt to buy power from the future arrays at 9.95 cents per kilowatt-hour.

The contract could cost $2.16 million to $6.48 million over its lifespan, depending on how much capacity the utility ultimately buys, according to meeting documents.

Heritage Sustainable Energy CEO Marty Lagina said those numbers came out of negotiations after utility board members gave the company’s first offer a cool reception.

“Tim Arends did his job and we submitted as low a price as we could possibly have and still make the project viable,” he said.

The project’s first phase requires upgrades to the utility’s transmission system, Lagina said. The resulting infrastructure will have the capacity to carry the electricity from a future phase, so the company can offer a lower unit cost for power from any future expansions.

City “Green Team” members will consider whether to recommend buying the array’s output at an upcharge to power city operations, Arends said. That electricity would cost up to two cents more per kilowatt hour over the city’s current rate of about 11 cents. City commissioners’ rejection of paying the rates wouldn’t stop the utility’s power purchase deal from proceeding on a parallel track.

Arends said that upcharge could turn out to be a deal before the 20-year agreement expires if energy from other sources becomes more costly.

The array’s output, while a tiny fraction of the utility’s energy portfolio, also would offset the need to buy electricity at the costliest time of year.

“During the peak times in summer, those hot days when solar produces the most, that’s when it costs the most to buy energy off the market,” he said.

Utility board member and city commissioner Tim Werner said the deal progressed exactly as he had hoped, with TCL&P taking the lead on negotiations for an opportunity to help the city reach its clean energy goal.

Participating in the project shows leadership on the city and utility’s part, board member and Green Team member John Taylor said. There’s also considerable interest in seeing a local company build a visible project. It’s not a typical power purchase agreement, as the city could share part of the cost through the higher rate.

“I’m very happy to have that conversation, we certainly should be working with them, I think we have a lot of expertise, but I don’t want to be a barrier, if you will, to the city meeting their goal by not supporting this at this stage,” he said.

Heritage Sustainable Energy originally could’ve offered power from future phases to Wolverine Cooperative, which has a grid connection point nearby, Lagina said. Now, the utility would have the right to this phase’s output.

The utility board’s vote Tuesday means Heritage Sustainable Energy can start ordering project items with longer lead times, Lagina said. But the company can’t invest in the entire project until the power purchase agreement is final.

“It’s something that the city has wanted and we think we have the absolutely perfect location, and it’s an exciting thing,” Lagina said.

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