Here Comes the Sun!
Burning fossil fuels is the root cause of global warming. Most of us know and accept this as fact.
Something you probably don’t know: Multnomah County government uses 42 million kilowatts of electricity a year, the majority of which come from power plants burning fossil fuels. In other words, we’re part of the problem. The good news is that we can be part of the solution, too.
This Thursday, I’m introducing a resolution to develop the largest solar energy facility in the Northwest on the rooftops of Multnomah County’s buildings. Collectively, the solar panels mounted on County buildings will more than double the total amount of solar energy produced in Oregon. The project will also lower the County’s greenhouse gas emissions by more than 700 tons per year.
This ground breaking resolution authorizes the creation of a “Virtual Power Plant” atop the roofs of select County-owned buildings. With minimal maintenance, the County can get at least 20 years of worry-free energy production from a non-polluting, renewable energy source.
The Energy Trust of Oregon, a non-profit organization dedicated to expanding renewable energy use in our state, will help develop the County’s solar project. The County will then purchase the clean energy generated on our rooftops at the same rates we are paying to our current providers for “normal” electricity. The County will continue to buy power from our current providers for energy needs that aren’t met by the solar installation. Best of all, because of Energy Trust’s support and generous state (thank you Oregon Legislature!) and federal tax credits, this project will happen at little or no cost to County taxpayers.
I know what you’re thinking: it rains, it’s cloudy, it rains, it’s cloudy, then a little sun – our weather does not seem ideal for solar electricity production. Well, as it turns out, we’ve come a long way since photovoltaic solar panels were first introduced in the 1970’s. Germany – which has fewer sunny days than western Oregon – is the world’s leading producer of solar power. The fact is, even in our often cloudy and rainy climate, we can produce significant amounts of solar electricity here in Oregon.
Besides the obvious environmental impact, there are significant economic benefits to come from local support for green-energy. The solar energy industry is gaining momentum in Oregon. SolarWorld of Germany has recently decided to open a solar cell factory in Washington County, with plans to hire 1,000 employees. Solaicx of California also just announced plans this month to open a cutting edge solar energy facility employing up to 100 in Portland’s Rivergate District.
I’m excited to help keep Multnomah County at the forefront of sustainable living. This project helps reduce our footprint on the Earth; supports the local renewable energy market; encourages like-minded business to think about Oregon as a place to locate; and sets an example to the rest of the country that progressive environmental policy is realistic and financially possible. Best of all, it shows that with creativity and good partnerships, local government can help create the kind of community Oregonians expect and deserve.
Posted on June 28, 2007
Comments
(Note: Comments are the views of their authors, and no one else.)
Posted by: Kari Chisholm - June 28, 2007 11:43 AM
Jeff, over at the Portland Tribune story, there's this:
The county would then pay for the power at the same rates as it currently pays for its electricity...
The deal will cost the county little or no money, Cogen said, and will allow the county to own the solar panels after the private entities that install and own the solar panels reap 10 years worth of tax credits that are part of the deal. The county could then use for free the power the solar panels generated until their operational life ends – which would amount to at least another 10 years, Cogen said.
So, basically, the County would pay the going rate for power for 10 years, and then would get free power for ten years. Right?
Is there any way to structure the deal so that some of the savings could be realized now?
Posted by: Jeff - June 28, 2007 11:57 AM
Kari,
That's a good question. Actually, the way we structured this deal is designed to give us the best deal possible up-front.
Typically, when folks decide to use solar energy it involves a big initial investment: buying and installing the panels. By working with the Energy Trust and private partners the entire upfront cost (about $9 million) is paid by them - which is a good thing since Multnomah County currently doesn't have $9 million just kicking around.
We simply pay them what we have been paying the utilitites for 10 years (until the state and federal tax credits that make this pencil out for them expire) and at that time we can take ownership, and free electricity for the remaining life of the panels.
Jeff
Posted by: Jack Bog - June 28, 2007 12:21 PM
Jeff: What's the deal on electricity costs over the 10-year period? Someone said the county gets a lock on the current rates it pays for power. Is that true?
Posted by: Jef Cogen - June 28, 2007 12:46 PM
Jack,
That is the what Energy Trust told us to expect. As you noted on your blog, we still have to do an RFP to find the company to own the solar panels (and to answer your concern, no we don't have anyone lined up - there will be a fair, open, competetive process). But the Energy Trust has done these sorts of projects before, and has experience regarding what terms we can expect, and based on their experience we are predicting stable electric rates for the 10 year term. It makes sense when you think about it: unlike gas or coal generated electricity, there are no fuel costs, which vary quite a lot. All of the costs are fixed, upfront costs associated with the purchase and installation of the panels, so the costs are predictable and stable.
Jeff
Posted by: Chris McMullen - June 28, 2007 01:37 PM
Jeff, how much will the arrays cost a month (debt serviced), and how much revenue a month will they generate?
Posted by: Elizabeth - June 28, 2007 01:46 PM
We're going to pay for electricity for the next ten years anyway. Why not make it a non-polluting energy? Thanks for thinking ahead, Jeff.
Posted by: Mike Gundlach - June 28, 2007 03:16 PM
Jeff,
It's great to see the county working smart and adopting forward thinking solutions. Thanks for your hard work to pull this together. I look forward to seeing more of this type of activity in the future!
Mike
Posted by: Leslie Carlson - June 28, 2007 03:53 PM
It's great to see a local government entity stepping up to the big challenge of the next 25 to 50 years: finding a source or renewable, non-carbon producing energy. I hope Multnomah County's deal becomes an example for how governments can get free, plentiful energy and in the long-run, save taxpayers money.
Posted by: Spicey - June 28, 2007 04:07 PM
I wonder what other entities might get in on this action to perhaps buy these panels in bulk? PSU? Colliseum? Mt. Hood CC? BPA, Convention Center :) Where are the biggest rooves?
Thanks, Jeff. Now I'm extra proud I sported those two yard signs last Summer/Fall
Posted by: Jeff Cogen - June 28, 2007 05:09 PM
Thanks for all the great feedback!
Chris, in answer to your question, the County is not financing these solar panels. Instead, a private company will provide the financing, because they can take advantage of generous state anf federal tax credits that the County as a government cannot. The County will, instead, pay the company for the electricity generated by the panels - at the same price we currently pay for our non-renewable electricity.
Jeff
Posted by: Chris Lowe - June 28, 2007 05:40 PM
Don't misinterpret the following questions, I'm not opposed to this. But I'd like to know if some things have been taken into account, and to dampen down the "free energy" enthusiasm a tad, because while it might still be cheaper in the second decade, there costs that haven't been mentioned.
There was an interesting story on NPR this morning about private companies doing something like this, except that the business model was that the contractor owned the solar panels & sold the electricity. Part of the argument that the power consuming / solar panel landlord entity would not have to worry about maintenance and repairs, which would remain in the hands of folks with the requisite technical knowledge.
So, when the county takes over ownership, won't there be some additional overhead costs? Is the plan to have solar panel techs on the county payroll, or to contract out maintenance & repairs?
Also, it sounds like the lifespan of the panels is ca. 20 years. Is it known if problems become more frequent later in that lifespan?
Finally at the back end, what happens when it comes to decommissioning? I suspect that solar panels are to some extent sources of toxic waste when disposed of. Are there plans about the methods for decommissioning, detoxifying and disposal? Estimates of the costs?
E.g. Reed College at some point faces a big hit when they have to decommission their toy nuclear reactor, which I believe is already past its originally intended lifespan. In the 1990s the issue was assiduously avoided by the then admin.; maybe that's changed now. If they'd done it 15 years ago the costs would have been much less than they will be now.
At front end, while solar panel manufacturing seems o.k. to encourage on its face, again I suspect that like many computer-related production processes, there will be considerable toxic by-products involved. Are there plans to regulate how that will be handled if this does indeed lead to new production in the metro area?
Point is that sustainability needs to consider the entire life-cycle of the technology as part of an ecology.
It seems quite likely that even taking these questions into account, this is a good way to go. Thanks for the initiative Jeff.
Posted by: pdxnag - June 28, 2007 08:13 PM
Can you offer any conceivable argument to link the costs that PGE faces with the costs faced by a specialized entity that would contract to install and operate solar panels for the benefit of Multnomah county taxpayers on Multnomah county property? Pulling the PGE rates out of a hat would surely support a jury finding that all inquiry into any routine rate setting notion such as what is "reasonable and just" had been wholly abandoned.
To whom do you owe a fiduciary duty? (See for example a good discussion in the corporate context -- Chiles v. Robertson, 94 Or App 604, 619-20, 767 P2d 903, on recons 96 Or App 658, 774 P2d 500, rev den 308 P2d 592 (1989)) (See this also "As we noted in Chiles, the heart of a corporate fiduciary's duty is an attitude, not a rule."
While a GREEN initiative sounds good, it would not justify losing one's bearings any more than if the issue were the delivery of water from a publicly owned aquifer or watershed. The public interest of individual electors could never be less than any artificial entity, regardless of whether such entity may organization themselves as a mutual benefit of public benefit.
As an exercise for the sake of argument consider creating a county spin off entity that can claim the tax benefits and limit it to the contemplated solar power installations and build in a sunset in ten years for automatic dissolution with distribution of assets being dedicated to Multnomah county just as with any other gift that the county can receive. I would want to be able to call it a "public body" just as much as the OSB, for public records demands and for examining the reasonableness of any salary or purchasing decisions with the same vigor as with any Multnomah county purchase of goods or services.
If you want to treat tax power like a pinata then at least make a visit to the DHS rules regarding consideration of client assets when determining eligibility to receive benefits. An artificial entity cannot represent any superior public purpose than that which it derives from the self-interest of the incorporators.
Posted by: Mark Schwebke - June 28, 2007 10:27 PM
Why don't we get all the local schools, community colleges and universities in on this?
Posted by: pdxnag - June 29, 2007 06:52 AM
Sorry for "sleep writing/editing" --
"whether such entity may [organize] themselves as a mutual benefit [or] public benefit."
Posted by: Jeff Cogen - June 29, 2007 09:33 AM
As far as life cycle issues raised by Chris, the County is responsible for routine maintenance, but our research shows this to be a very minimal expense. The 20 year period is conservative, most folks in the field suggest 30-40 year life span is more likely. You raise a good point re: end of life disposal/reuse, we'll investigate that further. Thanks.
PDXnag offers an interesting idea re: creating a "county spinoff" to own the panels for the first 10 years. I will ask the County attorney to evaluate whether that is possible, and whether such an entity would qualify for the state/federal tax credits that help make this deal work. The part about paying our current rates during the first 10 years isn't beacuse we chose PGE rates, its beacuse the economics of the deal as we currently understand them, would work with that amount paid for electricity, coupled with the tax credits/energy trust support.
Mark, I agree. I have already had conversations with the City of Portland, and they want to follow in our footsteps here. I will try to enourage other governments/institutions to follow suit. That idea: serving as a role model and inspiring other into action, was one of our main motivations with this project.
Posted by: Pete Forsyth - June 29, 2007 11:59 AM
Great idea. Sounds complex, but it sounds like you're right on top of the complexities. Looking forward to hearing where this goes.
Posted by: pdxnag - June 29, 2007 05:40 PM
As an Economist I posited the "county spinoff" option as a baseline so as to compare against any claims that a private "public benefit" entity might assert regarding a price based on energy use pegged to PGE pricing, as if picked from a hat.
No business (private or public) is entitled to government tax-based cover for their protected private business judgment freedom to make a bad bargain. If bids were let and the bidder was going to lose money it would be the duty of the representatives of the county to insist on receiving the benefit of the bargain. If the private contracting party might hint at not following through then I would insist upon a performance bond in advance.
I would demand no less from an attempt to mimic the theoretical efficiency of the bid process, and the price one could expect under effective competition, through any plan to select a private partner.
It would be one way of calculating what a correct price should be so as to void a contract and/or hold the responsible officials personally liable for the difference. Ergo, my assertion (at bojack's) of the more-than-plausible lack of "good faith" and a pointer to Avery v. Job 25 Or 512 (1894) to see how arguments might unfold.
A county spinoff, just as with SAIF, or the Columbia Regional Association of Governments, has a way of morphing. Here the temptation to extend beyond the territorial boundary of the county or to serving only county owned buildings would be just too strong for unconstrained politicians to resist. Some joker in New York even thought of selling off the New York lottery for a few billion -- or rather selling off nothing more than the power to act as a monopolist -- to a private monopolist but with state sanction. The cost to liberty, and efficiency and equity, from monopoly is just too high. The acceptance of a price that is too high would represent the harm posed by any monopoly, called monopolistic rent. Let's just say that the county spinoff option is just to aid in calculating the upper level of an allowable price for any deal with the Energy Trust.
As a non-profit I would think too that Energy Trust might even exclude the reasonable profit component one might expect to be demanded from a regulated for-profit utility -- lest they cease to be non-profit except in name only.
Waste and graft of public dollars has a direct cost to, among other services, meeting the needs of clients of OHSU-Cascadia; who have a protected class status not shared by Energy Trust. (Ask your county attorney how I feel about this issue, it is contained in an old notice of claim that I could not personally pursue.) Pencil this out.
Posted by: Jack Bog - June 30, 2007 03:07 AM
How much will the county pay at the end of the 10 years to take title to the units? If it's nothing, or a nominal amount, then how can the private investors be treated as the owners of the units for tax purposes?
Posted by: pdxnag - July 1, 2007 10:36 AM
Good point Jack, but that is not the point.
Picture a Spanish Conquistador returning to Spain on a horse with 300 pounds of gold chains, but transported in time and space to the middle of Death Valley. EVERYONE knows that WATER is essential to life itself. It transcends all (sort of like in the Clint Eastwood movie, The Good The Bad and The Ugly). Mr. Cogen cannot be troubled by nuances of societal norms designed to sustain a civil society at such times of extreme emergency. The word Solar or Sun is like a rain dance that will bring clouds and rain to solve the second most essential (and equally dire) need for food to sustain life.
It is an "attitude" as noted in the Chile's case. Nothing else matters. One might think that the only more extreme situation, in a challenge to civility, but caused by emergency, in the context of the human will to survive might be portrayed in the events for which Donner Pass is remembered. The only constraint there was someone's personal belief in the horror of a certain unmentionable act where the only witness is a supernatural being who will be the final judge.
Does Mr. Cogen even need to concern himself with nuances? If the County Attorney or County Auditor won't counsel him otherwise does it even matter? Then, what of a County Judge (today, unlike in the past) in expressing extreme deference to a "political choice?"
Posted by: Jack Bog - July 1, 2007 04:36 PM
Ron, I don't know how much longer it will be before you are banned from this site, but I am trying to have a dialog with Jeff Cogen. Will you please allow that to happen? Thanks.
Posted by: jeff cogen - July 2, 2007 09:38 AM
Jack,
In answer to your question, we don't know the exact amount we would be paying at the end of the 10 year term, that is something that will be part of the RFP and subsequent negotiations. But based on other experiences, it will likely be a small amount that is factored into the payment structure all along. You are correct that it needs to be a more than merely symbolic payment, in order to be valid "consideration" for the deal and to assure that the investors can legitimately claim the tax credits. However, in other deals the amount has been relatively small, because a substantial portion of the value to the investors is in the tax credits.
Did this get at what you were asking?
If not, let me know.
Thanks,
jeff
Posted by: pdxnag - July 2, 2007 10:37 AM
Perhaps I was applying the wrong standard; that of good faith from the perspective of the County Counsel.
Could Mr. Cogen avail himself of a statutory defense -- to use of his official position for the benefit of another -- of acting in good faith reliance upon advise of counsel? This would seem to be a factual and legal absurdity, in my opinion given his education.
If he should again make reference to county counsel as a dodge I will try to frame it as "if you were county counsel" how might you advise yourself as elected county commissioner. My attitude failed to clearly convey that this was the standard I was applying when drawing my own conclusions as to his good faith.
Posted by: tommymccarthy - August 11, 2007 07:27 PM
Hey Jeff!! Spotted your comment& link on E.A. Hank's piece "Summer in the City" on The Huffington Post. Keep up the good work! Committed public servants (here we use that phrase w/o sarcasm) like yourself are part of what makes P-town great!!