FAQ: New Castle Public Works Facility Solar Array financing

Questions and answers about the Power Purchase Agreement used to finance the 70.5 kW array

How big is the array and how much electricity will it generate?
The array consists of 328 solar panels mounted on the roofs of the Public Works administration building and the mechanical shop. Under full sunshine, the array is capable of producing 70.5 kilowatts of electricity. During a full year, it is projected to generate 94,218 kilowatt hours. The array is expected to meet about 90 percent of the Public Works facility’s annual electrical needs.

What are the environmental benefits?
The renewable electricity generated by the solar array will offset approximately 61 tons of greenhouse gas emissions per year.

What was the actual cost to install the 70.5 kW system?
$350,000.

How much did the solar array add to the cost of the Public Works facility?
The solar installation did not add any cost because it was financed under an arrangement called a Power Purchase Agreement. Under the PPA, the solar array was developed and is owned by NCPWF, LLC, a single-asset limited liability company that is managed by Hybrid Energy Group, LLC, of Denver.

How does the Power Purchase Agreement Work?
NCPWF, LLC, owns the array, and has a 20-year Power Purchase Agreement to sell the electricity generated from the system to the town. As the owner, NCPWF insures and maintains the system and pays local property tax on the asset.

As a private company, NCPWF can take advantage of the 30 percent federal investment tax credit for renewable energy, Xcel Energy’s rebate ($141,000) and renewable energy credit (about $10,000 per year for 20 years), and depreciation on the asset. Under the PPA, the town will have the option to purchase the array in six years.

How will the town use its $87,500 share of the Garfield New Energy Communities Initiative renewable energy funding?
Hybrid Energy Group has suggested that the town use this funding to prepay for the electricity produced by the solar array. If the town chooses to exercise the buy-out option in six years, the balance of the prepayment amount can be applied to the purchase price of the system.

Why did the town enter into a Power Purchase Agreement?
If New Castle had simply spent its $87,500, it could have purchased a 20 kW array, about one-third the size of the system installed using PPA financing. By structuring the purchase of the array through a PPA provider, the federal investment tax credit is fully used, and the town can enjoy the immediate benefits of clean solar power with no upfront costs. After six years, the town will have the option of purchasing the system from the PPA provider for much less than the original retail cost of the system.

Does the town have to buy the system in six years?
No, the town has an option to purchase the system but is under no obligation to buy it.

If the town buys the system in six years, what would the price be? What would be the advantages?
The early buy-out price for the system will be for fair market value, a price determined based on the six-year power performance of the system. If the town buys the system, it will no longer have to pay for power, and would receive the remaining 14 years of Solar*Rewards renewable energy credits from Xcel.