Jason Coughlin, a solar analyst at the National Renewable Energy Laboratory, was coauthor of a 2011 report, “Solar Schools Assessment and Implementation Project: Financing Options for Solar Installations on K–12 Schools.”
“Schools have continued to install solar using power purchase agreements (PPAs) and the trend is to continue seeing third-party installations,” says Coughlin. Three profiles below describe projects funded through PPAs.
Many of the financing options discussed in the NREL report are no longer available, but here are those that are. School districts may choose to go for voter-approved, tax-exempt general obligation bonds, tax-exempt municipal bonds, or a tax-subsidized federal bond if they choose to own their systems, which they cannot do with a PPA. In California, school districts may look to Proposition 39 funds designed specifically for them.
Still another option for schools is qualified energy conservation bonds (QECBs) issued by the US Department of the Treasury, which historically were combined with clean renewable energy bonds (CREBs). They were an inexpensive way for state and local governments to fund solar and energy storage projects while retaining ownership. However, QECBs have primarily been used, at least in the west, for energy conservation projects. CREBs were fully allocated by 2010 and are no longer available.
The Treasury Department provides an upfront subsidy that amounts to 70% of the interest rate as determined by Treasury via a refundable tax credit at the time of issuance to a bondholder. The issuer likely passes the benefit of the refundable tax credit to the buyer via cash interest payments as determined by the bond contract.
While this example is not of a school district, it illustrates how QECBs and other funding sources can be combined to own a solar system. Yolo County, CA, was the first to use QECBs and CREBs to develop and install a 1-MW solar photovoltaic (PV) project to supply power to a jail and juvenile center (Source: http://bit.ly/2iVUCgo). To begin the development, the county chose a location for the solar installation on a lot in between the jail and juvenile center.
County officials then issued a request for proposals for a PPA. After reviewing the submissions, the county determined the financial benefits of the PPA were insubstantial. Instead, it decided to own the solar PV system, and chose SunPower’s module and tracking system, based on the proposal the company had submitted in response to the RFP.
Yolo County chose a variety of funding sources to finance the solar installation. It combined QECBs, CREBs, a California Energy Commission loan, a Tax Exempt Lease Program loan, and a California Solar Initiative production-based incentive.
The QECBs and CREBs issuances each provided approximately $2 million in tax credit bonds with 15-year terms and a 3.9% interest rate. The CEC loan of $2.5 million has a 3% interest rate loan. A Tax Exempt Lease Program loan provided a short-term bridge loan of $765,000 with a 4.7% interest rate.
Yolo County finalized the commercial bonds and loan with Bank of America in February 2010. The total cost for the purchase and construction was $8.7 million. With interest payments, the total cost is closer to $9.4 million. The total utility bill savings are expected to reach at least $18.1 million over the 25-year life of the project with a positive cash flow of $100,000 per year starting in year one, and $600,000 per year starting in year 16.
The large savings are attributable, in part, to the high uninterruptable electricity rates the jail pays, typically around $0.23 per kWh. Yolo County also negotiated an agreement with the bank to postpone starting to pay interest payments for six months. This allowed them to accumulate utility bill payments while the solar system was not yet fully operational.
Prop 39 Funding School Districts
The California Clean Energy Jobs Act was approved by California voters in 2012 as Proposition 39. Follow-up legislation allocated Prop 39 funds to the state’s K–12 schools and California Community Colleges for eligible energy projects such as energy efficiency upgrades and clean energy generation (Source: http://bit.ly/2jaNdtv).
The program for K–12 schools is administered by the California Energy Commission. The California Community Colleges Chancellor’s Office administers the portion of the program for community colleges.
Funding for the program began with fiscal year 2013–14, and rolls over every year ending on June 30, 2018. School districts have two additional years to complete their energy plans and another year to report final project completion by June 30, 2021. Since the CEC received its first energy expenditure plans in February 2014, it has approved 912 plans as of July 14, 2016 totaling $637 million, which have funded projects at 3,230 schools. More than three-fourths of the 2,136 school districts in the state have requested funds.
According to the CEC, the 12,777 projects funded range from lighting (the most popular), to HVAC systems, pumps, electrical projects, and more. Three hundred solar PV projects and 39 energy storage projects were funded. As of 2015, 113 school districts had completed their projects and were reporting savings.
School districts are known in this program as local educational agencies (LEAs). They must begin the application process for their schools by submitting energy expenditure plans. Charter schools, state special schools, and county offices of education may also submit their energy expenditure plans to the CEC. Once the CEC approves the expenditures, the Department of Education distributes the funding.
School districts may apply for single or multi-year funds, including retroactive measures and to accumulate funds over five years to fund a larger plan with more projects across more school sites.
The energy expenditure plans must identify eligible energy projects and proposed costs and savings, and they must meet a minimum measure of cost effectiveness called a SIR. In July, the CEC approved reducing the SIR from 1.03 to 1.01 to help more projects qualify for funds.
The California Conservation Corps also receives funds to perform energy surveys and other conservation-related activities, and are available to assist schools.
Prop 39 also provides funding for a revolving loan program that provides no-interest financing to LEAs and community college districts under its Energy Conservation Assistance Act-Education Subaccount. Loans are available for energy efficiency, demand reduction, and generation projects. The current interest rate has been set to 0%.
The Bright Schools Technical Assistance Program also has Prop 39 funding available to assist LEAs in identifying energy saving opportunities in existing and planned facilities.
Rick Brown, president of TerraVerde Renewable Partners, says his company is advising over 45 school districts, preparing them to obtain Prop 39 funding and eventually tracking and reporting energy projects. He explains that Prop 39 money can be used to fully fund solar projects and retain ownership of the system, or to partially pay for the system and sign a PPA for the remainder of the cost—referred to as “paying down the cost.”
Brown says about 40% of the schools he has been working with have used the funds to acquire, by either method, solar systems, and a couple are using the funds for energy storage. Solar is popular with school districts, he says, because of rising utility tariffs. Utilities are putting more cost-recovery costs into demand charges, which are set by the highest peak in a 15-minute period in the month, he explains.
Schools are a Good Market
Green Charge Networks specializes in energy storage solutions and cloud-based energy management designed to manage clients’ peak demand shaving.
Stephen Kelley, senior vice president of sales for Green Charge Networks says schools are a really good market for the company. They are on fixed budgets and demand charges are going up.
Green Charge installed its first system in 2009. It offers to install, operate, and maintain energy storage systems at no cost to the school through power efficiency agreements. “We pay for 100% of the storage system,” says Kelley, and schools get 20 to 40% of the savings from reduced demand charges. “We try to put in systems that will maximize savings instead of the split” between the company and the school, he says.
This method of financing is a first for the energy storage industry, Kelley says. “We can get investors willing to invest in savings from energy storage,” he says, but investors want proof that you can get the savings. “This is a big issue and I’m excited that we could prove over the past three years that it can be done.”
Kelley says two of the school districts Green Charge is working with chose to use Proposition 39 money. “One used it to pre-pay the equivalent of one-third of the storage system. They get 100% of the savings,” he says. Green Charge continues to own and operate the system for 10 years. “We made our money by marking up equipment and charging for the software once a year. We didn’t have to pay interest on the loans, which reduced costs for financing,” he says.
Another district didn’t have enough funding from Prop 39 to pay down the cost of the system completely, so Green Charge moved the savings up to 50% that each would receive.
Green Charge also acts as an aggregator in the California Independent System Operators Demand Reduction program, which is managed by the three investor-owned utilities. In the case of Mountain View Los Altos School District, it is enrolled through Pacific Gas & Electric (PG&E).
Kelley says Mountain View Los Altos School District is seeing an average of 35% of its savings coming from the Demand Response program, just over 124% of what was expected. “We’re very excited to see these savings and to teach students about renewable energy systems,” says Kelley.
School Adds Storage to Solar
Mountain View Los Altos School District commissioned its energy storage system and went live with it in January, says Mike Mathiesen, associate superintendent for Business Services. The school district has 4,300 students, faculty, and staff. It is located in the heart of Silicon Valley—Google and LinkedIn headquarters are located nearby. It’s not surprising the school district has adopted leading-edge technology.
The school district had already installed 1.24 MW of solar panels on parking lot structures and 246 kW on the rooftops of two new buildings at the two schools. It funded the projects through a bond measure in 2010. Mathiesen says the systems are actually producing more power than the rated production levels. Mountain View has about two-thirds of the system, while Los Altos High School has about one-third. The solar panels reduced electricity use by half, and are saving the district $500,000 a year, according to Mathiesen.
As part of its sustainability initiatives, the school district wanted to install EV charging stations to encourage electric vehicle use among its facility and staff. But it could not find financing until a community advocate and member of the school district’s sustainability committee found Green Charge Networks.
Green Charge paid for 100% of the storage system under a 10-year power efficiency agreement and added the EV chargers. Installation began in August 2015 and both systems were commissioned and began operating in January. Delays were caused in coordinating with PG&E over Green Charge’s desire to install its own meters, he says.
Mathiesen says Green Charge gets 75% of the savings and the school district receives the remaining 25%. He says the school district did not have to put in any capital. Green Charge also provided a dashboard which illustrates a tariff band illustrating what the school would have paid had the storage system not been installed. Savings for the first four months are where they were expected to be, says Mathiesen. Annual demand charge savings are projected to be $86,000, totaling $1 million over the lifetime of the project.
Mountain View Los Altos School District is also participating in PG&E’s pilot demand response program with Green Charge acting as the aggregator. The purpose is to demonstrate the ability of demand response resources to bid into the statewide wholesale energy market. The school’s demand is tapped during overnight hours and has no impact on its peak shaving.
There is no load to curtail during daylight hours since the solar arrays generate more energy than the schools use. Green Charge selected the overnight hours to ensure that the sites are eligible for the pilot program. The school district is paid $10 per kW, but the monthly payment varies based on performance.
The district is not using the solar system to charge the energy storage system because the savings it gets by selling power to PG&E during the afternoons is more than it would save by charging the storage system during the day. The storage system is charged at night using cheaper utility power.
Mathiesen says the school district did get Prop 39 funding for energy efficiency projects but that it was challenging. The district hired Kramer Project Development to help them through the process.
Denver Public Schools Uses Both PPAs and Bonds
The Denver Public Schools installed 3.5 MW of solar PV systems on 28 school roofs and one land site next to a school in 2012 and 2013. The project was financed under a PPA according to Jim Faes, director of sustainability.
The project is owned by Oak Leaf Energy Partners and Main Street Power. The school district now pays about 10% less for electricity to the investors than the prevailing utility rates. Faes says the 100-kW systems provide 15 to 50% of actual energy usage at each school.
The development of the project began with a joint request for proposals with the City of Denver, says Faes. The company offering the best price, at 2.7 cents per kWh, could only build systems on 16 buildings. Under a second RFP, they chose Namaste Solar and Milender White Construction, which offered prices starting at under 3.5 cents per kWh up to a maximum of 3.9 cents per kWh.
Namaste Solar and Milender White Construction each installed a portion of the systems and received rebates from Excel Energy, the electricity provider in Colorado.
Faes says the district pays about $10.8 million annually for electricity. Since 2009, utility rates have increased 27%, he says, but utility billings for the school district has increased just 10%, thanks not only to the solar systems, but also to extensive energy efficiency programs.
School bonds approved by voters have allowed Faes and his colleagues to install new high-efficiency boilers and chillers, automated controls, new heating, ventilating and air conditioning equipment, and extensive lighting retrofits to LEDs. Faes says Denver Public Schools have gone to ratepayers every five years since 2000 and ratepayers overwhelmingly approve them. “We’re going to the ratepayers this November for $572 million in additional bonds,” he says.
Faes says the school district has not built any new solar projects in the past four years because Excel Energy backed off its aggressive rebates and incentives for energy projects once it reached its goal of 30% renewables in their generation mix. That goal, mandated by Colorado voters, was to be reached by 2020, but Excel reached it three years ago, Faes explains.
Hawaii Schools Are Now in the Driver’s Seat
Hawaii’s public schools now know when and how they are using their electricity thanks to new sophisticated energy monitoring systems funded through the Hawaii Department of Education’s partnership with Stem Inc. and the Hawaiian Electric Companies.
The long term goal of the department is to cool the 1,000 school rooms across the five islands in its jurisdiction without increasing electricity bills, and it needs good data on which to make its financial decisions. This effort is backed by the Hawaii State Legislature’s commitment to invest $100 million in improving the energy efficiency and cooling of the K–12 schools on the islands.
The Department of Education hired Stem, a California company headquartered in Millbrae that specializes in software-driven energy storage systems, to install 300 of its proprietary PowerMonitors at 250 schools. Funding came from Hawaiian Electric’s Smart Power for Schools and from the Hawaii Energy Excelerator, a program of the Pacific International Center for High Technology Research.
Stem had installed 235 PowerMonitors at schools on Molokai, Lanai, Maui, Hawaii Island, and Oahu by the first week of July. The PowerMonitors collect and transmit real-time energy use and cost data through Stem’s PowerScope software. The software’s interactive web-supported applications allow faculty and school staff to have access on laptops, tablets, and smart phones to monitor energy usage.
Tad Glauthier, vice president of Hawaii Operations at Stem, explains that the schools have outdated electric meters that provide only low granularity information. There are alternatives to cooling classrooms such as passive cooling or shading buildings, which have upfront costs. Window air conditioners have low upfront acquisition costs but high electricity costs. Central air conditioning would require partially rebuilding classrooms. But to decide which alternative to go with, or another not yet considered, the school district needs accurate data on energy use and costs on which to base decisions.
Over the next one and a half years, Stem will provide the numbers using the information gathered by the PowerMonitors to provide cost comparisons of various heat abatement projects, says Glauthier. The company will look at different kinds of energy investments by comparing each school’s square footage and its load shape, he says.
Glauthier explains that with the granular information PowerMonitors provide, the schools will be able to precisely identify their load profiles. For example, do loads with their high-demand charges at all schools decline between 2:30 p.m. and 3:30 p.m. on school days? School loads typically peak in the morning and at the end of the school day, which don’t align with utility system peaks. They don’t look like business peaks or residential peaks either, says Glauthier.
Hawaii’s schools are uniquely wired for excess solar production during the day, since Hawaii’s solar systems’ highest production occurs during the hours schools are in session, explains Glauthier. Between 10 and 20 schools already have solar systems, managed by Opterra Energy Services called the Ka Hei program. These schools will also be getting PowerMonitors, which will measure the school’s electricity demand and the impact on that demand of their solar systems. The Department of Education plans to use the data from the schools to evaluate the load profiles and to determine the benefits and best sizing of more solar systems.
Another reason for Stem’s PowerMonitors—Hawaiian Electric is in the process of creating time-of-use tariffs and it may create a separate tariff for schools, Glauthier says. “The PowerMonitors will provide good data sets for looking at this,” he says. Furthermore, the Hawaii Public Utilities Commission is planning to install smart meters across the state. Glauthier says Stem’s Power Monitors are like highly sophisticated smart meters, and there is a good amount of overlap in the information provided by the two devices.
Stem has no current plans for installing energy storage systems in the schools but the Department of Education project allows schools to evaluate these options with really good data, Glauthier says. “This is putting schools in the driver’s seat to make informed decisions about solar and storage. We are giving schools the ability to make fully informed decisions to discuss with energy providers.”
Stem’s PowerMonitors will also provide faculty members with the ability to bring the topic of energy use into the classrooms, and many who have sustainability goals are excited about doing this, Glauthier says. “We are happy to have this interest.” Some faculty members want to install kiosks in their front lobbies to show students what the school’s energy use is, he explains.
Hawaiian Electric will assist school faculty by providing tools, for example giving them the ability to set alerts for when usage goes above certain levels. Another tool might be giving teachers login ability to the web-based browser to watch the effect of turning a piece of equipment or series of lights on or off and watch the effect on the screen.
Stem will provide visibility into energy investments in the schools, says Glauthier, and will work with staff and students to create energy projects. “We will be providing a baseline at each school and as projects such as LED lights are installed, we can illustrate the impact on the new baseline.”
Glauthier finished by adding one other benefit to the utility. The data provided by its PowerMonitors will tell Hawaiian Electric what is happening in their system-wide network on the edges of the grid. “They are currently flying blind, just as the schools are,” he concludes.