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Solar Energy--Bright or Fright?

August 11, 2017 by Mark Hanson Ph.D. LEED AP BD+C and Todd Bushmaker AIA, LEED AP in School Business Affairs

This article originally appeared in the June 2017 School Business Affairs magazine and is reposted with permission of the Association of School Business Officials International (ASBO). The text herein does not necessarily represent the views or policies of ASBO International, and use of this imprint does not imply any endorsement or recognition by ASBO International and its officers or affiliates.







If you drive across the United States, you'll see vast wind farms spread across Iowa, Minnesota, Kansas, Oklahoma, Texas, California, and Oregon. Large solar plants, common throughout the Southwest, are now appearing elsewhere, including at an airport in Indiana.

The growth of renewable energy--coupled with the significant reduction in costs associated with solar panels, inverters, and installation--makes this a good time to explore the possibility of solar energy for your school.

According to the Annual Energy Outlook of the U.S. Energy Information Administration (www.eia.gov/outlooks/aeo), the cost of electricity will continue to increase. However, because on-site solar energy costs have tumbled drastically in recent years, and the availability of financial incentives such as tax credits to use renewable energy remains steady, we have a new paradigm. Despite the uncertainty of the Trump administration's view on sustainable energy, schools may obtain a solar energy solution for a nominal up-front cost without going to a referendum.

Solar as a Viable Option
As districts contemplate new construction and renovation projects, they should consider substantial on-site solar photovoltaic (PV) systems that convert sunlight into electricity. The larger the solar energy system purchase, the lower the price and the higher the financial returns.

One critical consideration should be the solar PV system's anticipated economic performance. The economic viability of solar energy for many schools depends on (a) the size of the school, (b) current utility rates, (c) state or local renewable incentives, (d) the configuration and condition of the roof, (e) adjoining latent space, and (f) shade.

An added benefit is that solar PV systems provide an interactive educational platform that supports STEM (science, technology, engineering, and mathematics), social sciences, and technology education. Exposing students to the opportunities in renewable energy and related jobs opens their minds and gives them a leg up on the competition if the curriculum provides for it.

A final benefit that should not be ignored is a reduced carbon footprint and a decrease in other emissions that are associated with fossil energy use.

Options for Schools to Obtain Solar Systems
As is the case with most modern technologies, solar PV systems and their pricing are always changing, as are the incentives and regulations. When considering solar, it's important to identify a professional service provider that understands solar system design, financial performance, solar contractors, and the current rules in your area. That provider should be experienced in procuring solar systems and should be able to guide you through the financial analysis to find the system and size that best meet your goals. 

A school district contemplating an on-site solar PV system has two primary options: (a) purchase the system outright with cash reserves or a bond referendum or (b) work with third-party participants, investors, or co-owners. Two additional possibilities in some parts of the United States are leasing and power purchase agreements.

A financial analysis of purchasing a 150-kilowatt solar PV system for a school district in Wisconsin, using the 2016 Wisconsin Focus on Energy loan program, revealed the following:

  • Full system cost: $341,000
  • Original cash outlay: $68,000
  • Bank loan rate for half of the loan: 5.5%
  • Focus loan rate for the other half of the loan: 0%
  • Internal rate of return (IRR) over the 30-year life cycle: 5.8%

Another approach is a third-party provider (TPP) arrangement in which another company or investor provides the installation and co-owns the system on the school's property. The school uses the generated energy through a long-term agreement (often 15 years). During the agreement period, the TPP is responsible for the maintenance and operation of the system and covers the insurance cost. After the co-ownership period, the district has three options: (a) buy the system at fair-market value (at a fraction of the original price), (b) extend the period, or (c) have the system removed. At the buyout point, the school will assume the operation and maintenance of the system and will no longer make monthly service agreement payments.

Analysis of the same solar PV system using a TPP arrangement resulted in the following:

  • Initial cash outlay: $0
  • Wisconsin Focus on Energy Loan: no longer available
  • Buyout at conclusion of the 15-year agreement: $82,500
  • IRR over the 30-year life cycle: 4.9%

If the same school could use a 300-kilowatt solar PV system, the IRR with the TPP would increase to 9.0%, demonstrating the importance of economics of scale in system purchases.

It is also worth noting that solar prices continue to drop; solar proposals for some schools in early 2017 were 10%-20% lower than in 2016. So the financial benefits to schools are increasing, and 2017 incentive programs may provide even more financial benefits. A school district could likely have a positive cash flow in years 1-14 when using a TPP. (Previously, the solar energy system may have had a slightly negative or positive cash flow in years 1-14, although producing a good IRR overall.)

A Wisconsin Role Model
In January 2016, the Darlington Community School District in Wisconsin completed the installation of a 156-kilowatt solar PV system on the roof of its elementary-middle school. The PV system provides power to the elementary-middle school as well as to the adjacent high school. The system is expected to generate nearly 200.000 kilowatt-hours of electricity each year, representing about 20% of the entire district's current use. The school district is enthusiastic about this innovative solution, which will provide savings in both usage (kilowatt-hour) and demand (kilowatt) charges.

According to Denise Wellnitz, district administrator for Darlington, "Darlington teachers and administrators are thrilled to provide our students and community with an interactive, real-time solar educational platform for students, which supports science, technology, and math education while reducing the carbon footprint of our community."

The district expects to save about $14,700 in usage and demand charges per year, or approximately 15% of its current electricity costs. And it's expected to operate for 40 years or more (its key component has a 25-year warranty). As electricity rates increase over the next four decades, the project's savings will also rise. The district anticipates that carbon dioxide emissions will be reduced by over 400,000 pounds per year, which is equivalent to what a 149-acre U.S. forest absorbs. The electricity output would meet the power demands of 18 average U.S. homes.

"A couple of years ago, I would not have thought a solar project like Darlington's would be possible," says Aaron Wolfe, school board president. "Through a lot of effort from many people we were able to see it done. It's hard to overstate the educational benefit. Our students are going to inherit significant energy problems from us, and they will have to find solutions that go far beyond a 156-kilowatt solar array. Hopefully, what we have done here will show them that innovation is possible anywhere and will perhaps provide a little inspiration for them to innovate in the future."

Darlington has set up kiosks and a link on the district's home page that provides information on the renewable energy produced, the carbon dioxide emissions avoided, and other elements to inspire interested parties. Students, teachers, and the community can observe continuous power output, noting daily patterns and the effect of cloud and snow cover to gain additional insight. They can compare minute-to-minute or annual solar production relative to monthly and annual building electrical loads and evaluate cost savings.

Ongoing Developments
The solar industry is constantly changing, and there are often new developments. For example, one issue is the pros and cons of ground-mounted systems versus roof-mounted systems. Factors that must be considered include a roof's age, reroofing, and shifting of solar production from summer months (when schools may be used less) to winter, spring, and fall, which can be done more readily with ground-mounted systems.

Another issue is demand management (control of peak kilowatts) as a complement to solar power to derive even greater financial benefit for school districts. Demand management primarily involves measures to adjust building temperatures to take advantage of those times when solar is available (including precooling some spaces in hot weather) and to allow temperatures to rise slightly when it is warm outside but solar is unavailable. Lighting controls might also be involved.

The Bigger Picture
Solar and other renewable energy opportunities should always be measured within the framework of an integrated approach to facilities operation. The essential tactic is first to reduce the energy requirements of an existing or new building. That includes examining the interior systems and equipment, such as heating and air conditioning, lighting, IT equipment, vending machines, food preparation equipment, and office machines. It's important to update building controls in existing schools, particularly the programming of the controls. As efficiency opportunities are met, districts can use solar or other on-site renewable energy systems, applying the same economic criteria to further reduce operational costs.

The goal now being pursued in the construction community is zero-net energy buildings--meaning the structure creates as much energy as it requires. That may mean that a building exports energy to the grid at various times and imports energy from the grid at others. As on-site battery storage becomes a reality, schools will store excess solar generation on-site to further offset peak demands and their associated monthly charges.

Don't Fear the Unknown
Now is the time to consider the benefits of a solar PV system for students, faculty, and the community. It is not only a cost-effective alternative but also a way to reduce the carbon footprint and to promote sustainability. 

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