The road to carbon neutrality also saves money

Texas is an energy leader regardless of the source being conventional or renewable. Like the oil and gas wildcatters of yesterday searching for the best producing fields, sophisticated solar firms today evaluate local policies, federal incentives, build consumption data and site constraints to develop high performing projects that return long-term financial benefits. The city of San Antonio solar program, the largest onsite solar program for a municipality in Texas, started as a way to reduce their carbon footprint but turned into a financially driven program that provided a financial return on investment and mitigated against rising utility costs.

The city of San Antonio began the planning process for a community led Climate Ready program in December 2017, which included a diverse coalition of community and business leaders across the San Antonio community. The biggest task of the planning process was to find equitable and just solutions for the future impacts of climate change - in a manner that is financially viable for the city. After two years and many Technical Working Groups and Steering Committee meetings plus community events and surveys, the city of San Antonio adopted the SA Climate Ready Plan in 2019. Once the community accepted the Climate Ready roadmap, the next step was the task of implementing the city mitigation strategies which include:

• Reducing energy consumption in city buildings
• Achieving net zero energy through onsite distributed generation
• Providing cooling HUBs and resiliency for the surrounding community

Starting with onsite generation at city facilities was the natural place to begin implementing the plan due to the large energy loads and available space, including large and hot parking lots.

Implementing the Climate Ready plan, specifically the renewable energy strategy, had its challenges such as:

• How to pay for the generation assets
• Should the distributed energy system be onsite or offsite
• How to deploy an equitable program across the San Antonio community
• How to organize the city departments and find internal champions to move the program forward
• How to develop the execution plan without solar energy subject matter experts, and develop ways to protect the investment

A deeper look into onsite facilities 

To overcome these challenges and mitigate performance risk of the solar program, the city leveraged its large municipal real estate portfolio, partnered with third party Rocky Mountain Institute, and leveraged the expertise of the solar market to identify the best locations and low hanging fruit for the program.

During the procurement phase, Big Sun Solar analyzed available facilities, annual consumption data, the local utility (CPS Energy) rate structures and solar programs, in addition to the physical site constraints such as easements, shading, roof condition and parking lots to identify the sites most likely to return positive financial metrics. Like other cities in Texas, San Antonio was looking for opportunities to activate public parks during the hot summer months. Big Sun proposed to cover parking lots with solar canopies as well as basketball courts, pickleball courts and playground equipment which poses two benefits: shade for the surrounding community and energy generation for the local facility. The city was able to deploy equitable shade canopies in areas that were historically left out of previous solar programs and that shade is an additional value stacked onto the energy savings.

Leveraging the city real estate portfolio was the easiest starting point and onsite distributed energy resources mitigate congestion risks associated with large utility scale programs, eliminate complex financial approaches like virtual power purchase agreements where the offtake needs to make an investment decision based on the volatility of the wholesale electricity marketplace. With cooling centers and resiliency HUBs part of the SA Climate Ready Plan, the distributed solar program installs the necessary infrastructure to add resiliency and future hardening projects to city facilities in the future.

With the city of San Antonio data in hand, Big Sun was able to recreate the previous 12 months of utility bills for the entire real estate portfolio, broken into energy, demand and applicable taxes. Having the facility locations and descriptions allowed Big Sun to develop preliminary solar designs that complied with the local solar programs, adapted to site constraints and provided the highest value. The project production estimates allowed Big Sun to forecast the value of the energy over the 25 years which is one portion of the financial analysis.

How the program turned cash flow positive 

The second piece of the financial analysis was the capital costs and available incentives. The larger the program with bigger systems and more locations, the unit costs for rooftop, parking canopies and shade structures are driven lower.

In August of 2022, the IRS passed the Inflation Reduction Act (IRA) which provides an energy investment credit known as Elective Pay or Direct Pay to nonprofit entities like municipalities. Simply stated, the Direct Pay program allows the city to recoup at least 30% of the program costs through the IRA credit program.

With the existing and future energy costs and forecasted solar production, construction costs and incentives, Big Sun was able to develop a detailed financial model and cash flow to estimate the financial metrics of the program. While the program started out as a way to lower carbon emissions in the city, the IRA turned the program into a cash flow positive program that provides financial benefits to numerous city departments. Other financial incentives include low interest loans for energy related, cost reducing retrofits of facilities from the LoanSTAR Revolving Loan Program from the State of Texas.

To protect the investment, the city required a long-term production guarantee and asset management agreement. Big Sun is providing operation and maintenance for all 42 projects, access to a monitoring portal with production data and as part of the asset agreement, a production and uptime guarantee. If the systems do not perform as expected, then the city does not recognize the carbon and financial savings. Big Sun will also help the city register with the Public Utility Commission of Texas (PUCT) and Energy Reliability Council of Texas (ERCOT) to receive and retire Renewable Energy Certificates (RECs). The RECs will help the city demonstrate compliance with the SA Climate Ready Plan.

How to follow the city of San Antonio’s lead

If other organizations in Texas are interested in implementing a similar program, where should they start? The first task is to find internal or outside subject matter experts to help collect the necessary data. In order for firms like Big Sun to develop program execution plans and financial models, the organization needs to provide information such as the facility description and location, future renovation or master plans, at least 12 months of monthly energy consumption data and the applicable rate tariffs. With this information, interested solar firms will conduct due diligence on the site which includes assessing the roof condition, potential shading issues from trees and surrounding structures, utility constraints and viable solar programs, reviewing interconnection methods, developing project cost estimates, and providing long term system production values and detailed financial analysis.

With necessary data, solar firms like Big Sun are willing to invest time and resources in the potential program during the procurement phase because providing the data and information upfront demonstrates the seriousness of the organization, and the likelihood of the program moving forward is higher.

The benefits of large scale city wide solar programs are not focused on carbon mitigation any longer, now city and other organizations can achieve carbon mitigation goals while recognizing financial returns, saving dollars and mitigating future energy costs by leveraging existing real estate portfolios.