Facilities Manager Magazine

Michael Philips is a consultant specializing in energy and environmental policy analysis and program design; he is based in Takoma Park, Maryland and can be reached at michael.philips3@verizon.net.  Andrea Putman is president of Green Innovations, based in Arlington, Virginia, which provides communications, marketing, and analysis for energy management and renewable energy initiatives; she can be reached at andrea.putman@greeninnovations.biz.  This is their first article for Facilities Manager.

This article is excerpted from a new book, The Business Case for Renewable Energy: A Guide for Colleges and Universities, a joint publication of APPA, the National Association of College & University Business Officers, and the Society for College & University Planning.

In some ways, planning and undertaking a renewable energy project is like any other capital project because it involves design work, costing out of materials and labor, getting permits and so forth. But in other ways, a renewable energy project is different. The college or university is building a small power plant, so there are electric utility interconnection issues. There is also a revenue stream from the project—in the form of reduced electric bills or payments from the utility for the electricity—that will affect decisions on project sizing and cash flow calculations. There may also be ownership issues. Will the school own the project, will an energy service provider own it, or will it be a community project with co-owners?

This article addresses the major steps and considerations in planning and building a renewable energy project on campus or near the campus: renewable energy resource assessment and site selection; initial economic analysis; ownership options; interconnection issues; and design and preconstruction. The steps are not necessarily sequential, and in fact some may need to be undertaken simultaneously. Others may not be relevant in a given situation or for a given technology.

Resource Assessment and Site Evaluation

Unless a college or university is certain which renewable technology it wants to pursue, the first step will be to assess the availability of all renewable energy resources located on or near the campus. This initial assessment should seek to identify each renewable energy resource and quantify its long-term availability. Extensive information is available online, especially from the National Renewable Energy Laboratory [www.nrel.gov] but also from state energy agencies. These general resources show, for example, prevailing wind conditions in a given region of a state. Data for some renewable energy sources, such as wind and biomass, must be site specific. The assessment will be easiest for solar energy, easy but time-consuming for wind, and most complex for biomass given the variety of biomass feedstock fuels, which range from agricultural products, to landfill methane, to animal wastes.

Wind Assessment

A wind resource assessment will determine the best site (or sites) for locating a wind project. It can be based on production numbers from nearby wind turbines or on public data from nearby meteorological towers. If there are no such towers or if the data are unavailable, the college or university can hire a meteorologist to prepare a production estimate. An expensive and time-consuming option is to rent a tower with wind data collection equipment (anemometers) for a year, at a cost of approximately $8,000, including installation and removal. More than one tower may be needed if there is more than one potential location for the wind turbine.

It’s a good chance that the available locations on a campus are not the best wind sites in the larger area. Nearby properties may have better wind conditions and/or proximity to transmission lines (for interconnection with the electric utility). The lease payment the school would make to another landowner will be a small part of the total project costs, and will be more than offset by the value of the increased kWh output from the superior site. As both Iowa Lakes Community College and Carleton College found in preparing their wind power projects, the wind resource was better one mile from campus than directly on campus.

Solar Assessment

The amount of solar radiation striking the campus will not vary from location to location, so a solar radiation assessment will not be needed to make a project siting decision. However, determining the average annual amount of solar radiation will be useful in evaluating the economic feasibility of the project. The National Renewable Energy Laboratory’s online tools help assess the solar radiation at any geographic location in the United States [see www.nrel.gov/gis/solar_maps.html].  Its PVWATTS software provides easy-to-understand performance estimates for grid-connected photovoltaic systems.

Selecting a suitable site for a solar project can be as simple as determining which unshaded campus rooftops are preferable (and are able to withstand the extra weight). However, Pierce College found that its preferred location on the gymnasium roof would violate local building codes and so had to select an alternative site over a parking lot.

Biomass Assessment

A biomass assessment should initially consider the full range of biomass resources. Although the availability and cost of the resources will vary by location, the most widely available resources are generally landfill methane, urban wood waste, and forest residues. In rural areas, crop residues and animal wastes should be considered, although odor issues can arise with the animal wastes. Crops grown specifically for fuel will tend to be cost-prohibitive in most instances, and can be dropped from most resource assessments. Resource assessments can also consider organic waste products from certain industries.

As a general rule of thumb, the assessment should consider resources within a 50-mile radius of the campus; otherwise, transportation costs become an issue. Some biomass projects use smaller radii. For landfill projects that transport their fuel via pipeline, there is no such rule of thumb. Hudson Valley Community College transports its landfill gas less than a mile, while UCLA has a 4.5-mile pipeline.

Initial Economic Analysis

The data from the resource assessment and site evaluation are used to calculate the cost per installed kW of each renewable technology. A careful analysis of the data will be essential to the decision making, but for an initial economic analysis, the general technology costs will be $5,500 to $6,300 per installed kilowatt for solar photovoltaics

(PV); $1,000 to $1,500 for wind; and $1,300 – $3,000 for biomass (lower if biomass will be used for space heating and not electricity generation). These prices assume that no batteries or other storage system will be included.

Ownership Options

Most colleges and universities begin on the assumption that they will own and operate their renewable energy projects. But there are alternative ownership approaches that can reduce costs, limit exposure to risk, provide price predictability, and allow for larger projects to be built than might otherwise be possible with sole ownership.

College or University Ownership

The simplest approach is for the college or university to own and operate the renewable energy project. The advantage is complete control of the project and first-hand knowledge of the costs, revenues, and technical performance. The disadvantage is the inability to make use of available tax benefits. Also, budgetary limitations may mean that the college or university will have to build a smaller project than it would have built with community partners or private investors.

Vendor Ownership

Under some ownership structures, the equipment provider retains ownership of renewable energy equipment, at least during an initial contract term. This is the case, for example, under leases, performance contracts, and the third-party service model. For a college or university, the obvious advantage of vendor ownership is not having to provide the capital for equipment purchase. Although the institution may eventually purchase the equipment, it does not have to raise a down payment. Under a third-party service arrangement, Stephens Institute of Technology in New Jersey had a 125 kW solar PV system installed at no cost. The school pays only for the solar electricity generated, while the vendor retains ownership of the system and captures the tax benefits and government incentive payments.

Vendor ownership is also advantageous when the energy equipment is innovative or experimental. In such cases, the vendor may want to retain ownership so that it can better monitor performance and make adjustments or repairs. The performance risk is mitigated for the college or university, and it faces no operations and maintenance costs. When a fuel cell was installed at SUNY College of Environmental Science and Forestry, for example, the vendor chose to retain ownership in order to engage in joint research with the university on the fuel cell’s performance.

Other approaches include private equity ownership and community ownership, which are not addressed here. There are also several third-party service models to consider; these are discussed in more detail in our book.

Connecting to the Grid

All projects that generate electricity for campus facilities— even those that will not be exporting electricity to the local electric utility—require approvals from the utility to avoid power quality problems. The utility does not need to approve generation projects that are providing power to an isolated facility, such as a building on a research farm that is unconnected to the campus electrical grid.

A college or university may decide it wants to export some portion of its generated power to the utility and engage in power sales. It will thus have to negotiate the price and terms under which the utility will buy the renewable energy offered to it. As part of this negotiation, the institution may want (or need) to negotiate possible changes in the price and terms under which it continues to buy electricity from the utility.

Many of the issues involved in connecting or “interconnecting” to the utility are addressed in state law. Most states have statutes or regulations that deal with utility purchases of renewable energy. These laws have been needed because utilities typically prefer not to buy power from small power providers. Even when required, utilities can and do place what can be costly conditions on the purchase. They can also end up offering far less than the price they pay for power from conventional power plants and certainly lower than the price at which the school is buying its electricity. The college or university should be prepared for some resistance and negotiation.

Power Purchase Agreement

A college or university will enter into two agreements with the utility: a power purchase agreement and an interconnection agreement. The power purchase agreement (PPA) is only necessary if the institution is selling some or all of its renewable electricity to the utility. The PPA specifies how much electricity the utility will buy, over what time period, and either the price or the method of calculating that price. Even if utilities are required by law to purchase the college or university’s electricity, there is still a lot to be negotiated. Utilities generally oppose PPAs with small power producers and resist paying a good price for the electricity.

In cases where a college or university plans to rely on the utility’s payments to help service the debt on a renewable energy project, they should be aware that banks will generally not finance such a project without a ten-year or longer PPA. This is applicable mainly to wind projects, but it may apply to other projects as well. The utility will often press for a much shorter PPA period.

In states that require net metering, there is no need to negotiate the electricity price because the utility is required to buy the college or university’s electricity at the rate at which the school is buying electricity.

In some cases, PPAs address the disposition of Renewable Energy Certificates (RECs). Colleges and universities should make sure they are not inadvertently transferring ownership of the RECs that accrue to them from their renewable energy project.

Interconnection Agreement

An interconnection agreement is needed for all college and university renewable energy projects, even those that do not export electricity off campus. This technical agreement commits the institution to generating electricity in a manner that does not adversely affect the safe and reliable operation of the utility’s electricity distribution system. The utility will want the college or university to avoid the generation of harmonic frequencies, voltage fluctuations, or operating at voltage levels outside normal ranges. These phenomena can cause problems with the utility’s equipment and can damage the lights, appliances, and other equipment of its other customers. In the interconnection agreement, the utility will often provide specifications (and even the brand name and model number) of the equipment needed and will require that the college or university conduct specific testing and maintenance activities in order to avoid the creation of power quality problems in the future.

In some cases, the utility may express concerns that merely specifying equipment and maintenance practices is insufficient to protect its system. The utility may thus decide to conduct a thorough technical appraisal of the college or university’s proposed plant and associated equipment. The appraisal is known as a power quality impact analysis or interconnection study and can cost $50,000 or more. The institution must bear this cost.

Colleges and universities should avoid an interconnection study, not just because of the high cost, but because the study could lead the utility to impose operational requirements that add procedures and costs to the projects. Operational requirements are included in the interconnection agreement and specify when the plant can and cannot supply electricity to the utility grid.

For small systems, interconnection studies are unnecessary as long as the college or university agrees to install the specified equipment. The definition of what is small in this situation is a project that is less than 15 percent of the utility’s circuit. The utility’s circuit refers to the particular transformer in the local substation that serves the school. The capacity of transformers generally ranges from 10 MW to 40 MW. Thus, for a project to reach 15 percent of the smallest circuit (a 10 MW circuit), it would have to be at least .15 x 10, or 1.5 MW in size. To date, the majority of college and university renewable energy projects are significantly smaller.

However, some utilities claim that even a project smaller than 15 percent of the circuit—and as small as 1 percent—can cause problems and will necessitate an interconnection study and the associated expense. Colleges and universities encountering this situation should be aware that the 15 percent guideline has been adopted as a federal rule applicable to generators interconnecting to federal government utilities. It has also been adopted as a rule at the state level in California, New Jersey, and Ohio, while Arizona, Colorado, and Pennsylvania are in the process of adopting it. The 15 percent guideline is a widely accepted standard, even by the utilities’ trade association, the Edison Electric Institute.

In essence, colleges and universities must be aware that some utilities seek to derail renewable energy projects by making them more costly. One way of adding to the costs is to require the institution to pay for an interconnection study based on the claim that the project could cause power quality problems for the utility. Colleges and universities must thus be cognizant of the 15 percent rule and be able to show that the proposed project is too small to warrant an interconnection study.