Doug Birk, St. Michael-Albertville School District’s administrator of special services, gave an update to the school board on a solar energy rebate program through Xcel Energy that has gone off its intended course, with more uncertainty looming in future months.
Birk explained that the district first signed on to Xcel’s solar energy rebate and subsidy program for municipalities in early 2015, when they were given information that they could save $12.9 million in energy costs over 25 years if they signed up for the program. The Minnesota Legislature directed this program with Xcel in an attempt to help municipalities and government entities fund solar energy undertakings. As it stands now, the STMA School District would become one of the leaders in solar energy among municipalities and government entities in Minnesota.
However, the process has been rife with uncertainty thus far.
Birk said the district paid upfront consulting fees totaling $5,000 and legal fees totaling around $3,200, with board approval, to get started with the rebate program. In May 2015 they signed on for subscription rights to four large solar farms in the St. Cloud area through a contract they entered into with Sun Edison in 2015. That contract would have given the district 11 million kilowatt hours of solar energy annually out of the estimated 15 million kilowatt hours they would use in total.
A long period of uncertainty began shortly after signing the contract with Sun Edison, a renewables company based in Missouri. In August 2015, three months after signing the contract, Sun Edison told the district that Xcel Energy changed subscription requirements and ruled that those changes made their current contract invalid. The district revised the terms and conditions of their contract with Sun Edison, which downgraded their potential for savings from $12.9 million to $10.3 million.
More problems emerged. Sun Edison declared chapter 11 bankruptcy in April 2016. Secondly, Xcel Energy announced that all solar farms associated with this rebate program had to be fully up and running by the end of 2017, which Birk said had not been part of the original terms of agreement.
As it stands now, Birk said, the school district will not start to see savings this fall as they had originally anticipated; rather, they now hope to begin realizing savings in mid-2018. Birk also warned there is potential for the district’s energy savings to fall significantly below the currently expected $10.3 million over 25 years, depending on which solar gardens are fully built by the deadline.
“We anticipate that there still will be significant actual realized savings, but it’s largely contingent on which solar gardens actually reach completion by the December deadline and how much energy STMA is going to draw from those completed gardens relative to other subscribers,” he added.
He said each of the gardens they have subscribed to have as many as a dozen other subscribers, all of whom are seeking rights out of their contracts.
“All that is clear right now is that this is really a landscape that’s in a constant state of change,” Birk said, “but the rebate program is still intact and we are still one of the largest government subscribers in the state of Minnesota.”
A Path Forward
Birk cautioned that the road ahead would likely include more uncertainty, as the district forges new estoppel agreements with the two companies who acquired Sun Edison’s accounts, SoCore Energy and Geronimo Energy. The district wants to seek legal counsel as they work through the new contracts to protect their future savings potential as much as possible, and Birk said it would take additional sums of money equal to or greater than the amount they have already invested into the project before everything is in order.
“The district is seeking to engage district legal counsel, making sure these agreements reflect what the district’s rights are as we move into what is perhaps the last stage of this project before its gets off the ground,” Birk said. He added that the district wants to fight to maintain its original flat-rate agreement. “We believe it’s very important to the district to maintain and advocate for its legal interests in these contracts, and as an admin team we simply can’t do that without legal assistance from district counsel.”
Birk said he brought this information to the board in order to keep them abreast of the solar project developments and to warn them that more uncertainty is likely ahead with contract negotiations and potential additional ownership changes.
He said the district wants to stay the course with the rebate program because they still believe, after gaining advice from consultants and legal counsel, that the rebate program is a low-risk, high-reward proposition, though not a no-risk proposition. Birk sought board member guidance and affirmation to incur additional legal fees to ensure the new contracts protect the district.
“All indications are this is a project that at some stage will get off the ground, and the district should still receive some significant savings that will more than offset legal expenses in the years ahead,” he said.
Superintendent Dr. Ann-Marie Foucault said they believe these issues will ultimately be resolved and said the district is still committed to utilizing alternative forms of energy where it makes sense and can result in long-term savings for district taxpayers.
“The rebate program is still in its infancy, but has helped to create a starting framework for us to partner with solar energy companies in exploring ways to save on future energy costs,” she said. “However, varying issues … have made it more challenging to work with one consistent partner or enjoy a higher degree of certainty as to when the district will actually realize savings.”
Board members asked several questions about the process and potential scenarios, but did not voice opposition to the district’s current course of action. They did ask district leaders to keep them updated of any future changes.
“I think it’s a very forward-thinking plan, which is consistent with our mission to be leaders among school districts,” board member Jeff Lindquist said. “And this Geronimo [company] is Warren Buffet’s baby-let’s put our money there.”