By Rebecca Bowe
A proposed solar-power project slated for discussion at the city’s Budget & Finance Committee on March 18 could help San Francisco edge a little closer to its greenhouse-gas reduction goals. But instead of owning and operating the solar photovoltaic system itself, the San Francisco Public Utilities Commission would enter into a long-term contract with a private entity – and the new approach has raised questions from committee members.
Supervisor Carmen Chu and Mayor Gavin Newsom proposed the deal. The idea is to establish a 25-year power purchase agreement between the SFPUC and Recurrent Energy for a solar-photovoltaic power plant. The large-scale system would be constructed atop a 480,000-square foot rooftop at the SFPUC’s Sunset Reservoir. The city would lease the space to the company for $1 a year, and the SFPUC would agree to purchase power from Recurrent Energy at a rate estimated to be just under $2 million a year. According to a report prepared by the city’s Budget Analyst’s Office, the cost for electricity over the entire 25-year stretch would come out to about $68.5 million.
The solar plant would bring the city’s renewable-electric portfolio from 0.5 percent to 1.8 percent, according the SFPUC. (Under state law, hydro power from Hetch Hetchy does not count as renewable energy.)
Under the terms of the agreement, the city would have a one-time opportunity after seven years of operation to purchase the entire solar PV power plant for either $33 million or fair-market value, whichever is higher.
Supervisor David Campos wasn’t sure if the deal would be in the city’s best interest. "What I'm wondering," Campos told us, "is why we aren't just doing this ourselves. Why are we paying a private contractor all this money to do something the city could do?"
The partnership would mark the SFPUC’s first public-power project that it does not own, operate, and maintain. If the SFPUC were to spearhead the task on its own, the upfront cost would be an estimated $40 to $45 million in city bond financing, according to the Budget Analyst’s report. If the city entered into the contract and decided to purchase the plant after seven years, it would spend a potential $33 million on top of the projected $16.7 million in the first seven years of power costs, bringing the grand total closer to $50 million.
Yiaway Yeh, an analyst who helped to prepare the report, noted that Recurrent Energy would be eligible for federal tax credits that are not available to public entities like the SFPUC. This could be a benefit, he said, because it would lower the overall cost of the project while reducing the financial risk the city would have to take on if it pursued such an endeavor independently.
But ultimately, Yeh said, his office came to the conclusion that the final decision on the matter should be left up to the Board of Supervisors.