Two Southern Minnesota Municipal Power Agency (SMMPA) officials Chris Schoenherr, director of agency and government relations, and Executive Director and CEO Dave Geschwind, appeared before the Grand Marais Public Utilities Commission (PUC) on August 17 to discuss four topics: the potential for community solar programs; rate structure changes; an amendment to the SMMPA agency agreement; and climate change/carbon fee and dividend.
Community solar
For the past several months the Grand Marais PUC has been discussing installation of a community solar garden but the expense has been daunting. SMMPA might have a solution, said Schoenherr, but added it takes “skin in the game” from communities who want to participate.
SMMPA has looked at developing smaller projects in local communities and also discussed building a larger combined project “where we can capture some economies of scale,” Schoenherr said.
To that end the company has discussed pursuing a 3-megawatt capacity solar garden where SMMPA customers would pay upfront to purchase a solar panel (or panels) and then would receive a credit for the electricity those panels produced on their monthly bill.
“Not everyone who wants to take part owns their own house or lives in a house that is right for solar panels,” Schoenherr said.
When asked how much this would cost, Schoenherr replied, “That would depend on the site and how the project is structured.”
But he added current cost-per-panel estimates are $1,100 under this model, and people would need to sign a 20-25 year contract. If a small community like Grand Marais developed the same project on its own, estimates are $1,700 per panel.
“So economies of scale show up pretty clearly,” Schoenherr said.
To begin with, subscribers would actually purchase power from the Lemond Solar Center, a 5-megawatt project SMMPA is developing near Owatonna. Then, when 25 percent of the capacity is reserved (500 subscribers) construction will begin on a new 3-megawatt project. Schoenherr estimated that 2,000 residential subscribers would be needed in total.
Cost to develop the project would be $8.5 million, “not a trivial amount of money,” he said. So far, six to seven communities seem interested, while the remaining SMMPA member communities are showing little interest in the solar garden project.
SMMPA has signed an agreement with Lemond Solar Center, LLC, a subsidiary of Coronal Development Services, to buy all electricity generated over 20 years from a 5MW solar photovoltaic array that will be built, owned and operated by Lemond Solar Center, LLC. Once operational the Lemond Solar Center will produce enough electricity to meet the needs of approximately 775 homes per year.
In 2015 SMMPA received 12 percent of its retail energy sales from wood, biodiesel, biogas and municipal solid waste, enough electricity to power about 32,490 homes.
Changes in agency agreement
In related business, SMMPA is asking its 18 member municipalities to make changes to its agency agreement.
The changes would allow municipalities that don’t currently buy power through the agency to be involved in a particular power project. Schoenherr said this could be a solar project or the Badger Coulee transmission line, which the agency helped to support in Wisconsin with a 6.5 percent buy in. Rochester and Austin, two cities whose contracts with the agency run out in 2030, have expressed some interest in continuing to be financially committed to the transmission project, Schoenherr said.
According to Schoenherr, a project partner would be involved in the decision making for that project and for the overall membership, but would not vote on financial aspects for the agency unrelated to the particular project.
Rochester and Austin are two of the three largest systems who receive power from SMMPA and, as such, have two seats on the SMMPA board that are reserved for the three largest systems. In weighted votes, Rochester’s vote counts for 43 percent; Grand Marais counts for .77 percent (which is still larger than three member communities).
Grand Marais City Administrator Mike Roth suggested to the board that the city’s attorney look over the agreement before the city signs off on it. The PUC board agreed.
Rate structure changes
SMMPA hasn’t had a rate change in six years, noted Schoenherr. That will change next year when SMMPA will potentially increase its rates by as much as four percent.
The decision to increase rates is difficult but necessary for SMMPA to maintain long-term fiscal responsibility and allow its members to continue to provide reliable service to customers, Schoenherr said.
Driving those rate changes are changes to wholesale market conditions, increased debt service, diversification of the generation mix which includes renewable energy, increased transmission line costs and other costs associated with doing business, he said.
Carbon Fee & Dividend
The Grand Marais PUC recently passed a motion calling on the U.S. to enact legislation that would call for a Carbon Fee and Dividend. The Citizen’s Climate Lobby, of which PUC board member George Wilkes is a member, created this proposal.
If enacted, Carbon Fee and Dividend could greatly reduce greenhouse gas emissions that are now going into the atmosphere.
Under this program companies that produce carbon-based fuels would pay a progressively higher fee, which would be returned to the public as an energy dividend. Once the company (or companies) reduced their reliance on carbon-based fuels—or quit them entirely—they will fall out of the program.
“At your current generation mix, there is a problem,” Wilkes said. “Grand Marais would like to see your timeline [for renewable energy] advance. Other communities might want to see that as well.”
“We have to be very mindful about what we take out and what to put into our energy mix. It’s vey complicated,” said Geschwind.
With no more coal-fire coal plants coming on line, a commitment to keep adding renewable energy sources to its power grid, and SMMPA’s Sherco coal-fired power plant that will be paid for in 2027, Geschwind said SMMPA is preparing for the inevitable day when electricity isn’t generated by burning coal.
“SMMPA isn’t married to coal. That’s not our identity,” Geschwind said. “Right now we have a coal-fired resource with debt, directly and indirectly. As we move away from coal SMMPA and society is faced with coming up with solutions on how to make that work.”
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