Solar project debate grows feisty
Iola City Council members were nearly unanimous in agreeing to purchase a pair of used generators that will add to the city’s ability to produce electricity if and when necessary.
They were much more split — at times, heatedly so — as talk then pivoted on whether to enter into a solar-powered project with Westar, eventually pushing off the decision for a couple of weeks.
The energy issues took center stage at the Council’s regular meeting Tuesday.
Council members voted, 7-0 with Councilman Daniel Mathew absent, to spend $1,111,250 with High Plains Power Systems LLC for a pair of diesel-fired Caterpillar generators, each of which is capable of producing up to 2 megawatts of electricity per hour.
The plan is to use the generators only in case of emergency. The true benefit is that it adds to Iola’s generating capacity.
Currently, Iola’s capacity requirement is roughly 28 megawatts per hour, while the city only has enough equipment through its existing natural gas and diesel generators to produce 22.5 megawatts.
To maintain its status as a partial-requirement electric utility — and remain eligible for cheaper electric rates through Westar — Iola for the past decade has had to spend about $100,000 annually from Chanute and Sabetha for those communities’ excess capacity.
For years, the city discussed eventually installing new generators, projected to cost about $10 million to $12 million for a 10-megawatt project, before agreeing in recent years to instead look for used generators.
The generators offered by High Plains were built in 1996 and used at an AT&T plant in Dallas. They were eventually replaced with new generators, making them available on the open market.
Iola City Administrator Sid Fleming said his original hopes were to purchase a third generator as well from High Plains — four were for sale — but two of the generators were sold to another customer while the city was drafting its specifications.
The units will be installed at the city’s power plant in Bassett, where old generators had been removed in 2013. The building still offers an ideal location. The system would be designed so that a third generator could be added at a later date.
The generators cost $800,000, with another $311,250 to pay for High Plains to install the units and associated equipment.
The city has $2.35 million in its coffers allocated for adding electric generation to the city’s portfolio, which should allow commissioners to act quickly if and when a third generator is made available.
COUNCIL members found themselves at odds when discussing the costs and potential benefits associated with entering a solar project with Westar.
The utility giant is proposing construction of a solar plant capable of generating about 2.7 megawatts per hour on a plot of city property west of Russell Stover Candies.
Westar would take advantage of state tax breaks, with Iola paying a slight premium over what customers are paying today for natural gas-powered electricIty, with the option of then paying $3.7 million in a lump sum after seven years to take ownership of the solar panels.
The advantage, explained energy consultant Scott Shreve, is that from that point on, the city would enjoy the benefits of having its own power source capable of generating electricity at a much lower rate than what Iolans would expect to be paying otherwise.
Shreve noted the plant’s largest benefit is that it would be at its most productive when demand (and cost) of electricity is at its highest.
The proposal was endorsed by Mayor Jon Wells and Councilman Chase Martin, who noted the explosion of “green energy” projects across the country in recent years.
“We need to either jump on board now, or we are missing the boat,” Martin said. “This is not for us, but for our kids, and our grandkids. This is an investment for us, for our town. There’s always a risk, always cons. But there are pros here.”
“We need this energy,” Wells added, noting that the Westar agreement would lock in the city’s solar cost at $29 per megawatt hour after year 8. “In 30 years, inflation alone will make that a reasonable rate,” he said.
Others weren’t as convinced.
Councilman Aaron Franklin put pen to paper, and calculated the city’s combined cost for the solar project at about $6.7 million.
“If we had $6.7 million sitting in the bank, I’d feel more comfortable,” Franklin said. “What this comes down to is I’m not comfortable making that decision now.”
“What your $6.7 million doesn’t factor is that we have to buy that energy one way or another,” Wells responded.
Councilman Ron Ballard, meanwhile, noted the city would have to set aside roughly $190,000 annually in order to have enough in the bank to buy the solar plant outright after seven years, although Fleming and Shreve both noted Iola also could finance such a purchase. To finance the entire $3.7 million would push the final cost to about $35 per megawatt hour.
Ballard was unconvinced.
“We can’t even afford to make our water plant payments,” Ballard said.
“The problem we have with the water plant was it was built and we expected new use and new users,” Wells said, neither of which the city is anticipating with a solar plant.
Adding solar “diversifies our renewable (energy) portfolio,” Wells continued. “That puts us in a pretty solid boat for 30 years. We’ve got ourselves 30 years locked on product, at about 25 percent of usage.
Franklin, however, called a promise of lower rates down the line a gamble for the city, which drew the ire of Martin.
“We need to be careful with terms,” Martin said. “We’re throwing out words like ‘gamble’ or ‘put citizens on the hook.’ I don’t think that’s fair.”
COUNCILWOMAN Nancy Ford asked for more time to pore over the numbers.
“I don’t feel like I understand it or have a grasp of the knowledge to make an informed decision,” Ford said. “I don’t feel like I understand everything well enough.”
The debate, she said, was like being tossed into a calculus class.
“How long are we going to push it off?” Martin asked.
Ford suggested two weeks. Franklin said the discussion should be brought back after the Council settles on the city’s 2020 budget over the summer.
“Is September too late?” Franklin asked.
Franklin’s motion to wait until after the budget was approved failed, 5-2, with him and Ballard the only two Council members in favor.
Ford’s subsequent motion to revisit the matter at the Council’s June 10 meeting passed, 5-2, with Ballard and Mark Peters opposed.
COUNCIL members also voted, 6-1, Ballard opposed, to maintain a pact to purchase a small allotment of hydroelectric power from the Southwestern Power Administration.
The city has had the agrement with SPA for the past several years, with the contract set to expire Thursday.
The new contract would run through 2034, with Iola having the potential to “sell” its portion to another community in need, although the terms of the contract may change, allowing the city to revisit the matter before year’s end, Shreve noted.
Factors to consider include transmission costs to the city to use hydroelectric power, and whether Iola’s obligation can be used by another entity if the costs are too high for Iola.