Garrett Cole, of GDS Associates, Inc., gives a presentation to Martinsville City Council on two energy projects during a July 14 meeting.
By Brandon Martin
Martinsville is moving forward with two energy projects after city council members approved the projects Tuesday.
The first – -a shared battery storage project with American Electric Power (AEP) — requires zero capital investment by the city but will allow them to take advantage of avoided capacity and transmission costs, according to Garrett Cole who works for the city’s electric power supply consultant GDS Associates, Inc.
“Outside of some basic utility setup that we would have to do to accommodate a scale utility storage system, we don’t have the responsibility for any capital costs related to this project,” Cole said. “It’s actually a shared savings agreement.”
Cole said that AEP will accrue 90 percent of the savings and the city will gain the other 10 percent until AEP is paid back for all the capital that they invest in the project. Once that happens, the benefits of the system will be shared equally.
AEP will be outlying $8.3 million to construct, own and operate the project located at a facility on Maple Street which will have nine megawatts in total power rating.
“It’s a battery storage unit so they are going to charge up by using megawatts on our system and then they are going to inject them back so they are just pulling power off of our system and putting it back at the right time,” Cole said.
“This is a win-win for us,” Mayor Kathy Lawson said. “We have no investment other than they are going to use some land that’s not being used.”
Cole said because of the lack of investment by the city that the project is the best opportunity to start a pilot program to evaluate battery storage.
He said the estimated revenue benefit for the electric department is approximately $200,000 a year. “That’s 10 percent of the savings that are estimated from the project,” Cole added.
Over a ten-year term, Cole said that it will add an additional $3.6 million in cumulative revenues. He said that even if the system were to go offline that the city would still experience some savings due to the avoided capacity and transmission costs.
The proposed project was unanimously approved.
A solar energy project discussed in March to help with rising capacity and transmission costs also was approved.
Currently, Cole said that the city pays $6.69 for transmission costs per kilowatt/month and capacity costs are around $3 a kilowatt/month but the capacity “clears years in advance” so the price is projected to be around $4.26 in 2021-22.
“The capacity is for our peak demand in the summer,” Cole said. “Our transmission is a separate bill that we pay for the usage of AEP’s transmission. We get the ability to avoid both of these charges with the project.”
In addition, Cole said that the city would have a fixed $45 per megawatt/hour in avoided costs from the project before factors like energy value are considered.
Cole said that contractors have been chosen for the project through a purchase power agreement. Sun Tribe, based out of Charlottesville, will be the developer and Sol Systems will be the investor and ultimate owner of the project at the Lynwood Golf Course.
The term is 25 years for the eight-megawatt project, according to Cole. He added that it will be 10 percent of the city’s annual load requirement and the commercial operation date will begin in the second quarter of 2022.
Cole said that there is a potential for regulatory changes in the future but even if the city can avoid only 50 percent of the costs of capacity and transmission, the net energy price will be in the $20 range or potentially in the $10 range.
In terms of equipment, the technology will be bi-facial, allowing the panels to pick up energy that is reflected from the ground. If the panels were to go bad, Cole said that it would be beneficial for the providers to replace the equipment.
“We have an agreement with them that is at a price per megawatt/hour and it’s fixed,” Cole said. “They only get paid if we are generating. Think about the capital costs that they have tied up in setting this whole facility up. If solar panels go bad, they are going to replace them because they want to get paid.”
Cole said that the owners of the solar panels–not the city–will be responsible for decommissioning the site and disposing of the panels if the purchase power agreement were to end. Additionally, Cole said that the city has ensured through bonded security with the developers that performance issues are covered, as well as if the businesses were to cease to exist.
There is an underperformance penalty of $40 per megawatt/hour as part of the terms of the agreement. “That’s a price on par with the price we are paying for the energy itself,” Cole said. If there is a delay in startup of the project, Cole said the city would gain $2,000 a day in damages.
During deliberations, Council Member Danny Turner asked to amend the motion to allow two weeks for council members to “see the small print” of the contracts.
City Manager Leon Towarnicki noted that specifics of the contract could not be discussed in open session until it is approved.
City Attorney and Assistant City Manager Eric Monday said the contract would be subject to a Freedom of Information Act if it is distributed outside of closed session.
“Frankly, we haven’t had any discussion with the solar people if they would consent to that,” Monday said.
Turner’s proposal died for a lack of a second, the project was approved in a 4 to 1 vote, with Turner dissenting.
In other matters, the council:
*Approved on first reading an ordinance authorizing the issuance of up to $2,500,000 principal amount of water and sewer revenue bonds related to the financing of the Reservoir spillway repair project.
*Adopted on second reading Ordinance 2020-3 concerning Uptown refuse collection. Now “In the Uptown Martinsville Historic District, refuse shall be placed on the curb for collection no earlier than 5:00 a.m., and no later than 9:30 a.m., on any designated day of collection. No refuse shall be placed on the curb between the hours of 9:30 a.m. of any Friday and 5:00 a.m. of any Monday, nor shall it placed on the curb during any holiday designated by the City on which refuse collection has been suspended,” according to Section 18-18.1 of the City Code.
