In the lunchroom of the Red Wing fire station, a couple of firefighters kicked back on lounge chairs, watching "The Andy Griffith Show" on a small television mounted near the ceiling. On the roof, a six-month-old, 17-kilowatt solar array turned sunlight into electricity, some of which was powering the television. "You don't notice the difference," said Jim Eppen, a fire captain.
But Jay McCleary notices. The longtime deputy director of government services, McCleary monitors the city's electric bills, and he's been the driving force behind Red Wing's plunge into solar, which will likely include six projects and 217 kilowatts by year's end.
That will cover just a small fraction of the city government's overall electricity use. But McCleary thinks Red Wing could save more than a million dollars on power over the 40-year life of the panels and be in the vanguard of a growing interest among small cities in generating some of their own heat and electricity.
After climbing a narrow ladder and flipping open a metal door to the fire station's roof, McCleary quickly brushed a few bees from the otherwise pristine surface of the solar array. Manufactured by Silicon Energy in Mountain Iron in northern Minnesota, the 90 panels cover half the flat, pebbled roof. Another installation, more than twice as large, went online recently at the city's solid waste facility, and four more have been green-lit by the city council that will send power to City Hall, the city's community development and public works buildings and a maintenance shop.
The breadth of the endeavor is ambitious for a city of 16,000 people and constitutes one of the biggest municipal solar installations in the state. McCleary, an enthusiastic green-energy evangelist who also likes big machinery — he drives a new Ford Mustang, but waited for the more efficient six-cylinder model before buying it — said this is the most exciting project he's undertaken in 32 years with the city. "It's been an incredibly good project to work on," he said with a grin.
"One of the things that is very challenging for the entire current framework for how we provide energy is the centralized nature of it."
"Red Wing has a longstanding reputation as a community that tries to stay on the forefront," said McCleary, also pointing to a new fiber broadband network. "This gives an image of a tech-based community."
Whether looking to establish a reputation for forward-thinking to attract residents and businesses, hoping to save money on utility bills or wishing to mitigate carbon footprints while creating local jobs, cities across Minnesota are installing green-energy projects. Many were driven by the availability of millions in federal stimulus dollars, which targeted efficiency and green energy generation. Now, with that money largely spent, progress has slowed. But still, cities and counties are finding ways to push ahead.
The city of Franklin, in southern Minnesota, heats three buildings with biomass, at first burning agricultural waste and now wood pellets. Crow Wing County generates heat from the methane coming out of a landfill. Royalton, northwest of the Twin Cities, has installed solar on its city hall, and so has Kasson, near Rochester. Lac qui Parle County in far western Minnesota built a geothermal system to heat and cool its courthouse.
A goal of all of these projects is to put money into the local economy through saved budget dollars, the use of locally manufactured equipment or job creation.
Rural Minnesota is already where much of the state's power is generated. It's home to enormous wind and solar farms, like a new one near the small town of Slayton, and more traditional facilities like Xcel Energy's Prairie Island nuclear plant a few miles north of downtown Red Wing. But a movement toward small-scale solar, wind and biomass tied to particular buildings or clusters of buildings — often referred to as "distributed generation" — has the potential to change the way we make and get energy.
Distributed renewable generation currently constitutes a fraction of 1 percent of the overall electricity picture in Minnesota, while total renewables make up about 15 percent. The small-energy slice is expected to grow, thanks to new funding pools and recent state legislation that encourages solar.
On top of a standing requirement that electric utilities in Minnesota provide a quarter of their energy from renewable sources by 2025, legislation passed in May requires some to provide an additional 1.5 percent from solar by 2020. (The standard applies only to four investor-owned utilities, to the disappointment of solar advocates). Some of that will be purchased from cooperatively-owned "solar gardens," newly introduced to the state, that are tied into the power grid. Having more energy pouring into the grid from individual, intermittent sources on city halls, houses and businesses poses a complex situation for utilities, as MPR News reporter Stephanie Hemphill points out in this story.
"I do think one of the things that is very challenging for the entire current framework for how we provide energy is the centralized nature of it," said Melissa Pawlisch, statewide director for a public-private partnership called Clean Energy Resource Teams (CERTS). Big utilities are trying to determine how to deal with a less centralized system, she said.
The shifting energy picture has more communities asking themselves what resources they have available for energy or heat generation. Will it burn? Will it turn? Often the most sensible approaches are geographically tailored. Farm country might burn manure, a forested place wood. If you look at maps of Minnesota, you see that solar has the most potential in the southwestern part of the state. There are a lot of biomass resources in the north and northwest, and the wind blows hardest in the southwest.
"Solar is on the cusp of really taking off. There will be a big fight. It's a threat to their business models."
Natural gas prices have plummeted lately, partly thanks to hydraulic fracturing in places like North Dakota. That has tempered enthusiasm for some green heating projects, like one in Brainerd that would use the city's sewage to heat and cool municipal buildings. The project has been extensively studied but other than a small test run, it hasn't been implemented. "Cheaper gas prices just make the paybacks longer term, however, I think the paybacks would still be there," said Scott Sjolund, technology supervisor for Brainerd Public Utilities. "Testing will help confirm it."
But some small cities in Minnesota don't have access to the natural gas pipeline. And fuel oil and propane prices fluctuate wildly but ultimately keep rising. According to the U.S. Energy Information Administration, heating oil prices in Minnesota have more than doubled in the last decade. "They are still thinking about it," said Pawlisch of biomass and other municipal green projects. "They are still having variable costs and higher costs than people on natural gas. It's pretty easy to take a look at a map of Minnesota and see lots of places all over greater Minnesota that don't have natural gas."
One example is Grand Marais, where a restaurant uses kitchen exhaust to heat water and residents are on the verge of building a $9 million biomass plant that would heat a string of county buildings, a hospital, a school, a community center, churches, hotels and other properties. MPR News reporter Dan Kraker explored the effort in this story.
PAYING FOR IT
The promise of free or cheap power and heat is alluring, especially for small cities looking to save money that might have a lot of open space for solar panels and wind turbines or a lot of wood or agricultural waste to burn. But the upfront costs for these kinds of projects are substantial, often ranging in the hundreds of thousands or even millions of dollars. This poses a formidable hurdle and is a big reason many projects are never realized.
"I don't care who you are. If you have concerns at all, do something about it."
Up until late last year, federal American Recovery and Reinvestment Act money drove many new-energy projects in Minnesota cities. The state distributed more than $54 million through a competitive grant program between 2009 and 2012, "supporting the Minnesota energy economy as we moved out of the recession," said a December 2012 report (PDF) from the Minnesota Department of Commerce. The federal dollars went to schools all over the state, which installed efficient lighting and new boilers and the like. They went to companies working on innovations like improved battery technology and to local governments dabbling in new-energy generation. Millions more went to weatherize low-income homes and make government buildings more efficient.
Outlays included $27,000 for the solar system on City Hall in Kasson, $100,000 to put the geothermal heating and cooling system in the Lac qui Parle County courthouse and $34,000 for the 7.5-kilowatt solar installation on the roof of City Hall in Royalton.
"We try to keep up," said Royalton Mayor Andrea Lauer. "If there are ways we can make things energy efficient and still have a positive impact on the city budget, those are things that have to go hand in hand." Now, Royalton is considering a small wind project, which Lauer thinks could help draw businesses. "It would create a certain buzz and perhaps get people to say, 'Can we check out this city more?'"
The stimulus money was a big boost and its absence has left a void. "I do think the lack of the stimulus dollars has been a challenge," said Pawlisch of CERTS, which offers small design and planning grants for energy projects. But communities have other options, she said. "It's less about having a grant and more about ways to do financing."
That might mean including a green-energy project in a capital plan, just like a city would do with a new road or water plant. "That is their strong suit," said John Farrell of the Institute for Local Self-Reliance, based in Minneapolis and Washington, D.C. "(Local governments) can borrow money over a long period of time for all sorts of capital projects. They can look at bond payments to be offset by energy savings. Savings over 20 years are going to be higher than the amount you have to pay for that loan."
"The customer is engaged. The city is engaged. It's good for them and it's good for us."
That's how Crow Wing County built its $1.3 million landfill heat-generating project in 2008. The project was financed out of the county solid waste program operating budget and the return comes from energy savings, but also from the sale of carbon reduction credits. Because the project prevents methane from being released by the landfill into the environment — it's used to run a boiler system during the winter for building heat and is also "flared" or burned off — the county gets credits for those avoided emissions. It can sell the credits to companies looking to offset their carbon footprints. "The last time we sold we made $48,000," said Doug Morris, Crow Wing County solid waste coordinator. "We sell them once a year... The county is trying to do the right thing."
Pawlisch also recommends an approach known as "performance contracting." A community estimates how much it will save by building a new-energy project or making its buildings more efficient and then can use the projected savings to finance the project. "You don't have to use grant dollars, not even your operating budget," said Pawlisch, who has a grant to educate people about the financing mechanism. "You can translate your lower operating costs into bigger projects."
There are still federal tax credits too, which often reimburse 30 percent of the cost of solar panels or wind turbines, but those only work for entities that pay taxes, which excludes cities, counties and nonprofits. Other incentives include a Minnesota-made rebate, created in 2010, that applies to equipment manufactured here.
The state law that passed in May, ushering in solar gardens, which can be as large as 1 megawatt, is expected to boost new-energy production in Minnesota too, since a handful of the largest utilities are required to buy power from small sources. Solar advocates, utilities and state agencies are currently hashing out the "value of solar," or the price utilities will pay for the energy.
SOLAR IS WHERE IT'S AT
Ken Bradley with MN Community Solar, which is installing an early solar garden on the roof of a business on East Lake Street in Minneapolis, thinks solar is about to have its day in the sun. "This week, I talked with municipal governments, more than one," Bradley said. "We've met with congregations in churches that want to do it. We've talked with nonprofits."
The price of solar panels is falling, which Farrell thinks will accelerate adoption by individuals as well as communities. "You have two cost pressures," he said. "Conventional energy from the existing utilities is going up. And the cost of alternatives is coming down. That is the catalyst. This becomes more powerful and has more potential when people see it working out economically."
"Solar is on the cusp of really taking off," Farrell said, predicting that more small-power generation will create tensions with the utilities. "There will be a big fight," he said. "It's a threat to their business models. What do you do when your customer has a more cost-effective method than buying from you?"
These sorts of debates over distributed energy generation, have cropped up in other parts of the country, as utilities wonder who will pay for the grid as customers fall from the big-power rolls. But Lee Gabler, director of demand-side management and renewable operations for Xcel, was unperturbed by the topic. That may be because his is one of the utilities mandated by state law to buy and provide more solar energy. "By 2020, to meet the 1.5 percent of retail sales through solar energy, this will continue to be a growing piece," he said, adding a note of caution about the grid. "I think we will always be cognizant of the impact to the distribution system. We will watch these on the grid as we continue to grow solar."
Xcel, required to meet heightened standards for renewables because of its nuclear power plants near Monticello and Red Wing, distributes millions of dollars every year for green-energy projects through its Solar Rewards rebates and Renewable Development Fund.
The increasingly-friendly environment for solar in Minnesota has drawn the interest of outside operators and investors. "Contractors from the east and west coasts have Minnesota in the crosshairs now," said Jason Edens of Rural Renewable Energy Alliance in Pine River, which installs solar arrays all over the state, including the one on Royalton's City Hall. "Minnesota is looking like a favorable market right now."
That interest benefited Red Wing, where the solar installations--big enough to power three dozen homes--are being financed by the California-based firm Newport Partners. The $1.8 million solar installation is financially attractive thanks to various federal and state tax credits and rebates--including the Minnesota-made bonus and Solar Rewards--and because Xcel needs solar to meet its production goal.
For the first 6.5 years, Newport will own the panels on Red Wing's municipal buildings, which are being installed by All Energy Solar, with offices in Minnesota and Wisconsin. And the city will pay Newport for the solar electricity at a 20 percent discount from what it would have paid Xcel for the same amount of energy. At the end of the 6.5 years, the city will own the panels and get an estimated $40,000 to $45,000 worth of energy every year for free.
The only cost to the city will be the expense of building two carports that will support some of the solar arrays, totaling around $170,000, which the city council recently approved. "City Hall was built in 1905 and is on the national register," said Jay McCleary. "There is no way there are going to be solar panels hung on the building or on the lawn. It's not going to happen." Hence, the adjacent carports.
McCleary said the arrays are a good deal for Xcel because solar panels make most of their energy on long, sunny summer days, when people are drawing a lot of power for air conditioners and the like. "They would have to pay a premium to get energy off the grid during peak times," he said. "This is 217 kilowatts they won't have to buy off the grid."
Gabler agreed, even though Xcel will lose electricity sales. "I don't believe there is a downside," he said. "The customer is engaged. The city is engaged. It's good for them and it's good for us. Their installation is counting toward the 1.5 percent goal in 2020."
The arrays are important to Red Wing as well, said McCleary, for a handful of reasons. "No. 1 is taxpayer dollars," he said. "This is a way to save taxpayer dollars looking out for many, many years. Second, the city of Red Wing and its citizens have made it clear they want our community to be very conscientious of how we operate... They want us to reduce our carbon footprint. They want us to be socially active and correct."
McCleary remembers presenting the solar plan to the Red Wing City Council. "When I walked into the City Council chambers a year ago, I told the City Council here is the project," he said. "Here is what we want to do. Here is what we want to approve. This is the most exciting thing I have ever presented to the City Council. They approved it unanimously."
"I think we're all obligated to do our part," he said. "I don't care who you are. If you have concerns at all, do something about it."
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