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This page contains a single entry from the blog posted on June 28, 2007 10:00 AM. The previous post in this blog was Correction: Tonight's McKay speech is not free. The next post in this blog is Who needs biodiesel?. Many more can be found on the main index page or by looking through the archives.

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Thursday, June 28, 2007

That fossil fuel's got no renewal

Forget those eco-roofs -- how about solar panels on a bunch of county buildings? That's what Multnomah County's about to get into under a deal unveiled yesterday by new County Commish Jeff "Little Big Pipe" Cogen.

Of course, there's a small catch -- always is, around these parts. The panels will be owned by a private company, and the county will still have to pay for the power they generate, just like it pays for juice now. All that's in it for the county taxpayers is that they will own the panels after they're 10 years old and the all the alternative energy tax credits for the private investors have dried up. Still, it should mean free power for the county at that point.

Hmmmm... O.k., I'll buy that (somewhat skeptically). Now let's talk about who's getting rich on this deal. Is the transaction going to be marketed in an open process, to the highest bidder? Or wait... don't tell me... we've already got the investors lined up?

The way things work in Portland, I wouldn't be surprised if some Peter Kohler or Tom Walsh types wind up being our new ecological "saviors." Indeed, I'll be surprised if it isn't somebody on Steve Janik's speed-dial.

Comments (20)

I saw a similar system on a recent segment of NOVA on PBS. The county's deal sounds slightly better than the one offered by the panel company on NOVA and that deal was good enough that I inquired about it for my employer (alas, the NOVA company only services the Northeast US).

It looks like a good deal to me. The county gets to lock in today's power rates for ten years and I don't think regular power rates are going to go down over that period of time. If anything, regular power rates will go up. Plus, the free power after ten years sounds good too. My guess is that money saved on power bills for the county will easily cover whatever tax breaks the solar panel company will get (but I could be wrong on that point).

The county would then pay for the power at the same rates as it currently pays for its electricity,

Does that really mean that rates won't go up? If so, that's a great deal. I thought it just meant "at the same rates as it would have paid under the current system."

As for the working condition and efficiency of these units after 10 Portland winters, I wouldn't get my hopes up.

Driving by the Disney Theater in L.A., I noticed an adjacent city/county building with rows upon rows of solar panels as a parking lot cover for employee cars. Not sure what their arrangement is, but it's something we shouldn't discount off the cuff.

At the very least, any new construction of publicly owned buildings should incorporate any feasible measure to reduce or generate energy. The new-ish business school at UofO generates enough juice that they actually sell power back to the grid. Rainwater is collected to flush toilets (why use potable water for dirty work?), plenty of high efficiency light fixtures, daylighting, etc.

If we're all saddled with the cost of public infrastructure, we should demand resource efficiency as much as labor efficiency... as long as we don't get snowed.

I agree. As I say, I'm skeptical but not displeased with the deal that's being proposed here.

Baaad bridge, Jeff, bad bridge!

So much for the Buckminster Fuller distinction between meterable and non-meterable energy. Even the sunlight over a public roof can now be securitizable -- like the roads and sidewalks. Can every homeowner and property owner now sell off the sunlight as a distinct recognized property right? Perhaps some neighboring property owner might like to host the solar panels and string a private line over to the county building? If Enron can organize weather hedges (divorced completely from anyone actually having to deliver) then surely one can find some way to place a value on the light above a county building -- let the auction begin!

Given the recent BPA court resolution dealing with preference versus non-preference customers it should be universally recognized as folly to substitute magic asterisks (some future rate making determination, or mid-contract implementation change in law) for essential terms of a valid contract that would be sufficiently definite and certain to be enforceable without looking beyond the contract or to future contingencies.

As an intellectual exercise consider that the tax credits (like the Enron low-sulfur type tax credit schemes, as a precursor to carbon trading) were ended tomorrow would the present bargainers claim that their contract thus becomes void. This is an abject lesson in how to securitize tax law tweaks; and by extension a representation of what passes for capitalism and gives it a bad name by divorcing it from any downside investment risk.

We get it when maintenance costs soar, right?

Kinda like a warrantee?

Isn' this "we get to pay for the privilege of demonstrating your operating system and then be left with the then outdated system in need of repairs and spiralling maintenance costs because they haven't been factored in?"

Don't we already have toys like that? Or, is that just at the city?

Has anybody in local government heard of depreciation? Do they know the reason for it? Do they know how it is used?

And, hey...Take note of the wonderous "low income housing" in the old urban renewal area. Like a wisp of smoke on the horizon. There briefly and then....gone...

Right. In 10 years, not only will the hardware be in questionable condition, it will be obsolete. Probably more of a liability than an asset at that point.

PV arrays last about 20-25 years with minimal deterioration in performance and little or no maintenance.

Hey folks... Jeff Cogen is answering questions about this proposal over on his new blog, CommissionerCogen.com.

He's already answered mine, which was about the upfront costs and savings.

(Full disclosure - I built that website for Cogen, though I speak only for myself.)

The only problem I see is that solar panels only get 100% efficiency under direct sunlight. We dont get that too often here.

This will most likely end up like municipal wifi. Sounds cool, but doesnt work as well as everyone hoped.


This will most likely end up like municipal wifi. Sounds cool, but doesnt work as well as everyone hoped.

A perfect commentary on the the "hope-based" initiatives that pass for policy and problem-solving around here.

I guess if one has no need to find empirically tested, effective answers, one can always hope. Trying, after all, is enough these days. What more can we realistically ask of our public servants.

Our public schools are busily instilling such PC fluff in their charges so that none will lack self-esteem.

Judgement based on results is just so outre'. In fact judgement itself ist verboten.

...or is that verboten ist?

"PV arrays last about 20-25 years with minimal deterioration in performance and little or no maintenance."

Well, that's reassuring. But has the technology improved in the last ten years? Shouldn't we expect it to improve dramatically in the next ten?

Can the county just buy and install the panels? It would be a classic style capital improvement type thing that is precisely suited to old-style bond issuances (if necessary) that are so rare today.

See for example Avery v. Job, 25 Or 512 (1894) (discussing "good faith" in setting the price for the assets of Corvallis Water Company).

The benefits of any tax breaks should inure to the county taxpayers rather than being transferred to a private entity. It is, after all, intended as an inducement for the consumer so as to alter their purchasing choice -- even a municipal consumer funded by compulsory taxes. The price in the absence of private tax credits must be discounted by the tax credits so as to arrive at a lower price for delivery of the goods to the county taxpayers; that is if a third party shall contract to obtain install and service the panels, like a contracted-janitor-of-sorts. This would reflect upon whether a deal is stuck in good faith, to the county taxpayer.

If the price of electricity should spike then the county taxpayers could recalculate upward the benefit of the deal to buy the generating capacity; for PR purposes.

The Cogen plan for a ten year purchase agreement is itself odd, and displays a loyalty to someone other than the county taxpayer. It is, in "bad faith."

Rather than being "odd," the 10 year "flip" deals is how renewable energy transactions that involve significant state and federal tax benefits are structured. Yes, the county could purchase the PV systems using revenue bonds, but the cost per kWh required to pay the debt service on the bonds would be significantly more than under the proposed structure, as the County would not be able to take advantage of the tax credits (and under IRS rules prohibiting the transfer of the tax credits, no one else could either.

I think it is a good deal for the County - they get renewable energy for the same price they are now paying for brown power and in 10 years they get a free solar system that will last another 20-30 years.

"using revenue bonds "

But there would be no revenue. There would be only abatement of costs; like rent expense saved by owning office space for staff. Bond proceeds would cover the purchase of a classic piece of collateral, rather representing a moral pledge as with revenue bonds. The price of electricity would become wholly irrelevant -- unless there where excess to sell.

The tax credit game is not fatal when the municipal purchaser would demand that such private tax credits be factored in to any consideration of what is "reasonable and just;" to borrow a routinely litigated phrase. (As I noted in a comment posted to Cogen's new site.) The scheme, as designed, transfers the gain (if there be any) to a non-governmental entity -- seizing upon the existence of IRS rules to rationalize the complete disregard of all other inquiry.

Suppose the entity where dissolved five years from now and the assets where transferred to some creditor? I would not expect the creditors to ignore the value of a contract to receive payments for ten years. The purchase agreement does represent the lending of credit (as far as I am concerned) to a private entity, in conflict with an Oregon Constitutional prohibition of the same. It could be partially remedied by prohibiting consideration of the contract to receive payments as collateral by the private entity, and a requirement that the entity make each of their creditor's privy to the prohibition. And, insist that the obligation to make payments becomes null and void in the event of dissolution or insolvency of the entity for any reason. I guess this might just poison the "deal" now wouldn't it, as the payment stream would be instrumental to obtaining a loan to buy the panels by the private entity -- ALL so as to benefit from a tax credit.

Well, that's reassuring. But has the technology improved in the last ten years? Shouldn't we expect it to improve dramatically in the next ten?

Yep and yep. What's your point - don't use current technology when there's bound to be something better in the future?

That's a recipe for inaction - which, I have to say, almost sounds wise when referring to MultCo spending - but, c'mon, PV energy is a relatively well-established, maturing industry with a lot of positives. Encouraging people through example to, at least, look at this technology will help move some people out of the look-back mode and into the present - if not the future.

Boo!

I've had solar panels for 28 years and it is wrong to think that panels and the rest of the system is maintenance free. First, effienciency is directly affected by the cleanliness of the panels-requires frequent cleaning-costly. Associated parts to the system have failures-costly to replace, repair. Roof, or even ground installations are susceptible to damage from wind, trees, birds, etc.-costly to replace.

Even with the $4,000 dollar tax credits in 1979, which was really making the rest of Oregon taxpayers pay for my system, the payback has probably not been reached. Thanks, Oregon taxpayers.

In addition to the fact thaat solar panels are not free is the cost in most roof assemblies needing additional structural design, load increases, thus increased costs. Also I've experienced because of my panels' longevity the need for replacement of the roofing under the panels which required a considerable expenditure and logistics for replacement.

We have a habit in government around here of "just build it" and not considering the maintenance and future replacement costs.

More on this here.


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