Why big renewables shy away

Large-scale renewable energy projects seeking payment from the city of Fort Collins for the power they produce might have better luck elsewhere.

It’s not that they won’t get paid. It’s just that others sometimes pay better.

VanDyne SuperTurbo found that out and, in a decision that caused a stir in economic development circles and among elected officials, has opted to move out of the city.

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VanDyne is in the automotive engines business. But solar-energy proponents say that the same problem affects companies in their industry and discourages them from establishing themselves in the city.

Specifically, low rates of payment for electricity generated beyond what a business consumes – it’s called net-metering, in industry jargon – discourage commercial solar projects in the city, they say.

Utilities, the source of these payments, say coughing up any more dollars for power generated by such companies would amount to a subsidy that other ratepayers would have to help cover.

On the other hand, some do pay more than others. To wit:

The city of Fort Collins utility, served by the Platte River Power Authority, offers as payment a little more than 2 cents per kilowatt-hour.

By contrast, the Poudre Valley Electric Association offers power at a little more than 8 cents per kilowatt-hour. Both utilities pay at roughly the same rate they charge retail customers. In other words, there’s not a lot of profit or loss, either way.

Xcel, which provides service in multiple Larimer and Weld county towns and cities, typically pays 2 to 3 cents per kilowatt-hour, which is lower than the price at which it sells power.

Solar energy companies look for higher net-metering rates and incentives because, despite advances in the technology, it still costs more to produce energy from the sun than, say, coal-fired plants, said Angelina Pramatarova, a business development staffer with Wirsol. The German company develops solar projects globally and has an office in Fort Collins.

“Utility-scale (solar) projects are basically not possible” without such rebates and incentives, she said.

“It doesn’t really help to make attractive the solar business here,” she said.

Of course, a number of Fort Collins businesses operate commercial-scale net-metering solar power systems, many completed by Wirsol. But it’s a sideline for those businesses, not a primary revenue generator and whether they’re reimbursed at a higher rate isn’t a make-it-or-break-it proposition for them.

But the city’s low net-metering rates might discourage businesses considering net-metered solar projects, which tend to be pricey.

“The problem is, after you interconnect, how you’re going to make back your investment,” Pramatarova said.

A lower rate isn’t the only issue.

Steve Catanach, light and power manager for the city’s utility, points out that customers can receive net-metering payments for no more than 120 percent of their average annual electricity consumption.

That essentially means big renewable-energy projects likely would receive even lower payments for their electricity.

Platte River, a wholesale provider of electricity to Fort Collins, Estes Park, Longmont and Loveland, also offers payment for power produced by customers it serves directly. But, again, it’s not much. Platte River will pay only the amount equal to whatever cost it avoids by not producing the energy, General Manager Brian Moeck said.

That rate, set slightly higher by the city of Fort Collins, was not enough for VanDyne.

The company, which is developing a line of fuel-efficient engine turbochargers, runs diesel engines for thousands of hours. It tries to offset its costs by returning unused energy produced by the engines to the power grid.

VanDyne estimates it could get about $15 per megawatt-hour, or about $350,000 a year, for its electricity from Fort Collins. It would receive about $45 per megawatt-hour, or $1.2 million annually, for its metered power if it relocated into the service area covered by Poudre Valley, whose power is supplied by Tri-State Generation.

That would more than pay for the company’s diesel costs, and is about triple the offer from Platte River-powered cities.

Mark Herbst, VanDyne chief operating officer, said Windsor and Greeley have contacted him about relocating in those areas, but he has not yet made a decision.

Meantime, he has visited dozens of facilities in the area served by Poudre Valley in the past year and a half. He has looked north of Highway 34 to Fort Collins and on both sides of the interstate.

Utility officials said they were unaware of any other company that faces challenges similar to VanDyne’s.

Most companies only try to offset their energy use with renewable systems, not produce additional energy to sell onto the grid, said Ric Soulen, a Poudre Valley spokesman.

Josh Birks, economic health director of the city of Fort Collins, said VanDyne represents an isolated case: a growing, young company that needs additional revenue beyond that which it could generate through its normal course of business.

Birks does not consider the situation as a significant barrier to future economic development. But he acknowledged that it has limited renewable-energy development in Fort Collins.

Large-scale solar power projects often contract with a local utility to provide power, said Neal Lurie, executive director of Colorado Solar Energy Industries Association. And if the rates such projects can secure are low, they’ll look elsewhere.

Another challenge is that utilities often shut out solar-power generation systems. That’s because the utilities can make more money selling power themselves than paying more for power generated by solar sources.

“That’s where the current monopoly model can get in the way of free-market entrepreneurship,” Lurie said.

Also, utilities that already generate a great deal of power may not be eager to buy additional generation.

Regardless of motive, Platte River officials said their customers – Fort Collins and the other cities that operate their own utilities – might have to raise retail rates if they want to pay more to industrial customers like VanDyne for their power.

It’s highly unlikely that Platte River will, on its own, do likewise.

“We’re really not in the subsidy business at the wholesale level,” Moeck said. “That’s really a decision that we hear from our cities that they prefer to make on their own at the retail level.”