City Council OKs 20-year solar energy contract

Houston will ramp up its use of green energy to keep the lights on and laptops humming at City Hall with the approval Tuesday of a 20-year, $80 million deal to purchase solar power from Nashville-based Hecate Energy.

Hecate, which operates 20 plants around the world, will supply the city with up to 30 megawatts of solar-generated power annually, beginning in December 2016,from a plant it plans to build near Alpine in West Texas.

The facility will produce about 7 percent of the city's annual electricity needs and will use the new solar power to replace the equivalent amount of electricity that today is purchased from coal-fired generators, said Houston sustainability director Laura Spanjian.

Hecate offered a two-decade fixed price of 4.8 cents per kilowatt hour, the lowest among eight valid bids, and met city conditions related to financial capability and experience with energy markets and renewable energy generation.

Houston today pays 4.2 cents under its conventional energy contract, but that rate has averaged 6.7 cents over the past five years. If conventional electricity costs are low during the 20-year solar deal, city officials estimate the contract will cost the city $763,000. If fossil fuel rates are high during the period, however, estimates show Houston could save more than $19 million.

"I think it's important to reduce our greenhouse gas emissions to be a leader on climate change," Mayor Annise Parker said. "But what I've discovered is that, almost every time, doing the right thing environmentally is also the right thing to do financially. This was a great deal for the city of Houston."

The city's annual electric bill has averaged $114 million over the last five years; the average annual cost of the new solar power will be about $4 million.

Though the contract passed unanimously without discussion on Tuesday, several council members raised concerns when the contract first was discussed last week, calling attention to the 20-year term and the fact that the contract did not give the city the ability to cancel unilaterally, a clause that appears in most city contracts.

Some members also worried that the deal could fall through because the facility has not been built yet. Though Houston purchases renewable energy credits today, this will be the first time the city has worked with a plant built solely to serve it as a customer.

Parker sought to address those concerns, arguing that the contract does not hold a cancellation clause because Hecate needs a long-term commitment from the city to secure financing to build the plant.

Spanjian added that the timing is important because industry experts expect federal tax credits for solar production will not be renewed when they expire at the end of next year. If the plant is operational by Dec. 31, 2016, Spanjian said, it will enjoy rate subsidies throughout its life. If the plant misses that deadline, the contract allows Houston to collect $1 million with no further commitment.

"People are scrambling to get projects done now because it's going to take them a year to build it. This is the lowest it's ever going to get for us to do this. For us to get solar energy at under 5 cents, that's phenomenal."

Councilman Steve Costello, who chairs the city's budget committee, said he believes the deal will prove to be a prudent call.

"There's always a risk when you're looking at a 20-year program, but I think at the end of the day it will be a savings to the city," Costello said. "We should be looking at things like this. It's clean energy."

Houston will ramp up its use of green energy to keep the lights on and laptops humming at City Hall with the approval Tuesday of a 20-year, $80 million deal to purchase solar power from Nashville-based Hecate Energy.

Hecate, which operates 20 plants around the world, will supply the city with up to 30 megawatts of solar-generated power annually, beginning in December 2016,from a plant it plans to build near Alpine in West Texas.

The facility will produce about 7 percent of the city's annual electricity needs and will use the new solar power to replace the equivalent amount of electricity that today is purchased from coal-fired generators, said Houston sustainability director Laura Spanjian.

Hecate offered a two-decade fixed price of 4.8 cents per kilowatt hour, the lowest among eight valid bids, and met city conditions related to financial capability and experience with energy markets and renewable energy generation.

Houston today pays 4.2 cents under its conventional energy contract, but that rate has averaged 6.7 cents over the past five years. If conventional electricity costs are low during the 20-year solar deal, city officials estimate the contract will cost the city $763,000. If fossil fuel rates are high during the period, however, estimates show Houston could save more than $19 million.

"I think it's important to reduce our greenhouse gas emissions to be a leader on climate change," Mayor Annise Parker said. "But what I've discovered is that, almost every time, doing the right thing environmentally is also the right thing to do financially. This was a great deal for the city of Houston."

The city's annual electric bill has averaged $114 million over the last five years; the average annual cost of the new solar power will be about $4 million.

Though the contract passed unanimously without discussion on Tuesday, several council members raised concerns when the contract first was discussed last week, calling attention to the 20-year term and the fact that the contract did not give the city the ability to cancel unilaterally, a clause that appears in most city contracts.

Some members also worried that the deal could fall through because the facility has not been built yet. Though Houston purchases renewable energy credits today, this will be the first time the city has worked with a plant built solely to serve it as a customer.

Parker sought to address those concerns, arguing that the contract does not hold a cancellation clause because Hecate needs a long-term commitment from the city to secure financing to build the plant.

Spanjian added that the timing is important because industry experts expect federal tax credits for solar production will not be renewed when they expire at the end of next year. If the plant is operational by Dec. 31, 2016, Spanjian said, it will enjoy rate subsidies throughout its life. If the plant misses that deadline, the contract allows Houston to collect $1 million with no further commitment.

"People are scrambling to get projects done now because it's going to take them a year to build it. This is the lowest it's ever going to get for us to do this. For us to get solar energy at under 5 cents, that's phenomenal."

Councilman Steve Costello, who chairs the city's budget committee, said he believes the deal will prove to be a prudent call.

"There's always a risk when you're looking at a 20-year program, but I think at the end of the day it will be a savings to the city," Costello said. "We should be looking at things like this. It's clean energy."