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Four years ago, school district leaders said solar panels at more than 80 San Diego Unified schools and facilities would supply cleaner, cheaper power that would free up more cash for student needs – and they signed contracts with companies to make that happen.
Those promises didn’t pan out.
Only about half of those solar systems are on district rooftops and carports today. That means the district’s budget has been hit harder by San Diego Gas & Electric rate increases than it would have been if it had delivered on its solar goals.
Last year alone, the district saw its SDG&E bill increase by nearly $4.2 million, a spike it owed to a significant rate hike and a 9 percent increase in energy use.
Despite its struggles with solar so far, the district is preparing to ramp up its solar footprint with a major investment of bond funds.
“There was a sense that what we had anticipated happening didn’t happen so we had to go back to the drawing board,” said school board member Richard Barrera, who’s supported the district’s push for more solar power.
Proposition Z, a school bond approved by voters in 2012, gave the district an opening to continue that mission: Officials are preparing to sink tens of millions of dollars into new solar projects in coming years.
But the district’s experiences with its solar contracts drive home the challenges that can come up in the solar development process.
San Diego Unified’s first foray into solar power came in 2005, when it finalized 20-year power purchase agreements with solar and roofing companies for both new roofs and then-innovative flexible, thin-film solar panels at 24 district schools. The district would pay for the power the panels produced and would get free or discounted roof upgrades as part of the deal. Another company later installed the same panels at four other district sites.
Bill Dos Santos, San Diego Unified’s former director of maintenance and operations, recalls the excitement surrounding the new solar investments. The district expected to save $250,000 annually on its electric bills and about $25 million on roof upgrades.
“At the time that we finished that project, we had the highest solar production in the nation for any school district and we were among the highest solar production entities in the nation,” said Dos Santos, who now leads the County Office of Education’s energy strategy group.
But the district was instantly caught off guard. Its annual electricity bills went up about $20,000 instead of decreasing due to demand charges that large-scale commercial customers like San Diego Unified must pay.
By mid-2008, after backlash from San Diego Unified and other solar-powered districts, SDG&E introduced a new rate structure that facilitated the savings the district had planned. District officials started looking at solar panel deals again.
But four years later, that initial solar investment hit another wall.
Solar Integrated Technologies, the panel manufacturer, filed for bankruptcy and the district learned their panels could pose a fire hazard. (That’s no longer a common issue today.) Inspectors found burn spots on some panels and concluded it was too risky to keep them on district rooftops. The panels were ultimately removed at no cost to the district with the roof upgrades intact. But the district was left without solar panels at 28 sites, which meant it also lost the annual energy cost savings that came with them.
Tom Wright, now the district’s environmental compliance manager, said the district essentially had to press the restart button on its solar program.
But district officials weren’t ready to give up on solar power.
In 2010, board members approved two more large power purchase agreements.
The first was with AMSOLAR, a Solana Beach company that pledged to help develop solar systems at 20 sites across the district. The company partnered with financier GCL Solar Energy, a subsidiary of a Chinese solar manufacturer that claimed the project would be “one of the largest school systems in California.”
It never earned that distinction. Only five of the sites ended up with solar panels. The projects that did reach the finish line were installed atop carports rather than the rooftop installations that dominated the companies’ initial list. District officials originally estimated $13-$20 million in long-term savings; that’s been pared down to $3.5-$5.5 million.
The district and Brad Nelson, a former AMSOLAR executive, point to state regulations enforced by the Division of the State Architect, which handles permitting for school construction projects, as the projects’ undoing.
Nelson said the state agency wouldn’t sign off on the type of rooftop systems proposed, which would’ve relied on weighted objects to hold down the system rather than penetrate the roof.
A spokesman for the agency said regulators sought more extensive wind testing to ensure the installations were safe and gave the company options to move forward.
In the end, the company decided it couldn’t deliver the rooftop systems. They’d be too pricey.
“Someone’s gotta bear that cost,” Nelson said. “I don’t think the school district wanted to have significantly higher power rates and our investors wouldn’t have made any money off that project so it killed those installations of the project.”
Two years after their initial agreement was approved, the district and AMSOLAR agreed to remove the rooftop systems from their contract. AMSOLAR has since stepped away from the arrangement altogether, leaving GCL Solar Energy as the holder of the power purchase agreement.
Colorado-based Main Street Power Company reached a solar deal with the district around the same time AMSOLAR signed its original agreement. Main Street Power said it could install panels on rooftops at 36 district sites.
The company, which was later acquired by another firm, managed to make 31 of the sites work but ultimately used flatter solar panels more acceptable to regulators.
Wright said the district spent significant time negotiating with both state regulators and Main Street Power to make that happen.
“We had to get everyone comfortable with what was going to be the result,” he said.
Still, roofing issues forced the company to drop five projects from its list.
In the end, the district only got 37 of the 56 solar projects it expected from its two current power purchase agreements. (It’s separately added three other bond-funded projects.) The district has still saved cash with through its solar agreements. A Voice of San Diego analysis found the district saw about $618,000 in savings compared to what it would’ve otherwise paid SDG&E last year.
It would’ve saved more with more solar panels, though.
Yet solar experts say San Diego Unified’s early struggles to get the solar power it wanted aren’t entirely surprising.
Solar companies and financiers who work on power purchase agreements historically operate on thin profit margins and must offer rates lower than what utilities offer to make deals pencil out. Project hiccups can add considerable challenges.
And schools often have older rooftops that need overhauls before solar can be installed.
Michael Ware, vice president at EcoMotion, a Los Angeles-based consulting firm that advises government entities going solar, said it’s not unheard of for solar projects like San Diego Unified’s to be significantly whittled down.
“There are a number of problems that can crop up,” Ware said. “Some of them are nobody’s fault.”
Among the common ones: initial project locations that turn out not to be suitable for panels, regulatory hoops or economics that don’t work for the financing companies or the customers.
San Diego Unified struggled with all three.
Now it’s taking a new approach in going solar. Rather than contract with outside companies and pay them for solar power, leaders want to rely on school bond cash to buy their own systems.
They aren’t saying whether issues with past power purchase agreements – the most common way for schools to go solar – helped motivate the change.
In a statement, the district focused on cost savings associated with buying the systems rather than paying as they go:
“The district believes that greater energy cost savings can be realized by owning and operating photovoltaic systems. The PPA approach allows for a vendor to profit from solar energy production and resale over time. Being a public agency, the district can issue bonds at lower interest rates than PPA vendors typically receive when borrowing money to finance their projects.”
The district’s initial plans for the bond funds hint at the lessons it may have learned from past solar deals.
All but one of the eight solar systems the district hopes to build with bond funds next year are mounted on the ground or on parking stalls, systems that experts agree should be easier to get through the regulatory process.
This is part of our quest on whether solar will pay off for San Diego. Check out our previous post, San Diego Unified Is Going All in on Solar Power, here.