Special Bd. of Aldermen — 08/06/2019 Page 21
thereafter for the duration of that PPA contract. Again, minimum 5 years; standard term of 25 years but those
buy out options are annual beginning in Year 6. So the City determines for how long they remain in the PPA.
If you were to exercise that option at the earliest possible point in Year 6 there would be a capital expense of
just over $300,000.00. That amount is pegged to fair market value as required by the IRS so the amount
declines each year thereafter. If the City were to defer that buyout as it may choose to do in that given year, you
aren't required to commit upfront, but once again the sooner you own the asset and are generating your own
power the greater the long term benefits. And then assuming that the City does exercise its buyout option in
Year 6, the net savings, so this is deducting the cost to buy it out at $300,000.00; the cost to maintain it were
you to contract with ReVision for this optional Operations Maintenance Contract; the modest degradation factor,
we model in a loss in production of half of 1% per year; hence a 40 year old system at 80% as we see today on
systems in the ground. We build in these factors, | noted earlier a full replacement of the inverters midway
through the system life, very conservative assumptions around utility, inflation and renewable energy credits.
Put all this together and our conservative estimates on savings for the City over the 25 year warranty period
come out to a little under half a million dollars. And then if you extend out to the minimum commercial life span
of 40 years, $1.27 million dollars.
To represent these numbers graphically for a moment, you see in the yellow line that is the solar PPA with that
early buy out in year six. So you have modest initial savings and we can circulate the more detailed financials,
but the City is purchasing the power from the array, that 8.8 cent rate is approximately 20% below current utility
costs. So you are saving roughly 20% on each kilowatt hour provided generated by the solar array. So relatively
modest initial savings without any capital cost. Were you then in Year 6 to buy out at about $300,000.00, you
would be payback sort to speak of between Year 6 and Year 12 or 13 of approximately 6 % years to recoup that
investment and from that point forward your savings are accumulating to the long-term figure of $1.27 million.
The blue line there is if you were to — your worst case scenario if you will, that is if the City determined to never
allocate the capital, to purchase the array; simply took that Power Purchase Agreement to the full 25 years and
then acquired it at a very, very low cost after 25 years, your long-term savings would be less but still strongly
positive. Just a final way of representing these same numbers which we think is worth understand and please
pardon the label. Initially we did present in the RFP for 5 sites, we are currently at 2. So on the right you see
the status quo scenario. So for these facilities which are Eversource Rate Class G, General Commercial the
current rate, the current cost of that electricity, when you factor in not just the supply, but the transmission,
distribution, costs all the line items on your bill that are charged on a volumetric basis per kilowatt hour, the
current is about $0.123 cents per kilowatt hour. To the left the utility line in gray is if we take the Federal
Government projections on utility cost inflation over the next several decades; the US Energy Information
Agency projects for New Hampshire, an average 2 72% per year inflation. WWe have seen more in recent years,
about 3% going back the last 15 years. We think it is prudent and conservative to use the Government
projections, a bit lower than that going forward. So those are your utility status quo scenarios in that assumption
an average cost over the next 40 years of that power of just over 20 cents per kilowatt hour.
While those are projections, the numbers on the left we can have a lot of confidence in. We know the size of the
array, the power output based on the modeling that our engineers do through Helioscope as we have described.
We know that the cost to operate and maintain the arrays, the cost of the buyout, the degradation factor,
building all of this in, we arrive at on the left a long-term leveled cost. So an average unit cost per kilowatt hour
over the lifespan of the solar equipment of $0.057 cents if you exercise the early buyout of $0.085 cents if you
do not buy out at any point but go the full 25 year term. Or were you to purchase up front $0.058 cents but
naturally that would require a significant capital outlay at the beginning without the flexibility to determine at a
future point if you choose to own it or not.
