Sunshine on my shoulders "It's a simple question so why can't I get a simple answer? Should we convert the remaining municipal buildings to solar panels in the city or not?" That was what the mayor's office wanted Kennedy Smith, CPA to answer. Kennedy was the chief financial analyst for the City of St-Louis-de-Hahal's Operations department, and it was her department that was given the job of examining the option of determining whether to instal solar panels in the remaining two districts in St-Louis-de- Haha! If either or both remaining districts were to be converted, the contracts would begin in 2018 and run for 7 years. Some solar panels on municipal buildings in Districts 1 and 2 were installed under the previous mayor and now the decision whether to convert all remaining municipal buildings in one, both, or neither of the remaining two districts, Districts 3 and 4, had to be resolved. See Exhibit 1 for maps of the districts. There were many opinions on the matter and Kennedy knew she had to make a recommendation based upon both quantitative and qualitative factors. She looked through the information she and her team had collected and began the analysis. Current Data The conversion to solar panels had started in 2018, so there was some data which could be examined and used to help with the current analysis. Since there has not been an official RFP1 created for the possible installation of solar panels in Districts 3 and 4, Kennedy looked at the bids they had received when the RFPs for Districts 1 and 2 were sent out. When analyzing the districts Kennedy determined that for the purpose of her analysis, she would be able to compare Districts 2 and 3 with each other due to their similarity in nature and complexity even though there was a difference in the types of buildings and structures. She would also compare Districts 1 and 4 with each other due to their similarity in nature and complexity even though there was a difference in buildings. Exhibit 2 has the bid details that were received for Districts 1 and 2 when the RFPs went out in 2019 and 2020. Exhibit 3 has a summary of the current electrical service providers. Exhibit 4 contains details regarding the number of buildings and estimates of municipal electricity usage 2018. Some buildings will need to be brought up to code if they want to convert to solar panels. That is, District 3 cost estimates will include the St-Louis-de-Haha! Building upgrades. Costs if Regular Electricity is continued for District 3 and 4 Kennedy examined the previous 3 years of city costs for Districts 3 and 4 (2017 to 2019) and would use these as the basis for estimating what it would cost the city to keep the same purchasing contracts for electricity from 2022 to 2029. Her estimates would include a 2%/year increase which was consistent with the past 3 years. Exhibit 5 has the costs for Districts 3 and 4 for the past 3 years. Costs if Districts 3 and/or 4 are moved to solar panels Kennedy was having some difficulties estimating what the cost for contracting out District 3 and/or 4 would be since there were no formal RFPs issued and therefore no actual bids to compare. She had the information from the 2020 and 2019 bids and was thinking about how to make a reasonable estimate for possible contracts which would run from 2022 to 2029. Although there were no official RFPs issued yet, Kennedy did have some informal conversations with some of her colleagues in other municipalities who have also converted all their buildings to solar panels. "You have to be careful when you are negotiating and make certain you are taking a long-term perspective." one of her colleagues told her. "The contract terms are for 7 years but you need to think about the 7 years after that as well." When discussing the conversion to solar panel specifics of the two districts her colleagues thought the contractor bids might come in at between $2,750,000 and $5,750,000 per year for District 3 and between $1,500,000 and $2,500,000 per year for District 4. These would be the 2020 bids for the first year of the 7-year contract. Kennedy was surprised at how much higher the District 4 costs might be compared to when the first bids went out for District 1 in 2019. If the buildings are upgraded, the city would have could save on some electricity costs in District 3. It is estimated that these savings would produce the same amount of kWh usage per building as for District 1. If buildings in District 3 and/or 4 are upgraded to solar panels, then the city would be able to sell back any surplus energy to the province at the rate of $0.294 (FIT rate per kWh). If the buildings are upgraded, the costs would be depreciated over 20 years after which the roofs will need to be replaced. If the conversion takes place, the city will have to issue raise approximately $10 million to cover the costs of upgrading. Other Considerations Kennedy knew that there was going to be more to this decision than just the numbers. The topic of solar panels in the city was a very political issue. There were very strong views on both sides, and she wondered how much, if any, weight she would need to give to these factors. See Exhibit 5 for an example of advertising from a local company. The municipality believes that it can achieve the same advantages. Converting all municipal buildings in the remaining two districts would be a big commitment by the city and Kennedy wondered what, if any, consideration she should give beyond the seven years this contract would cover. Kennedy will use a 3% cost of capital. There are no tax considerations since St-Louis-de-Haha! is a municipality. It costs the city $0.12/kW to buy electricity. Required In April 2021, Kennedy must make a presentation to the mayor's office with her recommendations on whether to upgrade all remaining municipal buildings to solar panels in Districts 3 and/or 4. The city is looking at upgrading of all buildings in one of the districts, both districts, or neither of the districts. She knows she will have to back up her recommendations with the evidence and be ready to answer any questions they mayor's office will have. Exhibit 1 St-Louis-de-Haha! Districts District 2 District 1 District 3 District 4 Exhibit 2 Bids Received for Districts 1 and 2 District 1 Bids - From 2020 Proponent Total Maintenance per Year ($ millions) 7 Year Bid Price to upgrade ($ millions) 1.1 5.7 Budget Solars Sunshine Electrical 2.0 3.0 Terra Panels 1.4 5.8 Better for You Environment Inc. 1.6 4.2 Rubix Solar 1.0 7.0 District 2 Bids - From 2019 Proponent 7 Year Bid Price Total Price per Year ($ millions) ($ millions) GDLife 1.55 1.50 2.10 1.11 Budget Solars Better for You Environment Inc. Rubix Solar 2.92 1.30 2.61 1.25 Exhibit 3 Solar providers and contracts Service area Provider Notes District 1 (D1) Better For You Environment Inc. 7-year contract, expired June 30, 2019 GDL Life 6-year (2+, 1 year extension options) contract, began July 1, 2017 District 2 (D2) Better For You Environment Inc. 7-year contract, expiring August 6, 2021 (+2, 1 year extension options) n/a District 3 (D3) In-house staff District 4 (D4) In-house staff n/a Exhibit 4 Electricity Costs (kWh) and other information by District - 2019 Total buildings 2019 KWH used 2019 FIT rate (000) 2019 KWH generated (000) Per building 142.9 133.2 n/a n/a 121.6 District 1 District 2 District 3 District 4 20 10 215 75 1,600,000 77,625 2,515,617 582,500 113.1 n/a n/a Assumptions Annual kw Yield Note: Efficiency drops by 1 year Sales to Utility per kW $ 0.294 Additional Maintenance and Insurance Fees Maintenance = $150 Insurance $100 Year 1 2 3 4 5 7 8 9 10 11 12 13 14 15 16 17 18 19 20 11.750 11.633 11,516 11,401 11 287 11.174 11.062 10,952 10.842 10.734 10.626 10,520 10.415 10.311 10208 10,106 10,005 9.905 9,808 9.707 3,455 3.420 3,388 3,352 3.318 3.285 3.252 3.220 3.188 3.156 3,124 3.093 3,082 3,031 3.001 2.971 2.941 2.912 2,883 2.854 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 Exhibit 5 Local advertising SunSmart. Solar Solar Made Simple Phone: (613) 518-1868 www.SunSmart.Solar Info@SunSmart.Solar Now in Kemptville Ontario MicroFIT When It Is Sunny, Your Roof Can Make Money! Generate Green Income with municipalities, universities, schools, So How Much Money Can My Your Rooftop co-ops, hospitals, and aboriginal Roof Make? communities. SunSmart Solar will The Ontario MicroFIT program handle all your paperwork, from In our area a 10 kW solar system lets homeowners generate steady application to installation, we are a will produce up to 11,750 kWh per income by installing solar panels and one-stop-shop that is here to help year. This is a conservative estimate, selling renewable electricity directly you. There are no hidden fees, we will taking real-world efficiencies into to the Ontario grid. The program is give you a price up front. account administered by the ESO, they pay 29.4 cents for every kilo-Watt-hour All the electricity that is generat- For a 10 kW system this works (kWh) of energy made from sunlight, ed is sold back to the electrical grid. out to around $3,455 of income per with a 20-year fixed price guaranteed The resulting revenue pays for the year, and a total income of $69,090 contract. For a good south-facing roof system in 9 12 years, the remainder over the entire 20-year contract term that results in a rate-of-return of up of the 20-year contract is profit. SunSmart Solar curently charges to 5.8%, year after year, for the When the 20 years are up, the $31,995 to install a 10 kW turn-key contract term of 20 years. That is a solar panels will still work just fine, system, all expenses are included much better retuan than your bank can and can then be used to offset your except for HST (which is refundable). offer! own electricity use through net- That means you walk away with a A MicroFIT system (FIT stands metering Quality modules have a 25 profit of $37,100 at the end of the for "feed-in-tarifl") is for solar photo- year warranty and an expected life- contract! voltaic system of 10 kW or less. span in excess of Generally the panels have to be Up To Up To Contract installed on a rooftop, in some in- 10kw 29.4 5.8% stances ground-mounting may be 20 possible. This program is of interest PV ct/kWh ROI Years to homeowners, farmers, churches, www.SunSmart.Solar 30 years. Sunshine on my shoulders "It's a simple question so why can't I get a simple answer? Should we convert the remaining municipal buildings to solar panels in the city or not?" That was what the mayor's office wanted Kennedy Smith, CPA to answer. Kennedy was the chief financial analyst for the City of St-Louis-de-Hahal's Operations department, and it was her department that was given the job of examining the option of determining whether to instal solar panels in the remaining two districts in St-Louis-de- Haha! If either or both remaining districts were to be converted, the contracts would begin in 2018 and run for 7 years. Some solar panels on municipal buildings in Districts 1 and 2 were installed under the previous mayor and now the decision whether to convert all remaining municipal buildings in one, both, or neither of the remaining two districts, Districts 3 and 4, had to be resolved. See Exhibit 1 for maps of the districts. There were many opinions on the matter and Kennedy knew she had to make a recommendation based upon both quantitative and qualitative factors. She looked through the information she and her team had collected and began the analysis. Current Data The conversion to solar panels had started in 2018, so there was some data which could be examined and used to help with the current analysis. Since there has not been an official RFP1 created for the possible installation of solar panels in Districts 3 and 4, Kennedy looked at the bids they had received when the RFPs for Districts 1 and 2 were sent out. When analyzing the districts Kennedy determined that for the purpose of her analysis, she would be able to compare Districts 2 and 3 with each other due to their similarity in nature and complexity even though there was a difference in the types of buildings and structures. She would also compare Districts 1 and 4 with each other due to their similarity in nature and complexity even though there was a difference in buildings. Exhibit 2 has the bid details that were received for Districts 1 and 2 when the RFPs went out in 2019 and 2020. Exhibit 3 has a summary of the current electrical service providers. Exhibit 4 contains details regarding the number of buildings and estimates of municipal electricity usage 2018. Some buildings will need to be brought up to code if they want to convert to solar panels. That is, District 3 cost estimates will include the St-Louis-de-Haha! Building upgrades. Costs if Regular Electricity is continued for District 3 and 4 Kennedy examined the previous 3 years of city costs for Districts 3 and 4 (2017 to 2019) and would use these as the basis for estimating what it would cost the city to keep the same purchasing contracts for electricity from 2022 to 2029. Her estimates would include a 2%/year increase which was consistent with the past 3 years. Exhibit 5 has the costs for Districts 3 and 4 for the past 3 years. Costs if Districts 3 and/or 4 are moved to solar panels Kennedy was having some difficulties estimating what the cost for contracting out District 3 and/or 4 would be since there were no formal RFPs issued and therefore no actual bids to compare. She had the information from the 2020 and 2019 bids and was thinking about how to make a reasonable estimate for possible contracts which would run from 2022 to 2029. Although there were no official RFPs issued yet, Kennedy did have some informal conversations with some of her colleagues in other municipalities who have also converted all their buildings to solar panels. "You have to be careful when you are negotiating and make certain you are taking a long-term perspective." one of her colleagues told her. "The contract terms are for 7 years but you need to think about the 7 years after that as well." When discussing the conversion to solar panel specifics of the two districts her colleagues thought the contractor bids might come in at between $2,750,000 and $5,750,000 per year for District 3 and between $1,500,000 and $2,500,000 per year for District 4. These would be the 2020 bids for the first year of the 7-year contract. Kennedy was surprised at how much higher the District 4 costs might be compared to when the first bids went out for District 1 in 2019. If the buildings are upgraded, the city would have could save on some electricity costs in District 3. It is estimated that these savings would produce the same amount of kWh usage per building as for District 1. If buildings in District 3 and/or 4 are upgraded to solar panels, then the city would be able to sell back any surplus energy to the province at the rate of $0.294 (FIT rate per kWh). If the buildings are upgraded, the costs would be depreciated over 20 years after which the roofs will need to be replaced. If the conversion takes place, the city will have to issue raise approximately $10 million to cover the costs of upgrading. Other Considerations Kennedy knew that there was going to be more to this decision than just the numbers. The topic of solar panels in the city was a very political issue. There were very strong views on both sides, and she wondered how much, if any, weight she would need to give to these factors. See Exhibit 5 for an example of advertising from a local company. The municipality believes that it can achieve the same advantages. Converting all municipal buildings in the remaining two districts would be a big commitment by the city and Kennedy wondered what, if any, consideration she should give beyond the seven years this contract would cover. Kennedy will use a 3% cost of capital. There are no tax considerations since St-Louis-de-Haha! is a municipality. It costs the city $0.12/kW to buy electricity. Required In April 2021, Kennedy must make a presentation to the mayor's office with her recommendations on whether to upgrade all remaining municipal buildings to solar panels in Districts 3 and/or 4. The city is looking at upgrading of all buildings in one of the districts, both districts, or neither of the districts. She knows she will have to back up her recommendations with the evidence and be ready to answer any questions they mayor's office will have. Exhibit 1 St-Louis-de-Haha! Districts District 2 District 1 District 3 District 4 Exhibit 2 Bids Received for Districts 1 and 2 District 1 Bids - From 2020 Proponent Total Maintenance per Year ($ millions) 7 Year Bid Price to upgrade ($ millions) 1.1 5.7 Budget Solars Sunshine Electrical 2.0 3.0 Terra Panels 1.4 5.8 Better for You Environment Inc. 1.6 4.2 Rubix Solar 1.0 7.0 District 2 Bids - From 2019 Proponent 7 Year Bid Price Total Price per Year ($ millions) ($ millions) GDLife 1.55 1.50 2.10 1.11 Budget Solars Better for You Environment Inc. Rubix Solar 2.92 1.30 2.61 1.25 Exhibit 3 Solar providers and contracts Service area Provider Notes District 1 (D1) Better For You Environment Inc. 7-year contract, expired June 30, 2019 GDL Life 6-year (2+, 1 year extension options) contract, began July 1, 2017 District 2 (D2) Better For You Environment Inc. 7-year contract, expiring August 6, 2021 (+2, 1 year extension options) n/a District 3 (D3) In-house staff District 4 (D4) In-house staff n/a Exhibit 4 Electricity Costs (kWh) and other information by District - 2019 Total buildings 2019 KWH used 2019 FIT rate (000) 2019 KWH generated (000) Per building 142.9 133.2 n/a n/a 121.6 District 1 District 2 District 3 District 4 20 10 215 75 1,600,000 77,625 2,515,617 582,500 113.1 n/a n/a Assumptions Annual kw Yield Note: Efficiency drops by 1 year Sales to Utility per kW $ 0.294 Additional Maintenance and Insurance Fees Maintenance = $150 Insurance $100 Year 1 2 3 4 5 7 8 9 10 11 12 13 14 15 16 17 18 19 20 11.750 11.633 11,516 11,401 11 287 11.174 11.062 10,952 10.842 10.734 10.626 10,520 10.415 10.311 10208 10,106 10,005 9.905 9,808 9.707 3,455 3.420 3,388 3,352 3.318 3.285 3.252 3.220 3.188 3.156 3,124 3.093 3,082 3,031 3.001 2.971 2.941 2.912 2,883 2.854 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 Exhibit 5 Local advertising SunSmart. Solar Solar Made Simple Phone: (613) 518-1868 www.SunSmart.Solar Info@SunSmart.Solar Now in Kemptville Ontario MicroFIT When It Is Sunny, Your Roof Can Make Money! Generate Green Income with municipalities, universities, schools, So How Much Money Can My Your Rooftop co-ops, hospitals, and aboriginal Roof Make? communities. SunSmart Solar will The Ontario MicroFIT program handle all your paperwork, from In our area a 10 kW solar system lets homeowners generate steady application to installation, we are a will produce up to 11,750 kWh per income by installing solar panels and one-stop-shop that is here to help year. This is a conservative estimate, selling renewable electricity directly you. There are no hidden fees, we will taking real-world efficiencies into to the Ontario grid. The program is give you a price up front. account administered by the ESO, they pay 29.4 cents for every kilo-Watt-hour All the electricity that is generat- For a 10 kW system this works (kWh) of energy made from sunlight, ed is sold back to the electrical grid. out to around $3,455 of income per with a 20-year fixed price guaranteed The resulting revenue pays for the year, and a total income of $69,090 contract. For a good south-facing roof system in 9 12 years, the remainder over the entire 20-year contract term that results in a rate-of-return of up of the 20-year contract is profit. SunSmart Solar curently charges to 5.8%, year after year, for the When the 20 years are up, the $31,995 to install a 10 kW turn-key contract term of 20 years. That is a solar panels will still work just fine, system, all expenses are included much better retuan than your bank can and can then be used to offset your except for HST (which is refundable). offer! own electricity use through net- That means you walk away with a A MicroFIT system (FIT stands metering Quality modules have a 25 profit of $37,100 at the end of the for "feed-in-tarifl") is for solar photo- year warranty and an expected life- contract! voltaic system of 10 kW or less. span in excess of Generally the panels have to be Up To Up To Contract installed on a rooftop, in some in- 10kw 29.4 5.8% stances ground-mounting may be 20 possible. This program is of interest PV ct/kWh ROI Years to homeowners, farmers, churches, www.SunSmart.Solar 30 years