Traverse City commissioners and Light & Power Board members will decide within the next week whether to move ahead with a solar energy deal that will get the city nearly a quarter of the way toward its goal of powering all city operations with 100 percent renewable energy by 2020.

Developer Marty Lagina of Heritage Sustainable Energy proposes building a one-megawatt solar array on property next to his company’s wind turbine at the corner of M-72 and Gray Road (pictured). The array will generate an estimated 1,086,000 kilowatt-hours each year. Lagina is proposing to connect to Traverse City Light & Power’s grid and sell the solar power to the city at a rate of 11.25 cents per kilowatt-hour.

That rate – reached after months of negotiations between Lagina and TCL&P Executive Director Tim Arends – is higher than the average market rate of 8.9 cents per kilowatt-hour. At last week’s city commission meeting, Arends explained to commissioners that the proposed rate reflects $240,000 Heritage will need to invest in upgrading TCL&P’s distribution system to handle the solar power. While the rate means the city would pay an estimated $25,000 subsidy each year – a governmental “green rate” – it would also lock in the 11.25-cent solar price with Heritage for 20 years and help the city meet its renewable energy goal.

“Maybe we can increase our renewable portfolio and at the same time complement the city of Traverse City by helping you meet your goal,” Arends told commissioners. He said the deal would bring the city’s renewable energy usage up from 10 percent to 21.4 percent. Noting that the city’s deadline for meeting its 100 percent renewable energy goal is just two-and-a-half years away, Arends said “shovel-ready” projects that could provide renewable energy within that timeline were likely to be limited.

“We have a very small footprint (within the utility network),” Arends said. “We don’t have a lot of open land to do anything here.”

Lagina has also offered to develop between one and three additional mega-watts of solar power on his property in the future, which he’s offered to sell to the city at a rate of 9.95 cents per kilowatt-hour. Arends told The Ticker that if the city purchased all of that power, it’d reach nearly 70 percent of its renewable energy goal.

Mayor Jim Carruthers questioned Monday whether the city had intended to purchase renewable energy as part of its resolution, saying he believed the city would be “more focused on (achieving) energy efficiencies” within city buildings and facilities. Arends responded the city’s goal would be impossible to meet solely through such improvements.

“You are not going to be able to meet your goal by doing energy efficiencies in your buildings alone,” Arends said. “You would have to cut your energy consumption in all of your buildings by 90 percent. It’s not going to happen. You need (renewable energy), too, in some sort.”

While Carruthers responded that the resolution was a goal and “not a mandate,” other commissioners said they believed the resolution represented a serious commitment on the city’s behalf and that proposals like Heritage’s needed to be considered to meet that commitment.

“I didn’t sign up and vote for (the resolution) so that we’d hit 30 or 40 percent and take a couple pictures in front of a new lighting unit and hybrid car and say, ‘Look what we’ve done,’ and not actually come close to 100 percent,” said Commissioner Amy Shamroe. “I voted for that in good faith that we were trying to hit 100 percent.”

Commissioner Gary Howe also disagreed with calling the additional $25,000 the city would pay annually for solar power a subsidy. “It’s not a subsidy, it’s just above the average market cost of everything that TCL&P is purchasing,” said Howe. “To break it down in layperson’s (terms)…we’re a client who’s interested in solar, we want to reach 100 percent renewable energy, we’re going to do it through many different ways, this is one mega-watt toward that goal, and here’s the cost.”

Howe also noted that federal renewable energy tax credits expire in 2019, providing further incentive to reach a deal now. While Arends initially indicated to commissioners TCL&P would claim the renewable energy tax credits, he later told The Ticker he plans to propose to his board that the city receive them instead.

“If the city is going to be paying this premium, for all practical purposes, why wouldn’t the city get the entire renewable energy credit?” Arends says. “I will propose in a side agreement they get those credits. That way they’ll feel they’re getting something of value that is a commodity, that they can do with what they like.” Renewable energy credits, which can be sold or traded on the open market, could potentially offset some of the city’s costs for the Heritage contract.

TCL&P board members are set to vote Tuesday on approving the solar deal with Heritage contingent on the city’s participation in the project. City commissioners will vote on the contract next Monday (July 17). If commissioners rejected the deal, Arends says he would return to his board members to see if they want to move ahead with Heritage on their own. State legislation mandates TCL&P to begin offering a voluntary green rate that allows customers to pay a small price premium to purchase electricity generated by renewable energy sources. While TCL&P is looking at the governmental green rate proposed in the Heritage deal as a first step toward rolling out such an option for all customers, if the city walks away from the deal, the utility could consider proceeding and just launching the customer green rate, Arends says.

If commissioners approve a deal with Heritage, construction on the solar array could potentially begin immediately, with the goal of having the system up and running later this year, according to project documents. Additional arrays could be developed beginning in 2018.