Edgartown won’t bail out energy cooperative

Cape & Vineyard Energy Cooperative asked for $11,000.

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Edgartown selectman Arthur Smadbeck told Vineyard Sustainable Energy Committee member Robert Hannemann that the town would consider joining the all-Island committee. —File photo Michael Cummo

Liz Argo of the Cape and Vineyard Energy Cooperative (CVEC) asked the Edgartown selectmen for $11,000 — half a cent per kilowatt produced — to help fill a budget gap. Selectman Arthur Smadbeck told her he thought the request was unfair, and he and fellow selectman Margaret Serpa turned her down. Although they refused the request, they did not formally vote on the question, because the third selectman, Michael Donaroma, was absent from the Jan. 17 meeting.

In a phone interview after the meeting, Ms. Argo explained that 60 megawatts (MW) of planned solar projects had been scaled down to 12 MW. CVEC budgeted for greater revenue from more and larger projects, and now has to make up a $100,000 shortfall. CVEC is not asking each member community to pay the same amount, rather it is prorating each contribution based on the scale of the member’s share in the cooperative.

Edgartown’s 1.2 and 1.4 MW solar projects at Katama Farm and Nunnepog Well are some of CVEC’s earliest (Nov. 13, 2013, “Edgartown celebrates groundbreaking for CVEC solar arrays”)

Mr. Smadbeck said in a phone interview after the meeting that CVEC should not single out towns with the oldest arrangements with the cooperative (“round 1 towns”), but instead either ask all members of the cooperative for $5,000 or raise the kilowatt-hour (kWh) fees on energy produced by all cooperative-member projects “a tiny bit.”

In 2011, when the solar project was proposed in Edgartown, the town’s energy committee said the utility-scale solar installation could save the town more than $100,000 per year in electricity costs, and $3 million over the life of the project. The plan incorporated large federal and state subsidies, but no funds from Edgartown taxpayers (Feb. 28, 2011, “Taxing questions for Edgartown solar project”).

Ms. Argo, who is the manager of programs and administration for CVEC, explained the cooperative’s business model. The members, she said, ask CVEC to hire contractors to build energy production projects. Cooperative members include towns, counties, schools, and a fire district. The contractor builds and owns the solar arrays. CVEC makes agreements with third parties, who buy the energy produced.

The solar energy producer is paid 9 to 11 cents per kWH, according to Ms. Argo, and that rate, called the power producer agreement (PPA), “makes the vendor whole,” that is, recoups the expenses incurred to produce the power.

As part of the state Green Communities Act, the producers get one net-metering certificate (NMCs) per kWH of power produced. This is the amount paid by the energy distributor (Eversource) to the producer of energy from a renewable source. According to Ms. Argo, the amount is currently 14.6 cents, but it fluctuates. The cost of producing the power (PPA) —  9 cents — is subtracted from the amount paid for it, and the difference —  5.6 cents — is divided in half. One half goes to the host community and the to “offtakers,” member communities that do not have solar arrays, but have agreed to use electricity produced by this renewable source. Ms. Argo said that Edgartown has received approximately $347,000 since its solar arrays went online in March 2014.

Ms. Argo admitted that Edgartown has already had an expense that other towns have not had.

“There were issues with two installations,” she said. “The projects were not completed, and were bought by another company. The original builder walked away. It’s in court now. Edgartown decided to just get it done, and they paid the money to finish the project.”

Neighbors on Smith Hollow Drive complained about noise from the Nunnepog Well inverter, which changes the direct-current electricity created by the photovoltaic cells to alternating current, and it cost about $200,000 to mitigate ( Oct. 15, 2014, “Progress reported on Edgartown solar project annoyances”).

“There is a hum that you get with anything electronic,” Ms. Argo said, “and the noise of the fans that are needed to keep it cool on hot days.”

In addition, the berm built next to the project to shield it from residences at Katama was built with fill that proved to be rife with invasive plant species, and had to be replaced.

“Edgartown is the only town with these kind of expenses,” Ms. Argo said. “Other towns have had to do things like replace trees around the panel sites.” Most recently, many members incurred this expense after the tough winter of 2015 and the ensuing drought.

Because the selectmen did not vote to refuse the contribution, CVEC representatives — Ms. Argo was accompanied by the vice chairman of the CVEC board, Jennifer Rand, the town administrator for West Tisbury — said that they would return to make their case again.

“[The deficit was caused] by circumstances beyond our control,” Ms. Argo said. “Edgartown wants the payments to be shared, so we will show them that they are shared.”

Ms. Rand said that the CVEC directors had considered the option of spreading the request for an additional “adder” (the CVEC term for a fee) across both round one and round two members, but they had rejected it.

“Round two members are already paying a one-center adder,” she said. “We decided to add a half-cent [only] to round one because they don’t have [an adder].”

Ms. Rand was not on the board when the round one members joined, but said it was her understanding that an adder was not needed at that time. “They knew,” she said, “that in round two the combination of kilowatts planned and an adder would keep them solvent. But the number of the round two projects that came to fruition was fewer than planned, so that income did not happen.”

In addition, Cape Light Compact (CLC) no longer provides financial support to CVEC. CLC, the municipal aggregator that serves as a middleman between power suppliers and the distributor (Eversource) for a group of 21 towns on the Cape and Islands, is a member of CVEC and until 2014 was contributing up to $500,000 per year, according to Ms. Argo. CLC remains a member of the cooperative.

The round one and two agreements were signed “with the understanding that CVEC had a set of circumstances,” Ms. Rand said. “Those circumstances didn’t happen, so we are asking for contributions to the cooperative.”

The CVEC board member said that at a future meeting with the Edgartown selectmen, CVEC will remind Mr. Smadbeck that the town is part of an organization that exists only to bring the town a service. It is a cooperative, not a business. She said that of the 15 round one towns, only Edgartown has so far refused to make a contribution.

Ms. Rand gave an example of a circumstance beyond the control of CVEC. “The West Tisbury solar array was supposed to be larger,” she said, “but the DEP [state Department of Environmental Protection] scaled it back because of [limitations of] the site.” She said that some other round two towns simply changed their minds, and their projects didn’t go forward at all. She noted that this also happened in Edgartown, where a third project planned for the landfill did not go forward. Further, she said, anyone who has been involved in a construction project has had the experience of how change orders add to the cost of a project.

If Edgartown does not make its contribution and CVEC does not close its budget gap, the cooperative will build no more new projects.

“We would be contractually obligated to continue services,” Ms. Rand said, “and we would become an accounting entity.”

The CVEC board vice chairman said that in this event, the cooperative would likely sign a contract with an accounting firm, and that the member towns would bear some of the management costs of existing solar arrays.

If CVEC does receive a contribution from Edgartown, would it need to ask its members for more contributions in the future?

“At the end of the year, we’ll revisit it,” Ms. Rand said, “and see if we’ve stabilized with the new projects that have been built.”

If CVEC is financially stable, she said, then no more contributions would be needed. CVEC does not want to build an unnecessarily large stabilization reserve fund, Ms. Rand said, but nor do they want to skate too close to insolvency.