Eight years after the City of Hollister made a deal with ClearSpot Energy for solar at a wastewater treatment plant, government officials are looking to get out of the contract early in order to avoid losing money.
The city in 2010 entered into the 30-year power purchase agreement contract with ClearSpot to produce solar energy that powers the wastewater treatment plant. The city has buyout options for 2025, 2030 and 2035. City officials Monday discussed moving ahead on a buyout in 2025 at the earliest and they plan to approach ClearSpot about buyout negotiations before then as well.
A buyout amount, at a required fair market value, would be based on models set forth by the Internal Revenue Service. Those models take into account a comparison of other similar systems, costs of producing energy today and forward cash flow, according to officials.
A consultant with Sage Renewables, Tom Willard, said the company has been examining a buyout option for the city and gave a presentation Monday, and told council members that the 2025 buyout option would save the city the most money over the life of the contract. He said last year, the solar power at the wastewater saved the city $130,000 but that the city would eventually be losing money on the deal if it doesn’t act on a buyout.
Part of the reason for the anticipated losses if the city continues on with ClearSpot include Pacific Gas & Electric tariffs that will reduce the value of solar by 25 percent to 35 percent in the coming years. The city expects to continue saving money on the operation until 2021, when it would turn to a loss.
The city will move forward with those negotiation talks, and Sage Renewables offered to help on that end.
“They’re not contractually obligated to go for it,” Willard told the council.