Officials at the Greater Augusta Utility District said months ago they were interested in finding out what benefits solar energy might offer the utility.

Now, along with the city of Augusta and the Kennebec County commissioners, the utility district has signed a 20-year contract to allow 3.91 megawatts of electricity to be generated from a solar array to be installed on utility district property in East Winthrop.

When solar power comes online in about two years, those three entities expect to offset their spending on electricity through agreeing to pay for electricity at what’s expected to be a lower rate. They would receive a credit on their bills for every kilowatt-hour generated by the project.

“The idea is that with almost no cost to us, we’re going to save a lot for our ratepayers,” said Brian Tarbuck, general manager of the utility district. “The same holds true for the city and the county, although they are smaller off-takers.”

Last fall, the utility district started working with Competitive Energy Services to evaluate its options.

Tarbuck said the utility district had two options: either own its own solar panels and supply solar energy to the electric grid, or contract with a company that would install solar panels to supply power for the grid and get paid for it.

He said with that second option, the utility district would have the benefits of owning the equipment, but none of the cost of ownership, and the provider would pay the district.

That’s the option the utility district chose and is contracting with Encore Renewable Energy to build the solar array.

Two other factors made the project possible. The utility district owns land in East Winthrop, where its drinking water filtration facility, now no longer in use, is located. In addition to having the space to accommodate a solar array, it also has access to three-phase power, which is needed to put the solar energy on the grid. The grid there also has the capacity to accommodate the solar energy generated there.

The site can accommodate production of 3.91 megawatts of electricity, but the district’s need is only about 2.1 megawatts. To maximize the economic potential, the district reached out to potential partners to reach the maximum. Both the city of Augusta at 1 megawatt and the Kennebec County commissioners at nearly 1 megawatt signed on.

Ralph St. Pierre, finance director for the city of Augusta, said the city and the utility district participated in a collaborative of large-scale energy consumers that was seeking proposals to encourage solar farm construction in the state while also pursuing this option, which turned out to be a slightly better deal.

The savings come from two sources, St. Pierre said. One is the pricing differential; the other is selling the renewable energy credits in the New England pool.

“When you are selling the credits,” St. Pierre said, “you can’t say you’re using the renewable energy. But you can say we facilitated the construction of these kilowatt-hours of green power going into the grid. It’s a little technicality.”

Charlie Agnew, managing director of Energy Services at Competitive Energy Services, said the engine that makes this project go is L.D. 1711, which promotes solar energy projects and distributed generation resources in the state.

The project will undergo permit approval this year and is expected to be up and running by next year.

The savings will start when the energy is generated.

Tarbuck said he’s been told the utility district could save up to $150,000, or about 25% of what it spends on electricity.

“It’s not real until I have it in my pocket,” he said.

For the city of Augusta, its savings could be about $70,000 a year, or about 30% of what it pays. While city taxpayers are not likely to see a reduction in Augusta’s property tax rate as a result, over the term of the contract, the savings could be $1.4 million.

Kennebec County officials are also expecting savings of about $70,000, but what the county pays annually for electricity was not immediately available.

“This is going to save us a considerable amount of money,” Kennebec County commissioner Patsy Crockett said. “We’re very pleased to be a part of this.”

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