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|Federal Highway Administration > Publications > Public Roads > Vol. 76 · No. 3 > Spotlight on Solar Arrays|
Publication Number: FHWA-HRT-13-001
Spotlight on Solar Arrays
by Allison Hamilton
Surprise: showery Oregon is a leader in using renewable energy along highways to meet sustainability goals, reduce carbon footprints, support local green jobs -- and develop new revenue streams.
Today, transportation agencies face challenges unheard of 100, or even 50, years ago. In addition to keeping vehicles moving safely and efficiently, agencies must meet environmental regulations, social justice targets, goals for economic development and job creation, and, more recently, sustainability objectives and targets for reducing greenhouse gas emissions. All of these requirements are occurring at the same time that agencies are facing declining tax revenues as gas prices rise, inflation reduces the buying power of those revenues, and motorists conserve fuel and purchase more efficient vehicles. How a State department of transportation responds to these challenges can determine how smoothly it will transition into the future.
The Oregon Department of Transportation's (ODOT) Innovative Partnerships Program is tackling these issues head-on. Not only is ODOT's partnership program a national leader in exploring road usage fees -- "pay by the mile" -- as a way of funding the transportation system of the future, but also it is a leader in the installation of charging stations for electric vehicles.
What's more, it is the Nation's first transportation agency to host privately owned solar arrays on operating rights-of-way: a 104-kilowatt array at the intersection of two major freeways and a 1.75-megawatt array at a safety rest area.
"The Oregon Solar Highway Program showcases what can be accomplished when multiple values align," says Matt Garrett, director of ODOT. Garrett is referring to State and national policies supporting development of renewable energy and green energy jobs, trades, and manufacturing; legislation encouraging private sector investment in public assets; reduced use of fossil fuels; and the desire for a clean, sustainable, and secure energy future.
In the Beginning
In 2007, after watching a public broadcasting special showing solar arrays operating along the autobahn in Germany, an ODOT project director wondered, "If they can do it there, why can't we do it here?" That question opened the door to the future.
Although many people might not think of Oregon as a sun-drenched place, solar is the State's most abundant renewable energy resource. According to the Renewable Energy Atlas of the West, Oregon has the potential to generate 68 million megawatt-hours of solar energy and, through even partial development of those resources, could produce its current annual energy use of 48 million megawatt-hours.
The nonprofit Solar Oregon reported, "Germany is installing more new solar energy systems per capita than any other country, yet its capital, Berlin, receives less sun than the cloudiest location in Oregon, near Astoria."
ODOT's executive management agreed with the concept of highway solar arrays and supported the idea of developing a demonstration project. The following year, in 2008, the Nation's first solar highway project -- a solar array on publicly owned and operated right-of-way -- got underway. The initial project connected to the grid in December 2008, with the second, larger project following in January 2012.
Efforts underway today include exploring a statewide inventory of potential sites, developing a solar array option on an upcoming major project for transportation modernization (a new access-controlled four-lane facility), and assisting other States and countries in setting up their own solar highway programs.
Partnerships Were Vital
Despite management support, funds were not available for the department to simply select a portion of ODOT-owned right-of-way and erect a solar array. Private sector participation was needed, both for the infusion of funding and for expertise. ODOT engineers know the business of transporting people and goods, but not electrons.
ODOT turned to the State's largest utility, Portland General Electric, for assistance. The utility supplies electricity to Oregon's biggest population centers and other buyers, including 17 million kilowatt-hours annually to ODOT alone. This energy is used for buildings, street lighting and illumination, ODOT's intelligent transportation systems, and more.
The utility expressed interest for several reasons. First, the State's renewable portfolio standard, mandated by the Oregon legislature, requires the utility to acquire 25 percent of its new electrical generation from renewable energy resources by 2025. Second, the utility's customers want and support renewable energy; more than 10 percent of its residential and small nonresidential customers are enrolled in the utility's Clean Wind program, voluntarily paying a premium to receive green energy. A solar array alongside a highway in Portland General Electric's territory would provide a highly visible statement of the utility's commitment to a clean energy future.
"When ODOT approached us with its idea for a solar highway project, we decided to do what we could to make it work," says Mark Osborn, a manager at Portland General Electric. "It makes sense for us. Our customers embrace renewable power, and solar power is a growing part of our renewable power mix. Oregon also is becoming a hub for production of solar panels and other equipment."
Osborn adds, "By partnering with local banks, we were able to create successful financing and ownership models. ODOT's leadership and determination were key to our success. This public-private partnership has resulted in two projects that have helped put Oregon on the solar highway map."
With the resolve between both parties firmly in place to develop a project, meetings between ODOT and the utility then focused on two parameters: where to put the array and how to finance it.
Location, Location, Location
The primary purpose of a transportation system is to move people and products safely. Thus, the State's site options first had to pass the safety filter, meaning that potential locations had to be outside the safety zone and situated in a manner that would avoid producing glare from oncoming headlights.
Further considerations included identifying a parcel of land that the department would not need for at least 20 years -- the typical transportation planning horizon and the typical length of a solar power purchase agreement. The parcel also would need access to the utility grid; freedom from environmental constraints, such as being located outside any areas with threatened or endangered species; good solar access (no shading); and high visibility to showcase the project to the public.
The department located an ideal site meeting those requirements at the intersection of interstates 5 and 205, just south of Portland. A 3-acre (1.2-hectare) parcel had been graded during construction of the freeways, and interconnection to the utility grid existed a short distance away on the west side of southbound I-5. In 2011, more than 130,000 vehicles passed by the site daily. In selecting this site, ODOT launched its first solar highway as a demonstration project.
A second, larger project is located at the northbound I-5 Baldock Safety Rest Area in unincorporated Clackamas County, about 7 miles (11 kilometers) south of the first project. The rest area project also meets all of the requirements, safety and otherwise.
Financing a Solar Highway
Although the economic climate then -- and now -- was far from robust, ODOT found that financing mechanisms are available. The State provided a 50-percent tax credit for renewable energy projects (the program sunsets in 2012). Further support came from a 30-percent Federal tax credit for solar investments and accelerated depreciation. Energy Trust of Oregon supplied grant funding, with Portland General Electric's Clean Wind program making up the gap. The total cost of the demonstration project was $1.28 million.
As a public agency, ODOT has no tax liability and therefore could not take advantage of State and Federal tax incentives or accelerated depreciation. To address this issue, Portland General Electric, along with a tax equity partner, formed a limited liability company that could use the tax credits and other incentives.
As with the demonstration, the second project included a tax equity partner but used a "sale, lease-back" contract. That is, the utility financed and constructed the project and sold it upon completion to a tax equity partner, which then leased it back to the utility to operate and maintain. The total cost of the second project was $10 million.
For both projects, at the end of the tax recapture period (60 to 72 months), Portland General Electric will have the option to purchase the array from the tax equity partner at fair market value. That value is based on the present-day value of the sale of electricity generated for the remaining life of the project. Upon purchase, the utility will add the projects to its electrical generation rate base.
The two projects' legal agreements run for 20 and 25 years, respectively, with options during that time to renew in 5-year increments. At the end, Portland General Electric will deconstruct each project and return the land to preproject conditions, or ODOT may choose to purchase the projects at very low cost. At any time, if the land is needed for an official purpose, ODOT may exercise its option to have the project removed. The cost for doing so decreases over time based on fair market value, which includes the remaining project value and the lost future energy sales.
The Public Cost and Benefit
The State transportation agency has no ownership invested in either project; its contribution is the land. Early on, ODOT defined its role as offering land it determined to be in a shovel-ready condition and available for a period of 20-plus years. Being shovel-ready meant the environmental assessments were done, and permitting needs were identified.
The rationale behind this contribution is the cost of risk. If a parcel has unknown qualities, subsurface or otherwise, a solar developer will include the cost of those risks when estimating the project. The more unknowns, the higher the cost of the project. An overarching goal for the development of renewable energy today is to lower the cost per installed watt. ODOT's assessment work in providing a property ready to roll made a difference in that risk estimation.
On ODOT's side of the equation, two tangible benefits are realized from the I-5 and I-205 intersection and the Baldock rest area projects: a revenue stream in the form of an annual license payment for use of the Baldock land (the site license fee for the demonstration project was waived in recognition of its prototypical cost) and a dedicated percentage of the renewable energy certificates generated by the projects. The certificates count against ODOT's carbon footprint, offsetting its nonrenewable-energy electrical usage. One certificate equals 1 megawatt-hour or 1,000 kilowatt-hours of renewable energy. Voluntary markets exist worldwide for buying and selling these certificates, but at this point, ODOT has decided to retain ownership of the renewable energy certificates and count them directly against the department's nonrenewable-energy electricity use.
"[ODOT's] focus on the renewable energy certificates -- rather than on the energy produced by the Baldock solar highway project -- was inspired," says Lynn Frank, president of Five Stars International, a consultant to ODOT. "By receiving a share of the renewable energy certificates, the transportation system can claim a share of the solar power produced. [ODOT] understood that it will continue to receive the electricity it needs from the utility, but now it could brand some of that electricity as renewable -- wherever that electricity is used."
Frank adds, "This means that solar highway projects can be located on transportation system sites with the most promising solar resource opportunity, and the benefits can be assigned to where the electricity is used. This simple concept extends the opportunity to consider solar highway projects on all 19,000 lane miles [30,578 kilometers] in Oregon and all 8 million lane miles [13 million kilometers] across the Nation."
The Demonstration Project
On December 19, 2008, ODOT placed the Nation's first solar highway project in service -- the I-5 and I-205 intersection project -- and it has been operating seamlessly ever since. The 104-kilowatt, direct-current, ground-mounted solar array is made up of 594 solar panels stretching about two football fields in length and about one-third of the parcel, which allows for further expansion.
Net metering indicates that the array produces approximately 120,000 kilowatt-hours of renewable energy annually, offsetting about one-third of the energy needed for freeway illumination at the site. ODOT purchases the power generated through a solar power purchase agreement, but for this initial project, all of the renewable energy certificates generated go to the Energy Trust of Oregon in exchange for grant funding that helped bring the cost of the energy down to market rates.
The site has restricted access for maintenance personnel off an I-205 ramp to I-5 and is surrounded by an 8-foot (2.4-meter)-tall security fence. In accordance with the project's solar site license agreement, Portland General Electric has full responsibility for everything inside the fence, including the array, transformer, inverters to transform the direct current into alternating current, and even lawn mowing, which has been the only maintenance required so far. Oregon's abundant rainfall has managed to keep the panels clean.
Further, the site has several security cameras monitored by the utility, and the fence is equipped with a motion detection system. To date, Portland General Electric has seen no evidence of tampering. In addition to the fence, the steady flow of traffic passing by on three sides is likely a strong deterrent.
The Baldock Project
Following the success of the demonstration array, ODOT partnered with Portland General Electric on a second solar project, which borders farm fields on two sides and a safety rest area on the remaining sides. The 1.75-megawatt project with 6,994 solar panels sits on just under 7 acres (2.8 hectares) of ODOT property on the east side of the rest area. This project is the largest single ground-mounted solar array in Oregon. The array will produce an estimated 1.97 million kilowatt-hours of renewable energy annually.
Construction began in early August 2011, and the project was placed into service on January 17, 2012. In addition to the panels, the Baldock project includes a public interpretive display on solar energy installed on land bordering the solar array and funded as a Federal Highway Administration (FHWA) Transportation Enhancement project. The array is further bordered by an ornamental community garden featuring a low-maintenance and waterwise design to reflect the sustainable nature of the array.
For the Baldock project, ODOT used a legal structure that differs slightly from the one used for the demonstration project. Although the energy produced by the Baldock panels feeds directly into the electricity grid, it is not net metered, unlike the demonstration project. ODOT does not directly purchase the energy generated, so there is no power purchase agreement.
In return for use of the land, ODOT receives a small annual site license fee and a percentage of the renewable energy certificates generated over the life of the project. ODOT's percentage is equal to its share of the above-market costs to the department -- site assessments, staff time, consultant fees, and the costs of public involvement. As a result, 23 percent of the renewable energy certificates generated by the project over the life of the contract period (25 years initially, with two additional 5-year options to renew) goes to ODOT, and the department will apply those certificates toward ODOT's electricity use.
Because ODOT holds a share of the renewable energy certificates, the department can legally say that the rest areas at Baldock, both northbound and southbound, are powered by the renewable energy produced by the solar array. The certificates essentially "color" all of the electricity used at the rest areas as green.
The site usage fee, while small, was important in creating the legal framework for future projects. As solar costs continue to decline, it is expected that the department will be able to command higher fees over time, making solar highways a real revenue generator for the transportation system of the future.
Someday, perhaps, solar arrays like these could provide power for electric cars in Oregon!
Adding Value To the Equation
Because Oregon's solar highway projects were dependent on State and Federal tax credits and grants, the project team asked itself the question, "What public values are being secured or advanced by the investment of these public resources?" The team made a conscious decision to seek more than the lowest common denominator of cost. Given the investment of public resources, the team sought a broader return on the investment that would express the additional public values of supporting new sustainable businesses, creating jobs, producing renewable energy, using innovative green technology, and taking national leadership in sustainable development.
Because of the innovative public-private partnership in place with Portland General Electric and in consideration of the use of State tax credits, the procurement developed by ODOT and used by the utility resulted in the selection of solar panel and inverter manufacturers that reflect the State's public policy objectives. The procurement required the winning companies to accomplish the following:
The procurements resulted in the selection of two Oregon-based firms: SolarWorld, a German-owned company with U.S. headquarters in Hillsboro, OR, for the panels and Advanced Energy in Bend, OR, for the inverters. Altogether, Oregon companies designed, built, operate, and maintain the projects.
With the success of the first project and concurrently with Baldock's development, ODOT contracted for a geographic information system (GIS)-based study of all ODOT-owned land in the State to identify other potential sites for future solar projects. In addition to the siting criteria mentioned previously, other screens included size -- minimum of 5 acres (2 hectares) for an estimated 1-megawatt array -- and year-round access, appropriate slope and orientation, absence of scenic or cultural resources or wetlands, and more.
To date, the study has identified approximately 200 potential sites. In-office verification -- reviewing the GIS data online as opposed to actual site visits -- is underway and is expected to result in a prioritized list of sites. Those sites then will undergo more rigorous environmental review, with the goal of future permitting and financing.
Lynn Averbeck, senior project executive with ODOT in charge of the GIS study, environmental clearances, and permitting, notes, "While each site will be different and will have its own challenges, by using due diligence when searching for potential sites, we have found that solar highway projects can be selectively placed where they do not have significant environmental impacts and can fit nicely into either the urban built environment or undeveloped rural areas."
Averbeck continues: "With early and genuine outreach to adjacent communities and other local stakeholders, the permitting processes can be fairly straightforward and uncontroversial. The biggest cause for confusion is how the projects fit into existing local codes, which were not written with this type of project in mind."
With the exceptional access offered to the public at the Baldock project, local solar highway supporters hope that public fears can be dispelled by getting up close and personal with a solar array.
More information on the projects and program, including photos, video, and links to real-time solar energy generation at each site, is available at www.oregonsolarhighway.com. Also available on the site is a manual titled Solar Highway Program: From Concept to Reality, designed to help other public and private organizations develop their own solar highway programs and projects.
The Future Is Bright!
The Oregon Solar Highway Program seeks to increase understanding of solar's role in greening the Nation's electricity grid, add value to the existing public right-of-way asset, and supply clean, renewable, home-grown energy to Oregonians -- and thus support the drive to energy independence.
Oregon's solar highway future holds the promise of miles of solar highway installations, collecting fuel from the sun for the transportation system of the future. That future is underway today.
As Federal Highway Administrator Victor Mendez noted at the groundbreaking for Baldock on August 23, 2011, "Between this project -- the largest of its kind in the Nation -- and the solar interchange a few miles north of here, it's clear the road to the future starts here in Oregon. Well done, Oregon, for leading the way in building the solar highway."
Allison Hamilton manages the Oregon Solar Highway Program in ODOT's Office of Innovative Partner-ships and Alternative Funding. She has a B.S. in civil engineering and an A.S. in structural engineering from the Oregon Institute of Technology.
For more information, contact Allison Hamilton at 503-551-9471 or firstname.lastname@example.org.
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