In today’s economic climate, generating new revenue is a challenge for almost any municipality. Upgrades, repairs and new infrastructure are continuous needs, and they require funds. Yet rate and tax increases — unappealing in the best of times — are even more difficult in a slow economy.

Facing this dilemma, the City of Lowell, Mass., found a solution in a creative approach at its drinking water utility. The Lowell Regional Water Utility (LRWU) serves 135,000 residents and businesses in Lowell, Dracut, Tyngsboro and Chelmsford, purifying more than 4.6 billion gallons of water per year.

The city and utility used innovative financing to install a solar photovoltaic (PV) array on the roof and grounds of the water treatment facility. The project created a new revenue source through the sale of Solar Renewable Energy Credits (SRECs) and saves energy costs by reducing power purchases from the electric utility. The $2.2 million project was completed on budget and went online on May 28, 2013.

Low-interest financing

The City of Lowell retained the Woodard & Curran engineering firm to provide planning, engineering design and permitting, as well as public bidding, construction oversight and funding assistance for installing the 610 kW PV array. The firm had identified the opportunity and evaluated the feasibility of using a PV system to reduce costs and bring in revenue.

ABC Soils, a Massachusetts-based Women Business Enterprise, joined the team for on-site construction observation. Acting in concert, the city and Woodard & Curran obtained a $2.2 million low-interest State Revolving Fund (SRF) loan for the project. Lowell’s status as an Environmental Justice Community, and the fact the project involved renewable energy, qualified the city to have 19 percent of the loan principal, about $400,000, forgiven.

Last year, 89 clean-water and drinking water projects in 67 communities, regional water supply and wastewater treatment districts were awarded more than $512 million in low-interest SRF loans to fund projects to improve water quality, upgrade or replace aging sewer infrastructure, and cut treatment facility energy consumption.

The 2 percent interest SRF loans, administered by the Massachusetts Water Pollution Abatement Trust, will fund 54 clean-water projects totaling more than $391 million and 35 drinking water initiatives totaling nearly $121 million.

Thirty-two of the projects, worth some $337 million, are for renewable energy or green infrastructure projects, or green components of projects. Those projects involve energy-efficiency upgrades to treatment plants and the on-site installation of renewable energy technologies, such as solar cells and hydroelectric power.

“The projects supported by SRF funding help communities across the state improve water quality in our rivers, lakes and estuaries, and also protect the public health,” says Rick Sullivan, state energy and environmental affairs secretary. “The renewable and energy efficiency measures included in the projects will also help to cut air emissions from treatment plants and stabilize municipal energy costs.”

Innovative application

The solar array in Lowell applied an existing and rapidly improving technology to increase revenue and drive down costs. It incorporates the latest solar technology, including online monitoring that allows Lowell personnel to track energy production in real time.

Unlike many municipal solar projects that are owned and operated by third parties, the City of Lowell owns its array and can take full advantage of the state’s SREC Program. SRECs represent the renewable attributes of solar generation, bundled in minimum denominations of 1 MWh. The Massachusetts Solar Carve-Out provides a means for SRECs to be created and verified. It also allows electric suppliers to buy the certificates to meet their solar renewable portfolio standard (RPS) requirements.

In the early planning stages of the project, a feasibility study included a financial analysis of the various options, helping the city determine the best alternative. A Project Evaluation Form eventually helped Lowell obtain the SRF loan through a competitive application process.

Although cities and towns procure many solar projects through power purchase agreements (PPAs) with large solar development firms, Lowell procured its project under Massachusetts General Law (MGL) Chapter 149, typically used for building construction contracts. This procurement method allowed the city to take advantage of the low-interest SRF program.

All power generated by the solar array will be used on site, reducing the utility’s electric bills.

Counting benefits

With construction complete, the city and the LRWU own and operate the solar array and directly see the financial rewards: an estimated $150,000 per year in electricity savings and SREC revenue. Furthermore, the added revenue allowed the PV project to be built and other capital upgrades made without increasing rates.

The PV array is expected to produce more than 400 MWh of sustainable electricity per year, about 12 percent of the power needed to operate one of the utility’s high-lift pumps. This saves more than $50,000 per year and eliminates related emissions from fossil-fuel generation.

The project also has significant benefits in public perception. The portion of the array in front of the treatment facility is highly visible from busy Massachusetts Route 110 and serves as a showpiece that clearly demonstrates commitment to green energy.

After funding was awarded, there was limited time to complete the design; meet the approval, bidding and award deadlines; and receive SRF funding and principal forgiveness. Teamwork enabled design and bidding to be completed and the construction contract awarded within the aggressive timeframe. Through favorable bid pricing and a beneficial construction climate, the city was able to expand the system’s power production capacity to generate more revenue and further offset energy consumption without exceeding the original project budget.

With the revenue from SRECs and electricity savings, the city benefits financially from an existing space that had been underutilized. The new revenue will allow citywide improvements that will bring benefits to residents and business owners without increasing their rates.

About the Authors

Daniel J. Lahiff is executive director of the Lowell (Mass.) Regional Water Utility. Robert S. Little, P.E., is a vice president with Woodard & Curran in Andover, Mass. He can be reached at rlittle@woodardcurran.com.