At the Venture 13 grand opening on May 17, 2018, Dereck Paul, President & CEO of Lakefront Utility Services Inc (LUSI) announced that Solar panels would be installed on the roof of the Venture 13 building and would save approx. a third of its hydro costs. At last week’s council meeting he presented additional information. A key thing is that it’s not just LUSI involved but a consortium of LUSI, Veridian and Solera. And LUSI does not distribute Hydro – that’s a sister company: Lakefront Utilities Inc. The mandate of LUSI includes providing broadband to business as they will do for Venture 13, to manage the water supply for 4 municipalities and to expand their business (see the full presentation for more details – see Links below)
The organization is certainly not clear from the Lakeshore Utilities web site so let me first use Dereck’s information to clarify that.
- LUSI is a subsidiary of the Town of Cobourg Holdings Inc. (Holdco) and a sister company of the electricity distributor (Lakefront Utilities Inc.)
- LUSI is the non-regulated services company which includes 3 divisions — Water, Fibre Optic and Generation Services.
- LUSI manages the water systems for 4 municipalities: Town of Cobourg, Township of Cramahe, Haldimand Township and a portion of Hamilton Township.
- Owns and operates a fibre optic broadband network in Cobourg.
- Strategic mandate to expand non-regulated, but core, business in generation, community power and broadband.
So LUSI is free to work like a private company and does so in forming a partnership with Veridian and Solera.
Veridian is an Electric utility for 9 municipalities; Pickering to Belleville to Gravenhurst and including Port Hope. They already own and operate roof-top solar installations under FIT (Ontario’s Feed-in Tariff program – that is, it pays for Solar power generated and connects it to the grid).
Solera (Full name Solera Sustainable Energies Company Limited) is a provider of Solar Panels for these kinds of applications.
The three entities have formed a partnership with 42.5% owned by LUSI, 42.5% owned by Veridian and 15% owned by Solera.
They plan to put 380 solar panels on the roof with 123KW generation capacity. This would produce 147,000 kWH annual generation.
Based on historical data supplied by the Town, the building consumed annual average electricity of 476,000 kWh and the rooftop solar panels will provide about 30% of that annual requirement.
Paying for all this
The Town will be asked to sign an agreement to purchase this power with a 25 year contract. Three options are offered – fixed price or escalating over the 25 years. In all cases, there is a savings to the Town based on the assumption that the current rate of 18.1 Cents/kWH increases by 7% per annum.
In option one, the rate would stay at 24.5 Cents/kWH for 25 years so there is a loss for seven years; prices increase but the average savings per year over 25 years would be $19K.
Option 3 starts with the current rate (18.1 Cents/kWH) but escalates payments at 5%/year and has an average savings per year of only $5K.
Other benefits are quoted including being environmentally friendly and providing an image of leadership.
Council will be asked to approve option one and approve an agreement at the next Committee of the Whole Meeting on June 4. In all options, the Town makes no contribution to Capital or operating Cost – it just pays for electricity generated by the solar panel array.
The big unasked question: Who carries the risk that hydro prices do not go up at 7% for 25 years? If the price charged by the regulated utility LUI does not exceed 24.5 for many more years than assumed, then there is either no profit or a loss.
Links and Notes
- Venture 13 Solar Presentation
- Venture 13 Grand Opening
- Note re cost Escalation. If the cost of hydro to Venture 13 is now 18.1c/kWH/year and escalates at 7% per year, in 25 years it would be 98.2c/kWH/year. So hydro bills would go up by about 5 times. At an inflation rate of 2% (the Central Bank target rate), the cost of running any business would go up by only 1.64 times. With the options offered, there is only a cost benefit to the Town if hydro rates rise faster than 5%/year for 25 years.