Sun King* – Star Island: Where History and the Future Meet – Part 2

At Franklin Pierce University we offer an MBA in Energy and Sustainability Studies. In this program we provide students with all the business basics that are taught in traditional MBA programs such as marketing, finance, business leadership, etc but we also provide them the opportunity to focus 25% of their studies specifically into energy and sustainability studies. In these energy focused courses, students are required to submit a final project on an energy related topic of their choice. These projects are usually of very high quality and I end up learning a great deal from them myself.

This week I bring you Part 2 of a great project that was submitted by Chris Moore, one of the students in the Energy and Sustainability Program, who wrote about a New Hampshire focused project in the GM550: The Future of Energy, Business and Society course this past Spring.  You can find Part 1 here.

Star Island:  Where History and the Future Meeting – Part 2. Authored by Chris Moore for GM550: The Future of Energy, Business and Society at Franklin Pierce University

http://www.flickr.com/photos/davidwilson1949/8442350647/in/photostream/

In Part 1, the energy challenges for a Star Island and its resort hotel, located off the coast of New Hampshire were described. All the energy for the island was provided by old diesel fueled generators that would soon be out of compliance and energy costs were high. For all those reasons and more, a Request For Proposal (RFP) was released by the Star Island Corporation (SIC) to find a solution to the Island’s energy problem.  SIC received several proposals from highly qualified bidders for this project, however  there was one innovative bid that captured their attention. It was the genius of Clay Mitchell and the talented team at his alternative-energy company, Revolution Energy, that won over the SIC Board of Directors.

Green Solutions by Clay Mitchell and Revolution Energy, LLC:

”Solar was the only logical solution”, Clay commented during our conversation of how he and his team chose the generating source.  He continued, “There is not enough wind out there in the summer time when the Island is at peak demand; wind was never really a serious option”.

His solution is simple in concept - photovoltaic solar panels with propane gas backup - yet incorporates the latest in electrical controls and solar technology to maximize all efficiencies from the system.  The most recognizable part of the system will be a nearly one-acre solar array made up of six or seven individual panels and situated on a relatively remote part of the Island. See the figure below. 

Because the Island sees its peak energy demand during the summer season and has very little demand in the winter, the solar arrays are able to be positioned at a 10 degree angle which optimizes for the path of the summer sun.  This nearly flat positioning was also most acceptable to the historical committees of SIC and the town of Rye, NH because it did not detract, visually, from any of the Island’s historical landmarks.  These solar voltaic panels along with two new ultra-efficient and quiet propane backup generators will feed into a large battery bank which will be housed where the old diesel generators are currently located.

The 200 kW solar arrays will produce approximately 52% of the annual kilowatt hour energy demand during the operating season and the remaining demand will be satisfied by two new ultra-efficient propane generators.  The chart below shows the Island’s demand curve against the solar array’s power-generation curve for the operating season of the Island. It is worth noting that the kilowatt hours calculated for the Island’s energy demand incorporates a reduction of nearly 25%.  This reduction is the result of various energy efficiency upgrades within the buildings on Star that would be part of the Island’s energy overhaul with this project. According to Clay Mitchell, those energy savings will be accomplished using a variety of approaches; including ratcheting back on the operation of the energy intensive reverse osmosis unit the island uses to generate drinking water. In the future, drinking water will be supplied by treating water from a roof collection system and bringing in fresh water directly from the mainland more frequently. Other energy savings actions will include upgrading all kitchen equipment with high efficiency units, upgrading lighting units, as well as operational changes and, in the future, equipment changes to the wastewater treatment operation.

The two new ultra-efficient propane generators will be fully synchronous and controlled by a charge controller to help replenish the battery banks when they dip below a certain level of discharge, ensuring high quality electricity is always available when demanded. The generators will operate at a far higher efficiency when charging the batteries than they would if following the load of the island as the current diesel generators do.

Propane was chosen as a backup fuel source for two reasons; one, modern propane generators are quiet and extremely efficient, and two, because of the ease and relative safety of transportation of this fuel-type out to the Island.  Star Island will now be able to self-transport propane tanks to and from the island by way of their own maintenance boat, allowing for an increased level of energy independence. Of course, the risk associated with land or water based oil spills is also eliminated.

The generators will also be capable of bypassing the batteries altogether and will be able to provide the entirety of the demanded load in the unlikely event of failure in the battery bank.  Redundancies such as this are planned-in throughout the entire system to ensure the continuity of operations for the island. 

Financing a green endeavor:

Engineering the most efficient solar power generating system was a top priority of Clay Mitchell and Revolution Energy LLC, however he knew that this project was dead in the water if adequate financing was not available for SIC.  The financing solution proposed to Star Island Corporation that will allow them to move forward with the project involves two key features; 1) a Power Purchase Agreement (PPA), and 2) a means to utilize the federal government’s 30% alternative energy tax incentive by offering buy-in by outside investors.  A PPA was a logical route for Star to take because they have little to no flexibility from their Board-voted annual operating budget for capital expenditures, this project would be far too costly to undertake on their own.  Secondly, being a non-profit organization, Star Island Corporation is ineligible to directly benefit from the alternative energy tax incentives offered by the federal government. This fact opens up a prospective funding source for the project by courting capital investments from outside investors who can benefit from these potential tax incentives.

The proposal by Revolution Energy LLC involves the development of a secondary project-LLC named “Revolution Energy Star Island LLC”.  Revolution Energy Star Island LLC will own all equipment of the project, it will be the party responsible for implementing and managing the PPA and it will also be the entity that investors can participate in to receive the available tax credits and other project revenues as determined by the LLC operating agreement.  By approaching the project in this way, Star Island has no upfront costs with the design and installation of the system; they will essentially purchase power that the solar arrays generate from Revolution Energy Star Island LLC at a far lower rate than what they are paying with the current diesel generators.   As the owners of the installation, Revolution Energy Star Island LLC (and their investors) will be able to utilize the alternative energy tax incentives afforded by the federal government, without which this project would not be economically feasible.

There are several different avenues that Revolution Energy LLC could take to finance the final project package.  In the end, the package will likely be a blend of available finance options. Construction financing and long-term financing may be held by two different entities. Construction financing will likely be financed through Revolution Energy LLC’s pre-existing lines of credit with Provident Bank and Bank of America. Long-term debt may be held in part by individuals investing in the project to receive the available tax incentives.

Looking forward; a process of continuing improvement:

Replacing the existing diesel generators with a clean renewable power source on Star Island is merely the beginning of a laundry list of capital projects slated for their next three to five year strategic plan.  Jack Farrell, Star Island’s manager and strategic planner, mentions some projects to tackle after the power generation is in order, “finding a solution to replacing our antiquated wastewater treatment facility and managing our potable water systems are two on the very top of the list”. He adds, “what we came to realize very quickly was that all the systems out there are completely interdependent.  A change in our electricity supply will have an effect on all systems; the same is true for the drinking water system, the wastewater system…you name it, they are all connected.”

As it currently stands (at the time of this posting), the financial details and funding sources for the project are still being developed.  “It is hard to get tax equity investors right now at this level, sadly”, Clay laments when asked about the future of the project.  At this time the project is not a sure thing and shovels have yet to hit the ground, but Clay and his team at Revolution Energy have remained resolute and dedicated to bringing this much needed solution to Star.  The challenges of implementing a new power generation system at a unique setting such as Star Island is a formidable undertaking, but the potential pay-offs for the Island are tremendous.  Star Island will benefit greatly from harnessing the quiet power of the summer sun to operate their facilities and provide their guests with desired amenities.  Star Island is committed to a simple, sustainable and low impact existence; these ideals were established by necessity several hundred years ago and are the soul of Star Island’s way of life today.

http://www.flickr.com/photos/davidwilson1949/8446976290/sizes/c/in/photostream/

Chris Moore

Franklin Pierce University

12/15/13

(*Sun King: Pure unadulterated headbanging joy from The Cult, a 1980’s post-punk heavy metal group from the UK. These guys clearly spent a lot of time listening to their parents’ Black Sabbath and Deep Purple albums.  Turn up the volume and enjoy)