Forest Service Inaction May Have Doomed Solar Project

Payson struggles to save schedule for $65 million solar generating plant to preserve federal incentives

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Thunderheads of bureaucracy and delay have cast a dark shadow across Payson’s once-bright prospects for building a solar and geothermal power plant that would not only provide power for a proposed college campus, but put a roof on the Payson Event Center.

The original $65 million plan relied on lucrative federal incentives to lure enough investment money to generate 7.5 megawatts of power from linked solar and geothermal facilities, including an array of solar cells on a long-sought after roof over the rodeo grounds.

“We’re meeting this week” to see if they can revise the timelines to save the project,” said Payson Mayor Kenny Evans. “Hopefully, it will be good news, but it would be working magic.”

The builders of the solar energy system have to have at least 5 percent of the project done by the end of the year to qualify for existing federal incentives that would reduce the cost of the project to the investors by almost 30 percent.

However, a nearly year-long Forest Service delay in approving the environmental assessment for the Blue Ridge pipeline and delays in signing the final deal with Arizona State University threw the timetable for the energy project into doubt.

Previously, Evans had said the developers of the solar and geothermal systems had to conclude a deal in mid-August to build 5 percent of the project by the end of December and qualify for the federal grants.

On that basis, he said he doubted they could save the deal in its present form unless the federal government extends the incentives for another year, one of the elements in President Barack Obama’s proposed jobs bill.

However, he said backers of the project last week had insisted that they can still pull the deal together this year with the existing incentives, now that the Forest Service has forwarded the pipeline environmental assessment to the U.S. Fish and Wildlife Service for a legally required one-month consultation period.

“That’s another 30 days in a time frame that we don’t have,” said Evans. Nonetheless, the private backers asked for a meeting this week to work out an alternative schedule.

Moreover, he said that he has already had several conference calls with White House aides who have promised to support an extension of the existing incentives.

“We’re hoping to get the grant extension included in the president’s jobs bill and we’re reasonably optimistic Congress will pass the jobs bill in some form.”

The original schedule fell victim to an unexpected delay in approving the environmental assessment for the Blue Ridge pipeline, which prompted the backers of the college campus to put the entire project on hold until they had a better idea when the Blue Ridge water that would support the needs of the campus will arrive.

The Forest Service has now moved the pipeline assessment to the next stage, but that may not have come in time to save the solar project in its present form.

Starting in January, the federal incentives change into tax incentives — which means backers would have to completely restructure the deal.

Government agencies like the Separate Legal Entity (SLE) that will build the campus, can take advantage of the current incentives. However, backers would have to set up a whole new partnership to build a project with tax credits.

“If the incentives shift to an investment tax credit, that requires a shift to a private program.”

The current plans call for roofing the Payson Event Center and surfacing that roof with cutting edge solar cells. The project would also cover the event center parking lot with shade structures topped with solar panels, in addition to a solar generating field elsewhere.

The project would generate enough energy to serve all the needs of a 6,000-student college campus, when coupled with geothermal heating and cooling systems for the buildings and solar cells on top of the dorms, classrooms and parking structures on the campus.

The solar array would generate extra power during off-peak periods, which the SLE could then sell any excess energy back to Arizona Public Service.

As it happens, SLEs have a unique legal authority to generate electrical energy, under state law.

Payson adapted the existing laws concerning SLEs to use the legal structure to put together the complex college project, rather than to generate power. So the SLE turns out to offer the perfect framework for a solar power project, providing the federal grants for alternative energy projects remain in place.

However, the backers for the solar power facilities could not use the incentives and build the project until they were sure they had a buyer for the power generated — in this case, the college campus. And that made the solar project hostage to the Forest Service approval of the pipeline, which would double the town’s water supply.

“To purchase the power we needed the campus and to have the campus you have to have a pipeline,” said Evans.

Evans said that he suspects backers will have to start over if the federal government does not extend the alternative energy grants, but held out faint hope that backers will figure out how to get the project done at the last minute if the Fish and Wildlife Service approves the pipeline environmental assessment.

“The solar people believe we still have some wiggle room. I just don’t see how it all comes together, but they say it’s still doable. It’s just that we have compressed and compressed and compressed this schedule — every hour of spare time has been compressed right out of it.”

Nonetheless, he predicted backers will still pull together a solar project that will not only make the campus energy self-sufficient, but provide a way to put a roof on the rodeo grounds.

The town has struggled for years to come up with some way to cover the event center, which would give the town a year-round facility in which to stage things like trade shows, which could give a big boost to the town’s lagging tourist economy.

Moreover, if the college plans come to fruition, the Educational Alliance SLE will also build a 500-room conference hotel in partnership with a major hotel chain.

The preliminary plans for the campus would generate $1 million annually from the hotel to reduce the cost of the campus.

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