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Solid solar incentives

Thanks to some solid renewable energy incentives at the state level in Indiana, Melink Corporation was able to move ahead with one of the largest rooftop solar power systems in the U.S. Midwest, a 3.1-MW project in Indianapolis.

By Paul MacDonald

Sometimes you have to be patient with renewable energy projects-but patience has its rewards.

Getting a recent solar project going in Indianapolis took some time due to legislative changes and regulatory approvals. But for the project developer, Melink Corporation, the end result is a successful project and one of the largest rooftop solar power systems in the U.S. Midwest.

The 3.1-MW DC solar project is on a building owned by Equity Industrial Partners (EIP), a major developer and operator of industrial property in the U.S. The Massachusetts-based company manages more than 17 million square feet of warehouse and distribution property throughout the U.S.

Power from the system flows to Indianapolis Power & Light Company's (IPL) distribution system, making it part of the largest solar power program for an investor-owned utility in the Midwest.

"This solar array is the perfect application for almost 14 acres of rooftop area that would otherwise provide no additional use," said Donald Levine, principal at EIP.

Cincinnati-based Melink was the developer of the project and performed the engineering, procurement, and construction services.

But it took some time to get things moving with the solar project, reports Donna Jones, Melink's CFO.

Utility IPL introduced a voluntary feed-in tariff (VFIT) in March 2010, offering to pay above-market rates to producers of solar energy, in exchange for fixed power prices over 10 years. The VFIT program, known as Rate REP, pays IPL customers for energy they generate from wind, solar, or biomass, with the rate varying depending on the type of energy and amount of generation.

"It was originally a 10-year FIT program, but they revised it and re-released it as a 15-year program," explained Jones. "That was a significant improvement, given that it's much more difficult to make a project/asset with a 35-year life work if you only have contracts for the first 10 years. IPL did an excellent job with the final Rate REP program, all the way through execution."

Another major incentive for the Indianapolis solar power project was the passage of the Indiana Renewable Energy Property Tax Exemption. Under this legislation, systems that generate energy using solar power are exempt from property tax, with the entire renewable energy system and affiliated equipment, including equipment for storage and distribution, qualifying for this incentive.

"The property tax exemption was another critical piece in making sure the EIP solar project worked for everyone involved," said Jones. "So once those pieces all came together in spring 2012, we approached EIP from there."

Impact studies were initiated toward the end of that year, and Melink was negotiating the power purchase agreement and the interconnect agreement with IPL, concurrently.

The agreements were executed in 2013, the project was approved by the Indiana Utility Regulatory Commission, and they closed on the financing with financial partners U.S. Bank and Union Bank & Trust by the end of the year.

"There were a few minor documents related to the site lease remaining at that time, but they were all wrapped up by February 2014," says Jones.

The EIP project hits the mark in a number of ways for Melink. Jones explained that the company tends to focus on distributed generation with its solar power projects. "We feel that makes the most sense because you have less loss in the transmission and distribution process."

 
 The Indianapolis Melink project features 12,264 REC Solar Peak Energy Series 260-watt PV panels and six Solectria
inverters, and the racking was supplied by Ecolibrium Solar, of Ohio. (Photos by Ric Hine -property of TMI Electric.) 
  

"There are certainly instances and areas where you need a larger project because of the needs of the community-and we would consider larger projects in those cases. But the sweet spot for us has been in the one-MW to 10-MW space, though we have done projects smaller than that, and we would consider projects as large as 25 MWs."

Melink focuses on projects at "anchor" facilities that have a long life, such as a warehouse, or with multi-site partners, where a project offers a "win" for all the stakeholders, says Jones. "When I say win, I mean that we need to mitigate the risks acceptably for all the parties involved."

One of the items that must be ticked off the list in terms of risk mitigation on a roof-mounted solar project is the roof itself, says Colin Derhammer, senior sales engineer at Melink Corporation, meaning its expected life, the roof material, and any warranties. With an existing roof, they want to make sure that it can handle a solar project without impacting any roof warranties.

If a site does not have a recently replaced roof, they look to replace the roof as part of the solar power project installation, he notes. "It gives us the confidence that the roof is going to match the life of the solar asset for 30 years or more. With a 30-year life, that means we're looking for a pretty new roof."

The EIP property had a not-too-recent, rock-ballasted roof, and Melink provided a new thermoplastic polyolefin (TPO) roof as part of the overall project agreement. "A TPO roof is preferred for solar projects," says Derhammer. "The rock gets in the way of the solar racking, and the TPO provides a bright, reflective surface."

Replacing the roof brought some other work.

"Taking the ballast off the roof decreases the weight, so we did a bit of internal structural support on the building to compensate for the reduced weight," he said.

The large size of the roof meant they had lots of space to work with, another attractive feature.

"From a design perspective, the more space (and the more open space) you have on the roof, the easier it is to fit solar panels up there," he said. "You need a large building to have that large unobstructed space-and buildings like the EIP Indianapolis facility, which is 600,000 square feet, are not on every street corner. And although this building has plenty going on, on the roof, it is large enough that it has open space that is conducive to solar power."

The Indianapolis project marked EIP's first venture into solar power, though the company had previously installed two Gamesa 2-MW wind turbines at one of its industrial parks, in Gloucester, Mass., in 2012. "It was helpful that they had that frame of reference-they were familiar with some of the same concepts that apply in these types of site lease/power purchase agreement deals," said Jones.

 
While the Hoosier State may not be top of mind when it comes to solar resources, Indiana does pretty well on that front. Indiana, in fact, has more sunshine than solar leader, Germany. Added to that, the state also has some solid solar power incentives to encourage development of solar projects. (Photos by Ric Hine -property of TMI Electric.) 
  

"There were pieces of the solar side that were new to EIP, but we work closely with all of our partners on projects to help them understand anything that might be new to them," added Jones. "We expect to fill an advisor role so our partners understand the pros, cons, and risks of a project, and how all the pieces come together. EIP was involved in that overall process every step of the way."

Communication is hugely important with any of the Melink projects, Jones added.

"Everybody is involved," she said. "Depending on the stage of the project, it might be focused more on the financing partners, or the utility, or the facility owner. But communication is important, no matter what stage you're in."

All of this helped to move the project forward as they progressed toward getting the necessary approvals, and into the construction phase.

Once the necessary approvals were in place, they were ready to go. "The design was complete, and it was a matter of moving ahead and getting all the construction equipment on site," said Derhammer. Melink has worked on a number of solar projects with Cincinnati-based TMI Electrical Solutions, which again proved to be a reliable construction partner on the EIP project.

"They did an awesome job for us," said Derhammer, adding that the project involved a number of logistical issues.

"We were fortunate in that there was plenty of space around the building, and EIP was able to provide us with some areas to stage equipment and store materials."

The roof replacement in itself was a major undertaking; they removed thousands of pounds of rock from the roof, and by the end, had a sizeable "rock mountain" in the parking lot.

Derhammer notes that each solar project Melink does involves custom designs; there are no off-the-shelf plans.

"We're not just taking a pre-engineered solar power plant and dropping it on a building or in a field," he said. "Everything is custom for the space and local conditions-we are looking at latitude and weather patterns, and temperature variations."

While the Hoosier State may not be top of mind when it comes to solar resources, Indiana does pretty well on that front, says Derhammer. He points out that Germany is a leader in solar power but is hardly known for its solar resource. "We have more sunshine here in the U.S. Midwest than Germany, so we should be able to get it done."

A critical part of getting it done is the support structure in place in Indiana.

"Part of the reason you might see projects happening in one state versus another isn't necessarily the solar resource; it's about the structure in place to support solar power," explained Jones. "If you don't have that type of support and certainty, it doesn't matter how great your solar resource is-you won't see as many projects going ahead."

 
  

Melink had their fair share of weather in moving the EIP project ahead. When the last of the legal papers were signed off in February, they had some delays in March because of heavy snow. Once the snow was gone, there were some issues with wind and heavy rain. "Since we were going from a rock-ballasted roof to a white membrane roof, the roofers could only lay the membrane when there was little wind, otherwise we'd get air pockets under the membrane," Derhammer explained.

In addition to forming a business partnership on the contractor side with TMI Electrical, Melink also has solid supplier relationships. They've done a lot of work with REC Solar, and the project features 12,264 REC Peak Energy Series 260-watt PV panels. Six Solectria inverters were used on the project, and the racking was supplied by an Ohio company, Ecolibrium Solar.

"We're always looking at different vendors and equipment, but things have gone very smoothly with these suppliers on our projects," says Derhammer. "This system is going to be in operation for 35 years, and we want to make sure we are only working with top tier manufacturers and suppliers."

Due to the weather delays, Melink had to put a bit of a push on near the end, to meet the completion deadlines.

"You have the main electrical infrastructure-the inverters, transformers, transmission equipment, whatever you need to connect to the utility-and then you have all the solar panels and array wiring on a project. If we are slowed in one aspect, we try to hit the other one harder."

That said, Derhammer emphasized that safety is always the number one priority for the company.

Pre-planning is always key to any successful solar project, said Donna Jones. "We are proud of our planning," she said. "I think the fact we have little or no change orders on our projects in general-not just the EIP project-speaks to the efforts and the quality of our planning process and the partners we work with. We don't run into a lot of surprises."

What sets Melink apart from some of its competitors in the solar space is the in-house resources it has, says Jones.

"In areas like due diligence and planning, financial management, engineering, project management-we have all that within the company, and we use that daily."

Possessing this type of expertise in-house-rather than subcontracting it out-gives them better quality control and allows them to react quicker, she added.

Jones stressed the close business connections Melink has with the different parties on a project-and the company's resourcefulness.

"One of the things that Melink takes a great deal of pride in is that we collaborate with all of the partners involved in a project. We go into these projects looking at it as a long-term partnership with all of the parties, whether that be the site host, the utility, any other offtakers on the project, or the investors.

"We look at all the pieces of a project to make sure it works for everyone involved."

Both Jones and Derhammer agree that no project "ticks all the boxes" for Melink and its partners. "We find the key to making a project work is being creative and working with partners to help us understand their goals, their concerns, what they are trying to achieve. Then we can come back and offer suggestions on how to achieve that, and yet balance out some of the competing risks that might be in the discussion at the same time." says Jones.

Overall, the EIP project in Indianapolis was a good fit for Melink, says Jones. "One of the things we look for when we go into a project is partnerships and that means people that we can work with again and again." EIP has dozens of large properties across the U.S.

"We combined that with working with IPL, which is owned by AES, one of the major utility companies in the U.S., as the single offtaker for both the power and the SRECs, which definitely streamlined things."

The relationship has already started to bear fruit; in addition to the EIP project, Melink has already done another solar project with IPL. And Melink is talking with EIP about doing further solar projects on their other buildings. Being patient with the
Indianapolis project continues to pay off for the company.

 


January/February 2015