An estimated $100 million solar energy project to be located near Billings will remain a “go,” no matter what decisions are made by the Montana Public Service Commission, declared its developers, last week.
VK Clean Energy is developing a number of solar energy projects in Montana. MT Sun, LLC, a proposed 80 mega-watt facility, to be located just north of Billings, will be the largest.
Venture partners, Mark Klein and Ros Rocco Vrba, informed Yellowstone County Commissioners about their project, as they explored the process and qualifications required to get a ten year tax abatement from Yellowstone County. They believe they will be eligible for the ten year abatement program the county commonly grants as an incentive to businesses that are investing substantially in building new, or expanding existing businesses. State law specifically identifies energy development companies as being eligible.
MT Sun, LLC has already acquired a lease for state land from the Department of Natural Resources and Conservation (DNRC) near the junction of Highway 3 and Alkali Creek Road. About half of the 140 acres needed for the project will be public land and the balance will be private. The company is pursuing required permitting processes and environmental studies with the intention of being able to begin construction at the end of 2018. Construction will take between 14 and 18 months depending on weather.
VK already has two solar farms in operation in Utah and are planning two additional sites near Broadview, as well as other projects in the western part of the state. They also have a project in Wyoming.
“We have invested a lot of money and emotion and one way or another that project will be built; even if we have to wheel power out of state…We are committed and we are pretty stubborn,” said Klein in response to Commissioner John Ostlund’s question about the prospects for the project given the recent decision of the PSC to approve only a 10 year contract at $20 per megawatt hour.
Klein said that in order to get financing lenders want to see a 15 or 20 year purchase agreement with a rate in the high $30s.
MT Sun is appealing the PSC decision asking for a longer term and higher rates, which they say would be more in keeping with state law, which requires that terms be whatever is necessary to finance a project. Klein said they expect a response from the PSC very soon.
Under state law the PSC is granted authority over approving the purchase agreements between utilities and Qualified Facilities (QFs), of which MT Sun is one. By state law, in order to promote the development of alternative energy, a utility like Northwestern Energy is required to purchase the power generated by QFs.
In addition to federal subsidies provided for solar energy development, since the 1980s, Montana, has supported 25-year contracts and higher than market rates for QFs, as part of a policy to encourage investment in alternative energy.
The results are higher rates paid by consumers, which has prompted push-back from consumer organizations and by the state legislature.
Montana laws are so lucrative for QF investors, said the PSC, that they are being overwhelmed with applications.
PSC commissioners have said that federal law (PURPA) states that ratepayers shouldn’t pay more for one form of energy over another, and while federal law allows for long-term contracts, it does not define “long term.”
County Commissioners advised MT Sun owners to wait until their project is near completion before bringing forward an application for a tax rebate. The ten year tax incentive forgives 50 percent of the taxes on any new taxable value created by a project in the first five years, with the tax increased incrementally, ten percent, over the next five years, to 100 percent.