HomeMy WebLinkAboutA003 - Solar Energy Project at Ames Municipal AirportITEM #:3
DEPT:ELEC
April 21, 2026
Staff Report
SOLAR ENERGY PROJECT AT AMES MUNICIPAL AIRPORT
BACKGROUND:
The City's Electric Services Department is capable of providing electricity to over 28,000
customers through a combination of the utility's own boilers and combustion turbines, market
purchases, as well as Purchased Power Agreements (PPAs) that provide fixed terms for the
purchase of electricity from outside entities.
Currently, the utility is engaged in two PPAs:
1. A PPA with NextEra Energy Resources (d/b/a Garden Wind LLC) for wind energy. This
contract provides 36 MW of capacity from a wind farm located in northeast Story County.
Of this amount, 6 MW is passed through to Iowa State University and the City receives
the benefit of the remaining 30 MW. The agreement provides for energy to be sold to the
City through February 2030. This agreement, when considering its unique "take or pay"
provisions, costs approximately 8 cents per kWh in FY 2025/26. This translates to
approximately $5.6 million annually.
2. A PPA with Forefront Power for a community solar farm located on City property north of
the Airport. This agreement was entered into in July 2019, and the 25-year initial term
expires in 2044. The solar farm is 2.2 MW in size. The energy produced is purchased by
the Electric utility at 5.9 cents per kWh. Most of this energy is not a direct to the Utility
because it is credited directly to customers who have elected to purchase power packs.
The constructed capacity of 32.2 MW from these two projects, when adjusted by MISO to
calculate their contributions towards the utility's capacity obligations, results in credit of 6.8
MW of capacity.
With the knowledge that the PPA for wind energy expires in 2029, combined with the City's
aspirations as outlined in the Climate Action Plan, the City sought proposals from renewable
energy projects in 2024. Unfortunately, no proposals were received. Staff learned that this
lack of interest was in part due to the fact that most utility-scale projects had a buyer involved
prior to the development of the project rather than reserving some of the capacity for sale to
other entities after construction has occurred.
To address this new understanding of the market dynamics, staff identified a developer with a
track record of implementing utility-scale projects. In March 2025, the City Council approved a
letter of intent with Ames Greenfield Development Co., a subsidiary of Callaway Energy
Development, to identify a viable renewable energy project suitable for the utility to invest in.
Initially, this effort was focused on securing a wind energy project. However, during 2025 it
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became clear that there were few, if any, viable wind projects that the City could invest in.
Most such projects were committed to other utilities. Therefore, the developer began
evaluating the potential for a utility-scale solar project.
Following a review of potential sites, the developer identified properties owned by the City
adjacent the James Hermann Banning Ames Municipal Airport as a preferred location for a
project. A solar development firm, Recall Strategies, was identified as having interest in
constructing a project. Ames Greenfield LLC is a Special Purpose Entity (SPE). The SPE will
hold the assets of the solar project. The SPE is owned by Callaway Energy, LLC, which is the
development arm of Recall Strategies.
PROJECT CONCEPT:
The concept for the solar project being proposed by Recall involves the installation of up to
2 4 .9 MW of solar panels. Projects larger than this size would require an Iowa Utilities
Commission approval process that would delay the project and cause the loss of essential
federal tax credits that are being relied upon to make the project financially viable.
Up to 165 acres of Airport property would be utilized. The solar panels would be divided into
as many as seven separate zones situated in areas of the Airport property that are currently
part of the Airport farm operation. Most of these potential zones are in areas that are
unsuitable for other types of development due to the potential for conflict with Airport
operations. The solar panels would tilt to follow the path of the sun throughout the daylight
hours, maximizing the potential for energy production.
One advantage of the arrangement and location of the project on the Airport property is the
possibility for the Utility to take the energy at the distribution voltage, which avoids a lengthy
study process by MISO. The energy would be delivered to the Electric Utility at a fixed price
for a period of 20-25 years, depending on the terms negotiated under the PPA.
Recall has preliminarily estimated that the price per kWh would be near 7.65 cents per
kWh over the 20-25 year life of the agreement. It is important to note that this figure
would adjust and be finalized once further development steps are taken, such as
performing engineering analyses and identifying the specific equipment to be installed.
However, once the PPA containing the price is agreed to, the price would remain fixed.
Additionally, it is important to note that the estimate of the pricing is dependent on
Recall being able to meet key deadlines to secure federal tax credits for solar
production. Without these tax credits, the price under the PPA would increase by
approximately 30%, making the project significantly less financially viable. Further
discussion regarding the timing of these deadlines is provided below.
AGREEMENT OVERVIEW:
The project would require that the City lease portions of the Airport property to the developer
for the evaluation, installation, and operation of the solar project. This agreement would simply
provide the developer the right to complete the project if certain conditions are met, and it is
this agreement which is critical to complete soon if the project is to move forward and qualify
for the tax credits.
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A separate Power Purchase Agreement would need to be negotiated later by the City and the
developer to establish the terms for the purchase of the energy by the Electric Utility.
It is anticipated that the lease is structured as a revocable lease-option agreement, containing
several separate phases.
1. The Development Phase would allow Recall to enter the property, perform geotechnical
analysis, surveys, and other studies, and commence civil and electrical design work.
This phase would include the completion of necessary FAA studies for the project.
It is this phase that is the most time-critical. In order to qualify for tax credits,
Recall must demonstrate to the IRS by July 4, 2026 (the "Safe Harbor" Deadline),
that it has secured the lease option and has begun physical work of a significant
nature on the project (completing approximately 100 laborer-hours and $100,000
of work). Once Safe Harbor for the tax credits has been secured, Recall would finalize
its cost per kWh and the City would enter into negotiations for a PPA.
It is important to emphasize that the risk for these investments lies entirely with
Recall. The City would be under no obligation to pay for Recall's due diligence or
its preliminary construction costs necessary to meet the Safe Harbor provisions.
Additionally, the City would be under no obligation to agree to the PPA. If the
terms of the PPA are unacceptable, in the City's sole determination, the lease
option agreement would terminate. Additionally, the agreement would be
structured to prevent Recall from building the solar farm and selling the electricity
to any entity other than the City of Ames.
One major issue yet to be resolved is that it is unknown the manner in which the
solar project will interconnect into the Electrical utility's distribution network. This
will need to be evaluated further by Electric Services staff during the Development
phase. If it is not possible to connect each of the seven separate solar zones into
separate distribution lines, then the Electric Utility may need to incur expenses to
construct a larger feeder line between the solar project and the Vet Med
substation. This is not City staff's preference, as it results in additional costs for
Electric customers. More work will be necessary to determine the manner in which
the interconnection(s) can take place.
2. T h e Construction Phase would commence once the Development Phase has
concluded, and only after Ames and Recall are able to negotiate a successful PPA. It is
anticipated that equipment procurement would take place in 2027 and construction
would occur in 2028.
3. T h e Operational Phase would begin on the date the project enters commercial
operation and begins delivering energy, which is expected to be in late 2028. This phase
would extend for 20-25 years, depending on renewal periods.
Each phase of the agreement has the potential to impact the City's existing lease with a tenant
farmer for agricultural production at the Airport. Therefore, the agreement must contain
provisions to pay for crop damages and loss of Airport revenues that may occur during
the Development or Construction phases.
Additionally, a rent amount will need to be determined to reimburse the Airport for the
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use of the land during the Construction and Operational phases of the project. It is
important to note that as the rent amount owed by the developer to the Airport increases, so
too does the amount the Electric Utility will pay the developer for the purchased power.
FINANCIAL ANALYSIS:
The cost of the energy that is ultimately purchased through this project is added to the blend of
other purchased power, transmission, and fuel used by the utility's own generating assets,
ultimately reflected on customer bills through the Energy Cost Adjustment (ECA). The ECA is
calculated monthly on a rolling 12-month basis and is either a credit or additional cost on a
per-kWh basis for each customer's energy consumption. Because of the ECA mechanism, the
costs of entering into a PPA for this project would not affect the adopted rates. However,
these additional costs will be incorporated into the ECA and reflected on a customer's total
electric bill.
Because the proposed project has no competitive proposals to analyze, a key question is
whether the potential financial terms for the solar project are reasonable, competitive, and a
good value for the Utility. In the absence of direct comparisons with competitive proposals,
costs can be compared with: 1) other solar PPA projects in the market, 2) MISO market
energy pricing (with caveats), and 3) pricing from the City's other PPAs and generating units.
Solar PPA Pricing within MISO - Data from the Lawrence Berkeley National Lab
(https://emp.lbl.gov/pv-ppa-prices) shows that solar PPA pricing (excluding battery storage
projects) in the MISO market from 2013 to 2024 ranges from 2.4 cents per kWh to 11.3 cents
per kWh, with average pricing of 4.5 cents per kWh (in 2024 dollars). If only projects between
15 and 25 MW are considered, the average pricing rises to 5.7 cents per kWh. It is anticipated
that average prices for solar projects are rising as the federal tax credit deadline approaches.
MISO Market Pricing - Ames can purchase energy from MISO through transmission lines.
MISO's average on-peak energy price over the most recent 12 months has been 4.0 cents per
kWh.
In comparison, the estimated cost of 7.65 cents per kWh for this new solar energy source
would be 90% greater than the average on-peak MISO price. However, unlike other
comparisons, MISO prices have no long-term stability since these prices change
hourly. MISO prices are expected to rise at least 3% per year, according to analysis from the
City's consultants. Therefore, these prices should not be used as a direct comparison to a
fixed-price PPA.
Comparison with Other Ames Generation Resources - The utility's two natural-gas fired
baseload generating units (Unit 7 and Unit 8) can produce energy at approximately 4.2 cents
per kWh. A 20-year solar energy PPA with Forefront started in 2020. This solar farm is 2.2
MW in size and has a fixed price of 5.9 cents per kWh.
A PPA with NextEra Energy started in 2009. This wind farm is for 36 MW and has a variable
price. In the most recent year, pricing was approximately 8 cents per kWh. This PPA is set to
end in February 2030. A comparison between the expiring wind PPA and the preliminary
estimates for the Airport solar farm is provided below:
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PROJECT FUEL
ANNUAL MWH
PRODUCED $/MWH ANNUAL
COST
% of Ames
Load
NextEra PPA Wind 70,195 $79.70 $5,594,542 11.69%
Recall PPA Solar 52,350 $76.50 $4,004,756 8.8%
STAFF COMMENTS:
There are a number of issues that must be resolved if the City Council wishes to pursue
this project further.
LEASE AGREEMENT:
Foremost among the issues is the preparation of an agreeable revocable lease option
agreement. To secure the 30% Investment Tax Credit from the Federal government, a project
must achieve "safe harbor" status by July 4, 2026. If Recall fails to secure the lease and make
the necessary financial investments prior to this date, then the credit goes away and the
project would see a 30% increase in cost. Coming to agreeable terms prior to the looming
safe harbor deadline will prove to be a challenge.
City staff and Recall have had preliminary discussions about provisions for a lease. Entering
into revocable lease agreement will not obligate the City to move ahead with this solar project.
This agreement will make it clear that if for any reason the City decides not to sign a Power
Purchase Agreement, the land lease will be terminated with no financial obligation on the part
of the City. However, arriving at an agreeable lease in a timely fashion will be a
substantial undertaking.
Recall has indicated that May 12 is the latest feasible date to enter into the agreement in
order to complete the due diligence and begin physical work of a significant nature as
necessary to demonstrate that it has met the Safe Harbor deadline of July 4, 2026.
Therefore, on April 28, the City Council would need to set May 12 as the date of hearing and
approval of this agreement. It is not likely that the lease will be negotiated to staff's
satisfaction until shortly prior to the May 12 meeting where approval is requested.
Therefore, the Council will have little opportunity to review the agreement's terms prior
to being asked to approve it.
AIRPORT OPERATION IMPACTS:
As part of the lease negotiations, one of staff's concerns is ensuring that the areas made
available for solar installation allow the City to meet any existing or future FAA obligations
imposed upon the Airport. In addition to meeting FAA's approval prior to construction, the City
must maintain the ability to remove certain infrastructure if the FAA determines in the future
that doing so is necessary for operations. The potential for FAA obligations adds risk and
uncertainty to the solar project, which staff expects will translate to increased solar
PPA pricing.
ELECTRIC DISTRIBUTION INTERCONNECTION:
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Another significant hurdle is the ability of the Electric Utility to connect this size of a
project into the utility's distribution system. A full buildout of 24.9 MW would require a
substation to incorporate the energy into the system. A planning-level cost estimate for a
substation project would be $4 million, which would likely be a direct cost to the Electric utility
rather than being incorporated into the PPA cost.
Without a substation, staff anticipates that the size of the solar project would be limited
to approximately 12-14 MW. This, however, relies on constructing a large electric feeder to
the nearest substation. Because of Airport operations, this large line would need to be buried,
adding to costs. An initial estimate of the cost to pursue this approach is approximately $2
million, again a direct utility cost. Short of pursuing these capital-intensive options, the utility
would only be able to absorb perhaps 2-4 MW of solar development without the construction of
major infrastructure.
The sizing of the project would ultimately need to be determined after the lease option
has been signed, but before the PPA has been agreed to. Although the technical issues
are likely capable of being resolved, it must again be emphasized that the costs
necessary to resolve them, plus costs to compensate the project's investors for
uncertainties that exist in the future (e.g., FAA requirements), will increase the price the
Utility ultimately pays for the energy. How much the price increases can only be known
through more study and negotiation prior to the approval of a PPA in the fall.
If the prospect of an increased price and/or a smaller project is unsatisfactory to the
City Council, then the Council may wish not to pursue the project any further. City staff
has emphasized to Recall that the Utility's top priority at the moment is the New
Thermal Generation project to install replacement capacity for the Power Plant. That
project is critical to meeting our obligations to MISO for sufficient capacity to meet our
customer demand.
Although Recall has expressed a willingness to invest its staff's time in preparing
documents and performing studies to relieve City staff's burden, this solar project will
still require substantial City staff time to complete. If the Council wishes to proceed
with the project negotiation, it should indicate so at the workshop. Staff will then
proceed with setting the necessary hearing date for approval of the lease option
agreement.
ATTACHMENT(S):
Council 4.21.26 Solar presentation.pptx
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POTENTIAL UTILITY –SCALE
SOLAR FARM
(NEW SOLAR AT THE AMES MUNICIPAL AIRPORT)
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AMES ENERGY
MIX - 2026
Renewable under Power
Purchase Agreements
-Solar – 0.41%
-Forefront Power
-2.2 MW
-Expires 2044
-5.9 cents per kWh
-$94k annually
-Wind – 11.29%
-NextEra Energy
-36 MW (30 MW-Ames,6MW-
ISU)
-Expires 2030
-8.0 cents per kWh
-$5.6M annually
AMES Generation
from Natural Gas
39.87%
AMES Generation
from RDF
2.67%
AMES Wind
11.29%
Imported
Energy (MISO
less Wind)
45.39%
AMES Solar SunSmart
& Retail
0.41%
AMES Energy Mix
2025 Mar - 2026 Feb
621,671 MWh
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RENEWABLE EFFORTS
Climate Action Plan
Decarbonize Energy Resource Mix
Increase Renewable portfolio
RFP in 2024 – No responses
Lack of new Utility-scale projects w/o buyers
Loss of Federal tax credits after July 3,
2026
Attempting to extend wind contract under
better terms
New Market Dynamics
Wind/solar projects sold before built
Partner with Developer
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AMES ENERGY
MIX2030 –DO
NOTHING
Renewable
-Solar
-2.2 MW
-Expires 2044
-5.9 cents per kWh
- Wind –ends Feb 2030
MISO Market
New RICE Units
Carbon Reduction – 20.5%
Renewable Percent - 0.4%
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March 2025 – LOI with
Greenfield Ames LLC
Identify viable energy
projects for the City
Airport site(s) to construct 24.9
MW on 165 acres
Two Important Documents
Revocable Lease –
City passes on PPA, lease
terminates
Crop Damages
Land Rent
Protect Airport Operations
Power Purchase Agreement –
terms negotiated in fall of
2026
AIRPORT SOLAR
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AIRPORT AREAS
Dark Blue
Available for solar
today
Green
Reserved for hanger
growth
Purple
Land currently under
lease
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Estimated Cost
7.65 cents per kWh;
$4M annually
Fixed for 20-25 years
$1.6M annual savings if
wind contract is terminated
Developer’s interest in
maintaining Fed tax
credits
“Safe Harbor” by July 4,
2026
Lease option on site
Begun work (100 labor
hours and $100,000
invested)
PROJECT DETAILS
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2025 Ames Average Hourly Load
2025 AMES Hourly Loads
1:00 2:00 3:00 4:00 5:00 6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00 0:00
2025 Jan 67.005 66.038 65.401 65.478 66.135 69.261 73.015 76.045 76.442 76.755 77.168 77.133 76.968 76.756 75.466 74.717 75.703 79.329 79.354 78.361 76.853 74.266 71.640 68.714
2025 Feb 64.066 62.432 61.779 61.616 62.488 65.577 69.489 71.833 72.936 73.657 73.854 73.843 73.796 73.017 72.463 71.862 72.667 74.598 77.007 75.725 74.369 71.620 68.881 66.189
2025 Mar 56.724 55.257 54.390 54.182 54.897 57.636 60.968 63.512 64.783 66.156 66.910 67.444 67.670 67.824 67.143 66.482 67.029 67.760 67.554 67.459 67.084 64.785 61.894 58.930
2025 Apr 55.403 53.102 51.899 51.607 52.570 54.790 58.627 61.221 64.077 65.516 66.658 67.359 68.332 68.218 67.744 67.005 67.604 67.624 67.131 66.412 67.148 65.179 61.189 57.404
2025 May 54.771 52.474 50.845 49.849 50.469 51.782 54.598 57.498 61.633 64.907 67.614 69.450 71.110 71.764 72.727 72.571 73.391 73.277 72.304 70.177 68.503 66.713 62.342 58.356
2025 Jun 68.549 65.347 62.928 61.485 61.042 62.223 64.267 69.323 74.552 78.916 83.588 87.273 90.472 93.129 94.224 95.631 96.432 96.704 95.074 91.494 87.368 83.939 78.754 73.035
2025 Jul 75.775 70.838 67.901 66.559 65.570 66.516 68.461 72.590 78.188 83.480 88.963 93.386 97.420 100.481 103.038 104.905 106.123 106.337 104.234 100.205 95.945 92.125 86.227 80.260
2025 Aug 69.842 66.233 63.507 61.952 61.872 63.222 65.200 69.194 74.176 79.042 84.348 88.245 92.462 94.864 97.410 98.599 99.978 99.424 97.194 93.394 89.900 86.228 80.133 74.240
2025 Sep 63.611 60.015 57.858 56.682 56.418 58.198 61.852 64.786 69.012 73.165 79.250 83.106 86.458 88.802 89.717 90.927 92.157 91.872 89.166 86.448 83.711 79.356 73.701 68.524
2025 Oct 56.372 53.924 52.202 51.499 51.953 54.080 58.788 61.993 64.282 67.258 70.104 72.126 73.917 74.688 75.021 74.985 75.357 74.893 74.233 73.392 70.599 67.719 63.404 59.309
2025 Nov 55.766 55.851 53.646 53.519 54.311 56.910 61.244 63.111 64.869 65.852 67.751 67.634 68.298 67.811 67.471 67.282 68.316 70.536 70.045 68.030 66.516 64.115 61.271 58.226
2025 Dec 62.952 61.644 60.664 60.769 61.343 64.275 67.981 70.619 71.790 72.891 73.038 73.277 73.013 72.324 72.050 71.924 74.218 76.633 76.256 74.454 73.102 70.884 67.643 64.942
Legend
(MW)50 60 70 80 90 100
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2025 Ames Solar Output
2,000 kW Solar Farm
2025 Average Hourly Production Chart
1:00 2:00 3:00 4:00 5:00 6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00 0:00
2025 Jan 0 0 0 0 0 0 0 0 168 558 842 955 961 942 787 497 142 3 0 0 0 0 0 0
2025 Feb 0 0 0 0 0 0 3 48 271 548 706 835 913 845 690 471 261 52 0 0 0 0 0 0
2025 Mar 0 0 0 0 0 0 16 245 671 994 1,281 1,403 1,361 1,265 1,077 800 452 155 0 0 0 0 0 0
2025 Apr 0 0 0 0 0 0 6 94 335 665 919 1,100 1,194 1,242 1,200 1,065 839 487 194 35 0 0 0 0
2025 May 0 0 0 0 0 3 58 194 487 794 1,032 1,229 1,319 1,313 1,255 1,048 777 545 268 39 0 0 0 0
2025 Jun 0 0 0 0 0 3 52 174 474 790 981 1,113 1,223 1,152 1,106 1,013 890 565 287 106 16 0 0 0
2025 Jul 0 0 0 0 0 0 32 148 423 761 1,013 1,177 1,348 1,297 1,339 1,174 987 668 335 106 26 0 0 0
2025 Aug 0 0 0 -1 -1 -1 13 114 388 713 1,000 1,296 1,361 1,394 1,320 1,158 945 618 283 62 2 0 0 0
2025 Sep -1 -1 -1 -1 -1 -1 1 65 350 740 1,020 1,150 1,187 1,218 1,064 928 744 447 126 7 0 0 0 0
2025 Oct -1 -1 -1 -1 -1 -1 -1 14 211 562 861 1,028 1,123 1,130 1,002 785 520 197 18 0 -1 -1 -1 -1
2025 Nov -1 -1 -1 -1 -1 -1 0 60 348 642 843 899 927 820 620 303 57 1 -1 -1 -1 -1 -1 -1
2025 Dec -1 -1 -1 -1 -1 -1 -1 3 72 248 446 524 552 532 363 152 25 -1 -1 -1 -1 -1 -1 -1
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2022 Ames Wind Output
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AMES ENERGY
PORTFOLIO
2030 -NEW SOLAR,
NO WIND
Renewable
-Solar 9.2%
-SunSmart 2.2 MW
-Airport 24.9 MW
MISO Market
New RICE Units
Carbon Reduction – 27.3%
Renewable Percent – 8.8%
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Pros and Cons
Pros
Solar production matches City’s load profile better than wind
This Solar provides more capacity than the current wind PPA
Solar produces when energy is more expensive
Can take advantage of Investment Tax Credit, lowering the PPA price to Electric Services
Cons
Very close to Airport Operations and subject to current and future FAA regulations
Cost to tie into current Ames Electric System is not included in PPA price
Will likely require an additional substation
Higher cost per kWh when compared to existing 2MW Sunsmart solar farm
Requires staff to concentrate on second major project
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AMES ENERGY
MIX 2030 -
RENEW WIND, NO NEW
SOLAR
Renewable
-Solar
-2.2 MW
-Renew Wind
-30 MW
MISO Market
New RICE Units
Carbon Reduction – 29.6%
Renewable Percent – 11.69%
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AMES ENERGY
MIX 2030 -NEW
SOLAR, NEW WIND
Renewable
-Solar (Existing + New)
-27.1 MW
-Renew Wind
-30 MW
MISO Market
New RICE Units
Carbon Reduction – 36.3%
Renewable Percent – 20.5%
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Significant Hurdles
STEP 1 -Finalize a Revocable Lease Option acceptable to the City
Needs to come before Council on May 12th at the latest.
Limited staffing resources
FAA continued approval of solar required/Airport ops first
STEP 2-Hire Electrical Engineer to develop Interconnection Design
Recall pays for Engineering design, City hires Engineer
New substation - $4M+
New Feeder - $2M+, engage with ISU, may limit size of solar
More debt, limited staff resources
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Significant Hurdles
STEP 3-Develop a PPA acceptable to the City
Should the City decide, in its sole discretion, not to enter into the PPA, the
land lease agreement is terminated
COUNCIL DIRECTION BEING REQUESTED:
Given the information provided above, does Council want staff to pursue
STEP 1 and attempt to develop a revocable land lease?
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Modeling – Solar and Wind Energy
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63MW of Wind and 26MW of Solar Performance
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Questions
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