St. Louis Park is taking over a solar project after a contractor expressed a dim view of its ability to complete the work.
The city council voted Aug. 7 to terminate agreements with Apex, which also does business as Viridi, after company officials told city officials that the company could not ensure that it would be able to install a solar energy system this year on St. Louis Park’s Fire Station No. 2. The work would need to be completed in 2017 for the city to receive incentive funding.
City leaders plan to have the city take over the project using an installer, TruNorth Solar, that previously had planned to work with Apex.
Under the previous arrangement, the city would not have been required to pay for the project upfront, instead paying a monthly bill to Apex for solar power generated by the system during a 10-year period, according to St. Louis Park Director of Inspections Brian Hoffman. The city had been set to receive incentives, through the Made in Minnesota state program, worth an estimated $8,000 per year for a decade.
Although the program is ending at the end of 2017, the state agreed to continue with the 10-year commitment if the city’s system is operational by the end of this year.
To take advantage of the incentives, the city plans to buy solar panels and equipment and pay for the installation. The city would spend an estimated $120,000, using part of nearly $200,000 the council had allocated this year for unspecified initiatives related to a climate action plan or race equity, according to a city staff report.
“Staff feels this would be an appropriate one-time use of these funds while still providing dollars for race equity initiatives in 2017, including the hiring of a race equity coordinator,” the report states.
The city began working with Apex on the project last year, and installation had been planned to begin last spring.
“Everything was all set, and then we found the system wasn’t getting installed,” Hoffman said. “We wanted to see this up and running as soon as possible. It would be the city’s first renewable energy source on a city facility. It became apparent their business model had changed, and it may not look like it was going to be feasible any more.”
The city continued to push and work with Apex but finally agreed that the company could not financially commit to the solar system, Hoffman said.
“We decided it was probably in both parties’ interests to just break the agreements and go forward, still trying to see if we could get the system in this year,” he said.
The council and company agreed to terminate a lease on the fire station’s rooftop for a 40-kilowatt system and a purchase agreement between the city and the company.
Hoffman noted that the arrangement meant the city would not have had to pay for the system upfront, but the city would not necessarily have had any energy savings during the 10-year period in which it paid a monthly bill to Apex.
The company had invested in an initial design and engineering for the project, Hoffman said. The company agreed to give the design and information to TruNorth Solar and walk away from the project, Hoffman said.
“That portion of the work is already done,” he said. “If council wants to go forward with this installation for some renewable energy and take advantage of the grant, we need to move now. The system has to be operational, producing power, by December of this year.”
The city would have to pay for the upfront cost of the project, but Hoffman said that the city, by owning the system itself, would benefit financially from the reduction in energy costs. He said the system would equal about 30 percent of the energy use at Fire Station No. 2. The city staff report estimates that the city would offset its costs to develop the solar-powered system within 12 years, thanks to the energy savings and the state-paid incentive.
Councilmember Steve Hallfin asked whether the city had any legal recourse with the company.
Councilmember Tim Brausen, who is an attorney, said the city would have to show actual damages.
“It sounds like we have actually benefited from the contract by getting some value without having paid anything,” Brausen said.
Hallfin replied, “So, mister lawyer, what’s the good of signing a contract?”
Brausen said the city could try to force the company to meet the terms, but the city likely would have to pay attorney fees.
“The benefit would be unlikely to be worth the dollars we spend on that,” he said.
Councilmember Sue Sanger, a retired attorney, added, “The old legal maxim says you can’t get blood out of a turnip. If we have a company with a failed business model, it’s not very profitable to go after them.”
Mayor Jake Spano said the situation had shades of St. Louis Park’s attempt to install a solar-powered Wi-Fi system. The city sued the company involved in that project, Arinc, after the system failed to operate according to plan. The city and Arinc reached a settlement in 2008 on the project, which never reached fruition.
“I wasn’t around at that time, but I’m sure they had their own alarm bells going off about the project and then, you know, it was big back-and-forth and pain in the butt,” Spano said. “Personally, I would much rather have the vendor come forward and say, ‘We thought we could do it; we can’t do it; you can still take advantage of this.”
TruNorth Solar is anxious to continue serving as the installer of the fire station system, Hoffman said.
Councilmember Anne Mavity said she found the city’s situation to be unfortunate, but she said to Hoffman, “It sounds like you have rolled your sleeves up and tried to figure out how to problem-solve this in a way that I think aligns with what our goal is, which is to continue to put more environmental sustainability into our programs, our policies, into our actions, our impacts.”
Brausen agreed, “The staff is doing a great job of making lemonade out of these lemons.”
City Manager Tom Harmening noted that the city had budgeted for another solar project on the Municipal Service Center’s roof. That project is scheduled to wrap up by the end of the year.