Guaranteed Energy Savings Project

The board of education and district administration has worked diligently to address increasing district expenditures resulting from increases in personnel salaries, increases in health care costs, increases in retirement contributions, and increases in costs for educational resources and services by identifying  additional funding and revenue streams, introducing new programs, and developing more efficient schedules and procedures all in an effort to maintain high-quality educational programming in an economically-sensitive manner.

If the proposed guaranteed energy savings projects are approved by the board of education, the incurred costs would not be paid from the general fund which subsidizes personnel and operating costs.  Rather, capital improvements can be subsidized via financing and/or district revenue that has been placed into capital reserve.  The district has maintained the practice of situating revenue in a capital reserve investment account that can only be liquidated and utilized for expenditures incurred for improvements and updates to the district facilities and properties as needs present themselves.  The state imposes very strict guidelines and parameters that dictate how the revenue that is invested in the capital reserve may be utilized.  The capital reserve monies may not be utilized for personnel and operational expenses under any circumstances. 

Yes.  In coordination with Schneider Electric, the Millville Area School District Administration collaborated upon multiple applications for grants that subsidize capital improvement projects that yield energy savings and/or improved safety outcomes for rural schools.  Two grants that the district aggressively sought out include a targeted grant with the US Department of Energy (DOE) and the Office of Clean Energy Demonstrations (OCED) which awards upon to 1 million dollars to chosen rural entities as well as the School Violence Prevention Program (SVPP) COPS Grant which awards subsidies to schools in order to fortify their physical plants from school violence.  Unfortunately, despite the extraordinary energies put forth, the district was notified that it was not a chosen as a recipient of either of the aforementioned competitive grants. 

Project costs have been described as “All-In” costs.  However the costs can be broken down in the following manner:

Project A : Base Project + Solar : Total Cost is $5,721,489

             Solar : $2,657,699

 Project B : Base Project - Without Solar : Total Cost is $3,063,790

 Base Project Rough Breakdown Below:

               HVAC : $2,389,550

               Windows at ES : $674,240

Schneider Electric had bid the HVAC projects together understanding that the district would yield a significant savings by aggregating them together.  Schneider explained that the HVAC contractors can provide individual cost break downs.  They are not available to date. 

Project costs that have been reviewed with the Building and Grounds Committee and Board of Education are contingent upon committing to construction contracts on or prior to January 22, 2024.  In the event that the district approves this project post January 2024, the project costs may change to reflect supply constraints, equipment costs, long lead time for windows, and window installation timelines. Additionally, the supplies will be needed in preparation for the bulk of the work to be completed in the summer months when school is not in session.

The “multi-stack” is the HVAC system that provides heating and cooling at the high school campus.  The system works in tandem with the geothermal well system. The geothermal system provides water at a set temperature to be utilized by the HVAC to provide heating and/or cooling to the high school physical plant.  The multi-stack is swiftly approaching the end of its life.  Over the course of the past several years, the district has encountered numerous mechanical issues with the multi-stack HVAC system necessitating repairs and service calls. The multistack and the geothermal well field were installed in 2010.  In 2020, the district collaborated with the McClure Company to re-engineer the multistack in order to extend its capacity and longevity. As a result of re-engineering the HVAC system in 2020, the district was able to extend the warranty on the system through 2025.  After 2025, the district would incur unforeseen expense for any and all mechanical malfunctions.   The new HVAC system that is being proposed would replace the end-of-life multistack.  The new HVAC system would continue to work in tandem with the existing geothermal system.

The proposed guaranteed energy saving project encompasses numerous capital improvement projects that were prioritized in needs assessment undertaken by Schneider Electric.  On October 9, 2023, the board of education approved a resolution to proceed with the Design Development phase of the Investment Grade Audit with Schneider Electric.  As a result of this, Schneider Electric has designed out the proposed energy savings projects and has undertaken the bidding process to identify contractors who would realize the projects if the district elects to progress with them.  When the board of education decides upon the scope of the project, the district will engage RBC Wealth Management to determine financing options that are suited for the district’s needs.

Schneider suggests that the district provides $1.4 million dollars up front understanding that the district will be entitled to receive $1.23 Million back in the form of a direct payment Solar Investment tax credit from the Inflation Reduction Act in the following year.  Schneider explains that this project would enable the district to offset a large amount of its kWh usage for the next 20-30 years. Schneider projects that this would provide a hedge against a future rise in electric rates that can insulate the district from needing to make cuts elsewhere should electricity rates rise.

Schneider modeled the direct contribution as one scenario because it allows to the district to make the most use of their money with a capital maintenance upgrade. If the district subsidizes the costs of the solar initiative without using a tax-free debt obligation then they need to take 15% off the proposed Solar Investment tax credit incentive ($1,230,094).  Once the board of education identifies the scope of the project, the district will collaborate with their management consultant to explore all financial plans to identify the best options for the district which may entail financing, taking a bond, liquidating capital reserves, and/or a combination of the aforementioned. 

Schneider did not model any of the arrays on marked wetlands. Schneider will work with all local and state ordinances to ensure environmental concerns are addressed should the Millville decide to move forward with the proposed solar initiative. 

Schneider Electric modeled 4.15% interest rate when describing the proposed guaranteed energy saving project to the board of education.  Recently, Schneider Electric has contracted with the     Huntingdon Area School District to undertake a solar voltaic project very similar to the proposed initiative to be undertaken at the MASD.  The Huntington Area School District secured a bond to subsidize their project at an interest rate of 4.14 % at the end of December 2023. Once the district determines the scope of the project, the district will collaborate with its contracted wealth management group to aggressively secure the most cost efficient financing options to subsidize the projects

Schneider Electric explains that there are multiple different incentives for which the district is eligible to take advantage with regard to the proposed solar initiative. The $26,913 Incentive is a PPL Utility incentive that the district will receive for implementing solar.  This incentive was included with the Energy Savings within the pie chart so that a simple comparison could be seen. The Investment Tax Credit is something that MASD would be eligible through the Federal Government which is $1,230,094 (50% of the cost of the solar Array due to domestic content AND that Millville resides in an energy community)-This was not included into that column but is illustrated in the Pie chart! The ability to take advantage of this is in the IRA Legislation that was recently passed that allows Public Entities to take advantage of the Solar ITC. If you are interested to learn more about the tax credits available to public school entities that incentivize solar voltaic initiative, please access the resources below:

https://www.energy.gov/eere/solar/federal-solar-tax-credits-businesses

Solar Panels will typically degrade 0.5% every year in production capability but they typically last 30 years and beyond but they may not be producing adequate electric needed at the 30 year mark so they may want to replace them at that time or earlier or they may choose to not. Recycling costs were discussed during the presentation to the board.

There were multiple companies involved in the pricing and implementation of this work. Schneider is responsible for the design of the project as well as the construction management and performance of the project. Schneider solicited multiple subcontractors and performed numerous on-site walkthroughs to get the most competitive pricing for the district. Schneider’s role is to provide a turnkey project for the district whereby they manage the design, subcontractors, construction management, and performance of the project on behalf of the district.

All district assets are insured in the event of damage, catastrophic loss, and/or liability.  Consistent with district best practices, the solar arrays would be insured.  The cost of this has not been determined to date.  Furthermore, the solar field would be surrounded by a privacy fence to deter damage and/or vandalism. 

Schneider modeled it this way to allow the school to leverage their cash to get the full investment tax credit by avoiding using a tax-free municipal funding mechanism which would further reduce the Solar Investment Tax Credit by 15%. In summary, the outflow of 2.4 Million would be reimbursed by the solar ITC in the forecasted sum of $1,230,094.

In collaboration with Schneider Electric, the MASD assessed all potential available locations to serve as the site for the proposed solar voltaic field.  Many variables informed the identification of this site including the topography of land, proximity to district buildings and public utilities. Considering all variables, the location identified was most advantageous.   

The Multistack HVAC System has been problematic for it has necessitated numerous maintenance visits and repairs over its lifetime.  The district has maintained warranties and preventative maintenance agreements that have covered the expense of these repairs.  In 2020, the McClure Company indicated that it would not extend the warranty at the conclusion of the warranty period.  In 2020, the McClure Company was engaged by the MASD to extend the end of life of the Multi-Stack HVAC System. This was accomplished by re-engineering the manner with which the HVAC system operates.  The McClure Company re-engineered the system so that it operates on flow rather than pressure.  By undertaking this upgrade, the McClure Company extended the warranty on the system for five years.  The district is currently considering replacing the HVAC system because it is at the end of its useful life and will no longer operate under warranty.   

The minimum percentage of domestic content for 2024 to receive the tax rebate is 40%.  The minimum percentage of domestic content increases in forthcoming years: 45% in 2025 and 50% in 2026.

The current legislation indicates that since 40% of the overall infrastructure of the solar field: Arrays, racking, inverters, et al consists of domestic product, the district will receive a tax rebate payment one year subsequent to the end of construction.   

On behalf of the district, Schneider Electric advertised and bid out the solar voltaic initiative to all contractors in order to satisfy procurement guidelines and yield the most competitive and competent  contractors.  In order to provide the district with the most competitive pricing, contractors/solar developers considered both domestic and non-domestic content within their proposals. Domestic content was not necessarily a prerequisite of the bid parameters. 

In partnership with Schneider Electric, the district can consistently monitor the district’s energy production in order to ensure that the district is maintaining or exceeding the energy production that was forecasted.  If the district’s energy production yielded from the solar voltaic project falls short of the projected energy production forecast by Schneider Electric, they will guarantee and reimburse the district for discrepancies identified.   

Schneider Electric established baseline energy consumption based upon analysis of the last two years of utility data provided by the district.  Also, Schneider Electric determined  baselines by considering weather normalization analysis for the region.  Schneider Electric aligned its baselines for electric baseline comsumption to the baselines modeled by the district’s electricity supplier. This approach provides multiple data points from various perspectives to inform the baseline for electricity consumption.    

The projects base the savings in KWH saved which translates to dollars when a calculation is undertaken to determine the cost per KWH.   

Schneider Electric will work with all contractors to ensure that the district is afforded with comprehensive warranties to protect the district’s investment. 

Schneider Electric explains that the district will incur the following standard warranties:

• 5 year workmanship warranty which encompasses product defects and malfunctions related to installation and construction. 
• 30 year linear warranty for the solar panels which ensures that the solar panels will yield the forecasted minimum energy production forecasted.  In the event that energy production does not meet that minimum threshold, the district can have the underperforming panel(s) replaced at no cost to the district. 

30 + years…The solar arrays have a life expectancy of approximately 30+ years.  The degradation of energy production has been calculated out for thirty years.  However, some arrays can have a life expectancy that exceeds thirty years.  After 20 years, the infrastructure costs for the solar infrastructure will be paid off and debt service will be satisfied at the conclusion of 20 years. All energy production that occurs subsequent to 20 years will afford the district with 100% cost offset from the district energy consumption at that time. 

Act 34 is new legislation that was recently enacted whereby public school districts could apply for monies that could offset potential HVAC improvements to improve air quality for school stakeholder groups.  The district will pursue these funds and other grants as they become available to offset the incurred costs of the proposed capital improvements.  GESA legislation allows school districts to finance the costs of capital improvements and utilize guaranteed energy savings outlined in performance contracts as collateral in order to realize projects that improve energy efficiency. 

The district has prioritized examining the proposed capital improvement projects for the following reasons: 

• The Multi-Stack HVAC System at the high school is near the end of its useful life.  In 2025, the warranties that are currently maintained upon the Multi-Stack will expire. 
• Based upon the service history of the multi-stack HVAC System, it is incumbent upon the district to identify a heating and cooling system to ensure the safety of faculty, staff, and students who inhabit the high school campus in a manner that is financially responsible. 
• Within the current fiscal climate, it is critical to project anticipated expenditures.  Maintaining a HVAC system that has exceeded its useful life which may cause malfunctions that impact the continuity of education and introduce unanticipated expense is not in the best interest of the district. 
• The elementary windows have been prioritized as a potential capital improvement because the windows in the elementary school are NOT commercial school windows.  Rather the original windows that inhabit the building are residential windows.  Numerous windows do not properly function.  As a result, many windows do not open properly.  This poses a safety issue for they do not allow egress in the event of school evacuation.  Additionally, other windows cannot be properly secured. This presents a security vulnerability.  The window upgrade has been prioritized because the safety and welfare of our faculty, staff, and students is paramount to the district. 
• The solar voltaic initiative has been prioritized at this time as a means to offset the costs of the aforementioned capital improvements.  The PA Guaranteed Energy Savings Act (GESA) is a vehicle utilized by public entities to address increasing utility costs and their impact upon operating budgets.   This is accomplished through a progressive contracting process that enables mass upgrades of building components such as lighting, HVAC, water, etc. to be replaced through a budget neutral process. These upgrades significantly reduce energy usage which result in decreased utility spending.   The solar initiative was conceptualized a process that would enable the district to progress with prioritized capital improvements that sustain district operations in a manner that reduced that capital put forth by the district.