The city of Santa Barbara is taking another step towards its goal of using renewable energy sources..with the start of work on a new solar power facility to power some city facilities.

LO: One of the things that's especially unique about the project is the way it's being financed. What could have cost the city millions isn't costing it a cent.

ML: They get the benefit of being green, they get the benefit of purchasing this solar electricity from us at a rate that is competitive with the existing utility grid, in this case Southern California Edison. It's sort of a win-win situation for everybody.

LO: Matt Lugar is vice president of Tioga Energy. The Bay Area company is financing, will own and will operate the solar system. The city has signed a two decade long deal to buy the project's power. Tioga is assured that it has a long-term guaranteed customer. So the city doesn't have to spend potentially millions it doesn't have for infrastructure but is getting access to renewable energy.

ML: The host customer as we call them, such as the City of Santa Barbara in this case, gets all of the green benefits of going solar by hosting the solar array on their rooftops. They're only buying the electricity from Tioga Energy, and they have absolutely no capital outlay. The other beautiful thing about it is that we are able to monetize the 30% federal investment tax credit, which a municipal entity like the City of Santa Barbara is not able to do. What that allows us to do is deliver the electricity to them at an even lower rate.

LO: Tioga officials say in most cases electricity is competitive with power off the commercial grid. And because it's a long term deal, as commercial energy prices rise, the city could actually be green and save money at the same time.

ML: When we are defining what that price for the electricity is going to be, there's a predictable number for the entire term of the contract. And they tend to be 20 years, but 15 and 25 years are possible. We are looking at the credit worthiness of the entity, whether it's a private company or a municipal entity. Long term sales of electricity on the long term contract. And again, the benefit on the other side of the table for the City of Santa Barbara in this case is again this very predictable hedge against fluctuating energy rates that are bound to happen.

LO: EI Solutions' president Andrew Beebe says this no capital outlay approach to providing solar power to government agencies and non-profits has helped jump-start new interest in solar energy because it's suddenly more financially viable.

AB: The big innovation that's really changed the game is the ability for us to finance these installations so they can be at or near the current cost of power. And that way, customers aren't paying $10 million up front, they're just paying a penny more per kilowatt-hour on their electricity bill, and in some cases they're actually paying the same amount that they pay today on their electricity bill, and yet they're getting huge portions of their power needs from the sun.

LO: City of Santa Barbara officials say this approach made a project possible, which probably wouldn't have happened if the city had to lay out the capital. Jim Dewey with the City says its an important new step in the Santa Barbara's efforts to reduce greenhouse gas emissions and rely more on renewable energy.

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