Galt is joining a growing number of cities that are relying on solar power to run municipal water and wastewater treatment plants.
A private company will lease land from the city and construct and maintain solar panels for 20 years.
In return, the city will buy a certain amount of power every year for a price that will be lower than current and anticipated rates from the Sacramento Municipal Utility District.
The Galt City Council unanimously approved the agreement Tuesday night with Randy Shelton absent.
The city estimates it will save at least $1.2 million during the 20-year agreement with SunPower Corporation, said Sandra Kiriu, principal planner.
The panels will tower over a pond that used to hold water and is northeast of the new additions to the treatment plant. The panels will continually track the sun's movement east to west.
Last week, the city finished $16.6 million in state-mandated upgrades to the treatment plant, including two new steps in the cleaning process for the water. The new equipment, which includes 574 ultraviolet bulbs, will use about a half-a-million more kilowatts a year in electricity.
The solar project will take care of all of the city's current demand for power at the wastewater plant.
"Our first goal was to stabilize and minimize energy costs," Kiriu said.
Under current SMUD rates, the city would spend about 10 cents per kilowatt-hour, while the solar system will provide energy at about 8 cents per kilowatt.
The project will take four months to complete, and also helps the city meet goals to reduce greenhouse gases and promote and encourage the use of renewable energy, Kiriu said.
The system will offset the carbon emissions for at least 174 homes per year, or 3,323 over 20 years, according to Kevin Ross, a SunPower account manager.
It is unclear how many panels will be installed. The agreement provides for the city to purchase 2 million kilowatts per year, but the city could increase that to 2.5 million in the next 90 days.
Staff built in the option to create a larger system so it could evaluate how much electricity the plant's new upgrades will use.
Once the plant is constructed, SunPower will be in charge of any maintenance and cleaning the panels at least once a year.
"Mother Nature does a good job cleaning the panels, but we do come clean them in the summertime because dust builds up, especially if there is construction near the basin," Ross said.
Other cities have also entered into power purchase agreements to develop solar projects to run utility plants. SunPower designed a similar solar project in Thousand Oaks that went online on May 2008 with 2,783 panels.
Lodi also has considered using solar power at its White Slough wastewater plant. In August 2009, the city asked businesses for proposals to install and operate a solar plant, and sell the power to the city. But Lodi did not receive any feasible projects and the idea has stalled, city spokesman Jeff Hood said.
One of the advantages of entering a power purchase agreement is that private contractors can utilize federal tax credits, low-interest loans and SMUD rebates for installing solar that are not open to municipalities, Kiriu said. The company also receives the benefit of having a guaranteed buyer of the electricity it creates.
Because the company receives rebates and tax incentives, it can pass on the savings when it sells power to the city, Kiriu said.
If the company were to back out of the proposal, SunPower would be required to pay the difference between the locked in solar rates and whatever the city is paying SMUD at that time, Kiriu said.
City Attorney Steve Rudolph pointed out that the only way the contractor will earn money for its investors is if the plant keeps operating.
"One of the great comforts we have in this transaction … is they are highly motivated to keep this power plant up and running in peak condition," Rudolph said.
At the end of 20 years, the city will either be able to purchase the panels, extend the contract five years or ask SunPower to remove the panels. The agreement also allows the city the option of purchasing the plant after 10 or 15 years.
Resident Al Baldwin wanted to make sure that the council had more information on the project than what was presented at the meeting, but said he is a proponent of solar.
"The city could really need something like this as long as it is feasible," he said.