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Home My WebLink About03. Public Hearing on Sun Edison PPACentral Contra Costa Sanitary District BOARD OF DIRECTORS POSITION PAPER p Board Meeting Date: January 8, 2014 Subject. CONDUCT A PUBLIC HEARING TO CONSIDER AWARD OF THREE POWER PURCHASE AGREEMENTS TO SUN EDISON, LLC AND AUTHORIZE THE GENERAL MANAGER TO EXECUTE POWER PURCHASE AGREEMENTS WITH SUN EDISON, LLC FOR SOLAR POWER AT THREE DISTRICT -OWNED LOCATIONS AS PART OF THE REGIONAL RENEWABLE ENERGY PROJECT Submitted By: Initiating Dept /Div.: Dan Frost Engineering Department Associate Engineer REVIEWED AND RECOMMENDED FOR BOARD ACTION: N. Hodges — Provisional Senior Engineer D. Gemmell — Environmental Services Division Manager J. M. Petit —Director of Engineering Kent Alm Roger S. Bailey Counsel for the District General Manager ISSUE: 1) California Government Code Section 4217.12 requires public agencies to hold a public hearing when considering award of energy services contracts; 2) Board of Directors' authorization is requested for the General Manager to execute the proposed power purchase agreements; and 3) Board of Directors' approval is required prior to the filing of a Notice of Exemption under the District's California Environmental Quality Act (CEQA) Guidelines. RECOMMENDATION: 1. As required by California Government Code Section 4217.12: a. Conduct a public hearing to consider award of three power purchase agreements to Sun Edison, LLC; b. Find that the notice of this public hearing held pursuant to Government Code Section 4217.12 was given at least two weeks in advance of this public hearing; c. Find that the three power purchase agreements with Sun Edison, LLC are in the best interest of the District; d. Find that the anticipated costs to the District for electrical energy provided by the power purchase agreements will be less than the anticipated marginal cost to the District for other energy that would have been consumed by the District in the absence of the power purchase agreements; and e. Find that Government Code Section 4217.12 (a) (2) is not applicable to these agreements. C: \UHpr cgeg\AppData \Local \Microsoft \Windows \Temporary Internet Files \Content.0utlook \SZPPEJUP\PP for Holding PH for Sun Edison PPAs Ql -8 -15 Final Draft. dc rdews\ aq-#r W F41--sk-enlenE- AFHtee#44PA UA\PPR -fef Hol,ang P14 fea u �isen�F�AsB x-15 ra#t �eex Page 1 of 5 POSITION PAPER Board Meeting Date: January 8, 2014 Subject: CONDUCT A PUBLIC HEARING TO CONSIDER AWARD OF THREE POWER PURCHASE AGREEMENTS TO SUN EDISON, LLC AND AUTHORIZE THE GENERAL MANAGER TO EXECUTE POWER PURCHASE AGREEMENTS WITH SUN EDISON, LLC FOR SOLAR POWER AT THREE DISTRICT -OWNED LOCATIONS AS PART OF THE REGIONAL RENEWABLE ENERGY PROJECT 2. Authorize the General Manager to execute three power purchase agreements with Sun Edison, LLC to supply power generated by solar photovoltaic panels to the District's Household Hazardous Waste Facility, Collection System Operations Building, and Vehicle Maintenance Shop. FINANCIAL IMPACTS: The power purchase agreements will provide approximately $300,000 in energy savings (20 -year Net Present Value, NPV) over the 20 -year PPA term when compared to continued import of PG &E grid power. STRATEGIC PLAN IMPACTS: The power purchase agreements for solar power align with Goal Four, Strategy 1 of the District's 2014 -2016 Strategic Plan to be a leader in the wastewater industry by using "...sustainable practices that minimize waste, maximize resources, protect the ratepayer, improve the community, and embrace innovation." ALTERNATIVES /CONSIDERATIONS: The District could choose not to enter into power purchase agreements with Sun Edison, LLC. By not executing the power purchase agreements, the District would continue to import PG &E grid power for each of the three District facilities. BACKGROUND: R -REP Program: In January 2013, the Board of Directors authorized the General Manager to execute a Memorandum of Understanding (MOU) for participation in the Regional Renewable Energy Procurement (R -REP) program, which included eighteen other public agencies. The R -REP process is led by Alameda County and modeled after the Silicon Valley Collaborative Renewable Energy Procurement Project (SV -REP), which took place in 2009 -2011 and demonstrated that collaborative procurement leads to a reduction in both administrative and installation costs for solar. In preparation for the R -REP project, the District conducted a Solar Feasibility Study in 2012 with Optony, Inc., which indicated solar power to be cost - effective for the following three District sites: Household Hazardous Waste Facility (HHW), Collection System Operations Building (CSOB), and Vehicle Maintenance Shop (VMS). In 2013 and 2014, Alameda County (Lead Agency on behalf of the R -REP participating agencies) completed an RFQ /RFP process, that was structured as an C: \Users \cgee\HppData \Local \Microsoft \Windows \Temporary Internet Files \Content.Outlook \SZPPEJUP \PP for Holding PH for Sun Edison PPAs 01 -8 -15 Final Draft. docxGAWreF6W Page 2 of 5 POSITION PAPER Board Meeting Date: January 8, 2014 Subject. CONDUCT A PUBLIC HEARING TO CONSIDER AWARD OF THREE POWER PURCHASE AGREEMENTS TO SUN EDISON, LLC AND AUTHORIZE THE GENERAL MANAGER TO EXECUTE POWER PURCHASE AGREEMENTS WITH SUN EDISON, LLC FOR SOLAR POWER AT THREE DISTRICT -OWNED LOCATIONS AS PART OF THE REGIONAL RENEWABLE ENERGY PROJECT indefinite quantity, multiple award, best -value solicitation. California Government Code Section 4217.10, et seq. authorizes public agencies to solicit proposals from qualified persons and award a contract on the basis of the experience of the firm, the type of technology employed by the firm, the cost to the local agency, and any other relevant considerations, provided that the_proiects deliver net cost savings to the public agency. The solicitation included 186 sites that were grouped into 11 bid bundles. Sun Edison, LLC was ultimately recommended for award of the District's three proposed sites for solar photovoltaic systems. Sun Edison's bid included pricing for both direct purchase and a power purchase agreement. The District opted to pursue the power purchase agreement, where Sun Edison would design, install, own, and maintain the solar arrays at the District's facilities and the District would enter into a long -term contract to purchase electricity generated by the solar installation. Proposed Facilities: Sun Edison, Inc. will install the following solar panels: 144.5 kW at CSOB; 25 kW at VMS; and 25 kW at HHW for a total of 194.5 KW. See Exhibit A for locations at each site. Key PPA Terms: Below are some of the key terms from the PPA contract: • Agreement Length: 20 -year term with optional 5 -year extension at mutually agreed upon terms. • Purchase Option: The District can purchase the solar systems for fair market value approximately 6 years and 3 months after the commercial operation date. • Production Guarantee: Includes minimum delivery of at least 90% of the expected annual power output. • Early Termination Fees: If the District decides to terminate a PPA without cause prior to completion of the 20 -year term, the District would be responsible for paying an early termination fee (ranges from $6.63- $8.59/W during the 1St contract year to $1.53- $1.85/W during the 20 h contract year). • Removal Fund: Sun Edison, Inc. is required to establish a reserve fund in an interest - bearing escrow account to be used for removal of the solar systems and restoration of the facilities to pre - project conditions. • Project Management Funding: Sun Edison, Inc. is required to provide approximately $30,000 to the District to cover project management costs. • Maintenance: Sun Edison, Inc. is responsible for all maintenance related to the systems, including routine cleaning of the panels. C: \Users\coee\APPData \Local \Microsoft \Windows \Temporary Internet Files \Content.Outlook \SZPPEJUP \PP for Holding PH for Sun Edison PPAs 01 -8 -15 Final Draft.docx Page 3 of 5 POSITION PAPER Board Meeting Date: January 8, 2014 subject. CONDUCT A PUBLIC HEARING TO CONSIDER AWARD OF THREE POWER PURCHASE AGREEMENTS TO SUN EDISON, LLC AND AUTHORIZE THE GENERAL MANAGER TO EXECUTE POWER PURCHASE AGREEMENTS WITH SUN EDISON, LLC FOR SOLAR POWER AT THREE DISTRICT -OWNED LOCATIONS AS PART OF THE REGIONAL RENEWABLE ENERGY PROJECT • Energy Pricing: Each PPA includes a base price based on site - specific requirements and includes a 2 percent per year fixed escalator. Project Triple Bottom Line Benefits: Financial Benefits: Based on analyses performed by Optony, Inc., the power purchase agreements will provide approximately $300,000 in NPV energy savings for all three sites over the 20 -year PPA term when compared to continued import of PG &E grid power. The 20 -year levelized cost of electricity (LCOE) for the three sites with the PPAs ranges from $0.152 /kWh to $0.187 /kWh. Currently the District's LCOE ranges from $0.199 /kWh to $0.229 /kWh. According to the R -REP analysis, the bids average between 17% and 45% below comparable market pricing. Environmental Benefits: Based on first year solar production estimates, the solar sites will offset 74 percent of the annual grid demand for the Collection System Operations Building, 71 percent of the annual grid demand for the Household Hazardous Waste Facility, and 85% of the annual grid demand for the Vehicle Maintenance Shop. The three systems are expected to produce over 280,000 kWh of electricity in the first year, resulting in an estimated greenhouse gas reduction equivalent to 200 metric tons of CO2. The solar vendor obtains all rights to report ownership of all environmental attributes such as emissions reductions /benefits /credits. Social Benefits: The proposed sites will increase public awareness of solar as a viable energy generation alternative that provides energy savings, stability for the District's long -term power costs for the three sites, and increased energy self- sufficiency. A viewing "kiosk" will be provided for each site for the District and the general public to view real -time solar energy production. Environmental Review: Staff has concluded that this project is exempt from the California Environmental Quality Act (CEQA) under 1) District CEQA Guidelines Section 21080.35, since the project involves installation of solar energy facilities that are located on the roof of either an existing building or an existing parking lot; 2) District CEQA Guidelines Section 15301 since it involves minor alterations to an existing public facility; 3) District CEQA Guidelines Section 15303 since it consists of construction of small structures; and 4) District CEQA Guidelines Section 15061(b)(3), since it can be seen C: \Users \cgeeWogData \Local \Microsoft \Windows \Temporary Internet Files \Content.Outlook \SZPPEJUP \PP for Holding PH for Sun Edison PPAs 01 -8 -15 Final Draft.docx Page 4 of 5 POSITION PAPER Board Meeting Date: January H, 2014 Subject: CONDUCT A PUBLIC HEARING TO CONSIDER AWARD OF THREE POWER PURCHASE AGREEMENTS TO SUN EDISON, LLC AND AUTHORIZE THE GENERAL MANAGER TO EXECUTE POWER PURCHASE AGREEMENTS WITH SUN EDISON, LLC FOR SOLAR POWER AT THREE DISTRICT -OWNED LOCATIONS AS PART OF THE REGIONAL RENEWABLE ENERGY PROJECT with certainty that there is no possibility that the activity in question may have a significant effect on the environment. This certainty is based on the District's past experience with numerous construction projects and the relatively small areas involved. Authorizing the General Manager to execute the power purchase agreements will establish the Board of Directors' independent finding that this project is exempt from CEQA. COMMITTEE RECOMMENDATION: The Engineering & Operations Committee reviewed this project at its meeting on , and recommended RECOMMENDED BOARD ACTION: 1. As required by California Government Code Section 4217.12: a. Conduct a public hearing to consider award of three power purchase agreements to Sun Edison, LLC. b. Find that the notice of this public hearing held pursuant to Government Code Section 4217.12 was given at least two weeks in advance of this public hearing. c. Find that the three power purchase agreements with Sun Edison, LLC are in the best interest of the District; d. Find that the anticipated costs to the District for electrical energy provided by the power purchase agreements will be less than the anticipated marginal cost to the District for other energy that would have been consumed by the District in the absence of the power purchase agreements; and e. Find that Government Code Section 4217.12 (a) (2) is not applicable to these agreements. 2. Authorize the General Manager to execute three power purchase agreements with Sun Edison, LLC to supply power generated by solar photovoltaic panels to the District's Household Hazardous Waste Facility, Collection System Operations Building, and Vehicle Maintenance Shop. Attached Supportinq Documents: 1. Proposed Solar Layouts (3 pages). C: \Users \cgee\AppData \Local \Microsoft \Windows \Temporary Internet Files \Content.Outlook \SZPPEJUP \PP for Holding PH for Sun Edison PPAs 01 -8 -15 Final Drab OCX Page 5 of 5 Regional Renewable Energy Procurement (R -REP) Update �<<CD December 9, 2014 Engineering & Operations Committee Meeting Public Health unit (lie Environment R -REP Timeline (4/21/14) E &O Committee (1/10/13) CCCSD recommended staff Board Authorized continue to evaluate sites (9/22/14) Staff GM to execute and agreed on triple update to E &O MOU with R -REP bottom line approach Committee Optony, Inc. Completed CCCSD Solar Feasibility Study R -REP RFQ /RFP led by Alameda County (19 agencies, 180+ sites, >30MW) per CA Govt Code 4217.12 Sun Edison selected for bundle with CCCSD sites R -REP Group PPA negotiations R -REP Timeline (12/18/14) Staff Presentation & Request Board (12/4/14) Board Authorization to Set Public Hearing Date Meeting vote to "table" setting (1/8/15) Board of public Meeting to consider hearing date award of PPAs 20 -Year PPA Term ( approx.) I I Dec Jan Nov 2014 014 2015 Jan 2015 -July 2015 July 2015 - July 2035 a Design and (11/24/14) Staff (12/9/14) Staff Construction Update & E &O Presentation & Phases (approx.) Committee E &O Committee recommended review of Position setting public Paper to consider hearing date awarding PPAs Collection System Operations Building 1 1� %qA PPAs dependent on CSO inclusion 20 -Year Levelized Cost of Electricity: Without PPA = $0.199/kWh With PPA = $0.165/kWh Savings increase as PG &E escalates at higher rate than PPA (2 %/year) 12/5/2014 Key PPA Terms • Agreement Length: 20 -year + 5 -year optional (re- negotiate) • Purchase Option: Fair market value after -6 years, 3 months • Production Guarantee: 90% of the expected output • Early Termination Fees: If District terminates without cause (from $6.63- $8.59/W in 1st year to $1.53- $1.85/W in 20t" year) • Removal Fund: Sun Edison required to establish reserve fund for removal of the solar systems and restoration of facilities • Project Management Funding: $30,000 included in PPA to cover District project management costs • Maintenance: Sun Edison, Inc. responsible for all maintenance including routine cleaning of the panels • Energy Pricing: Includes a 2 percent per year fixed escalator • Permitting: Sun Edison is responsible for permitting. District responsible for CEQA. R -REP Agencies Moving Forward • Alameda County • City of Fremont • Foster City • Contra Costa County • San Mateo County • City of Cupertino • Hayward Area Rec District • Other Agencies in Negotiations: CCCSD, City of Walnut Creek, City of Mountain View, City of Redwood City, UC Berkeley, City of Menlo Park Energy Cost Savings Minimal Savings Energy Price Stability Early Termination Fees High Visibility to Public Unforeseen Costs Aligns w /Strategic Plan No Grants or Rebates Available (Goal Four, Strategy 1) "Green" Power: 200 tons Site Constraints CO?/year reduction Grandfathered into Net Metering Cannot Predict PG &E Rates Tariffs prior to NEM 2.0 Reduced Effort using R -REP Solar Vendor Owns Environmental Credits Lower Pricing w/ R -REP Potential Liabilities * 12/5/2014 5 12/5/2014 Al 12/5/2014 7 Current 2010.2014 Currey 2007 -2014 current 2007 -2014 Raft Avg. Avg. Avg. ($/kWh) Escalation ($ /k h) Escalation ($/ kWh) Escalation (%/rear) (% /rear) (% /rew) summer $0.25 2.82% $0.18 2.70% $0.68 8.07% On Peak Summer $0.28 4.20% $0.17 8.18% $0.27 7.88% Part Peak Summer Off Peak $0.22 8.80% $0.18 8.71% $0.18 8.88% Winter Part Peak $0.17 2.74% $0.18 2.00% $0.17 8.02% wince Off Peak $0.18 1.08% $0.11 2.08% $0.14 4.40% 12/5/2014 7 O &M Included • Continuous remote monitoring and alarming to detect irregularities early • Remote diagnostic capabilities and performance analysis • Remote controls of system • Preventative maintenance schedule: • Mechanical: 2 visits per year • Electrical: 2 visits per year • Cleaning/Corrosion Checks: 2 per year (min)