HomeMy WebLinkAbout14. Receive update and authorize staff to initiate procurement of a Power Purchase Agreement for a solar energy project Page 1 of 15
Item 14.
CENTRAL SAN BOARD OF DIRECTORS
POSITION PAPER
MEETING DATE: MAY 7, 2020
SUBJECT: RECEIVE UPDATE AND AUTHORIZE STAFF TO PROCEED WITH
RECOMMENDED ACTIONS TO INITIATE THE PROCUREMENT OF A
POWER PURCHASE AGREEMENT FOR A 1.75 MEGAWATT SOLAR
ENERGY PROJECT ON CENTRAL SAN'S LAGISS PROPERTY
SUBMITTED BY: INITIATING DEPARTMENT:
MELODY LABELLA, RESOURCE RECOVERY ENGINEERING AND TECHNICAL SERVICES-
PROGRAM MANAGER PDS-RESOURCE RECOVERY
REVIEWED BY: JEAN-MARC PETIT, DIRECTOR OF ENGINEERING AND TECHNICAL
SERVICES
Roger S. Bailey Kenton L. Alm
General Manager District Counsel
ISSUE
Board authorization is requested for staff to initiate the procurement process for a Power Purchase
Agreement (PPA)for a 1.75 megawatt solar energy project on Central San's Lagiss property.
BACKGROUND
At the August 1, 2019, Board meeting, staff along with Russell Driver, Founding Principal of ARC
Alternatives (ARC), a solar energy and energy efficiency consulting firm, provided an update to the Board
on the development of a solar energy project on Central San's Lagiss property. At the conclusion of the
presentation, the Board directed staff to complete a detailed financial analysis for presentation to both the
Real Estate, Environmental and Planning (REEP) Committee and the full Board. The detailed financial
analysis involved two aspects:
May 7, 2020 Regular Board Meeting Agenda Packet- Page 123 of 166
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1. Refining our reliable, future grid power demands, which included:
• Reexamining past grid purchase data
• Completing an evaluation of energy efficiency opportunities at the Treatment Plant campus
(walk-through audit and review of drawings)
2. Refining the assumptions in the financial model
Staff continued to work with ARC to complete these elements of the detailed financial analysis and, along
with Mr. Driver, presented the results at the February 10, 2020, REEP Committee meeting. At that
meeting, the REEP Committee requested additional analysis and information, including:
1. An updated financial analysis on the project excluding the grid power demand from Central San's
Treatment Plant, and
2. An updated analysis that includes a timeline and the financial commitment required for each timeline
milestone for the project delivered with the following scenarios:
• as a Power Purchase Agreement;
• as a Central San Capital Project; and
o with 1% California Energy Commission funding.
Staff again worked with ARC to complete these additional analyses and, along with Mr. Driver, presented
the requested information at the April 20, 2020, REEP Committee meeting. After a thorough and
thoughtful review by the REEP Committee, staff is returning to the Board to provide the attached
presentation, which reviews the detailed financial analyses, and to seek the Board's approval to proceed
with staff's recommended steps to initiate procurement on the project.
CEQA
Staff has concluded that this activity is exempt from the California Environmental Quality Act (CEQA)
under Central San's CEQA Guidelines Section 15262, since it allows for further planning and feasibility
studies for possible future actions which Central San has not approved, adopted, or funded, and the
outcome of these tasks will not have a legally binding effect on later activities. Approval of this activity will
establish the Board's independent finding that this activity is exempt from CEQA. Central San will conduct
an environmental evaluation of any project that is proposed in the future as a result of this activity to
determine the need for any additional CEQA documentation.
ALTERNATIVES/CONSIDERATIONS
The Board could chose to not proceed with procurement of this project, but that is not recommended, as
this project has a projected long-term operations and maintenance cost savings and would reduce Central
San's reliance on non-renewable energy.
FINANCIAL IMPACTS
The proposed project is estimated to save Central San approximately$4 million in energy costs over the
25-year analysis period. In addition to staff time, proceeding with the recommended actions would cost
approximately$50,000 for solar and environmental consultant support.
COMMUNITY OUTREACH
Community outreach to the residents near Central San's Lagiss property is included as part of staff's
recommended actions to initiate the procurement process for the project. Staff has innovated ways to
solicit public input on projects in compliance with the COVI D-19 shelter-in-place and social distancing
requirements.
May 7, 2020 Regular Board Meeting Agenda Packet- Page 124 of 166
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COMMITTEE RECOMMENDATION
This matter was considered at the April 20, 2020, REEP Committee meeting and the Committee was
supportive of bringing staff's recommended actions to the full Board for consideration.
RECOMMENDED BOARD ACTION
Receive the update and authorize staff to move forward with the following actions:
• Begin the environmental review(CEQA) process and community outreach;
• Amend ARC Alternatives' existing contract (under staff authority)to develop a Request for Proposal
(RFP), support Central San through the procurement process, and conduct a performance audit of
Central San's existing solar arrays; and
• Release an RFP for a PPA for a 1.75 megawatt solar array on Central San's Lagiss Property.
Strategic Plan Tie-In
GOAL THREE: Be a Fiscally Sound and Effective Water Sector Utility
Strategy 2- Manage costs
GOAL SIX: Embrace Technology, Innovation and Environmental Sustainability
Strategy 2- Reduce reliance on non-renewable energy
ATTACHMENTS:
1. Presentation
May 7, 2020 Regular Board Meeting Agenda Packet- Page 125 of 166
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UPDATE ON DEVELOPMENT OF
CENTRAL SAN'S POTENTIAL
SOLAR ENERGY PROJECT
Melody LaBella, P.E.
Resource Recovery Program Manager
Board Meeting
May 7, 2020
I
BACKGROUND
• At the August 1 , 2019, Board meeting,
staff and Central San's solar consultant
reviewed the project concept:
• 3 megawatt (MW) solar array on Central
San's Lagiss property that would
interconnect through PG&E's
Renewable Energy Self-Generation Bill
Credit Transfer Program (RES-BCT) to
export energy to the grid and receive
generation credits, which can be applied
to awn it of Central San's electrical
accounts not already on solar
Iz
CFNTPAI SAN
May 7, 2020 Regular Board Meeting Agenda Packet- Page 126 of 166 1
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BACKGROUND (CONTINUED)
• The Board directed staff to complete a detailed financial
analysis and return with an update
• The detailed financial analysis involved two aspects:
1 . Refining our reliable, future grid power demands
• Reexamining existing grid purchase data
• Completing an evaluation of energy efficiency opportunities at
the Treatment Plant campus (walk-through audit and review
of as-built drawings)
2. Refining the assumptions in the financial model
13
BACKGROUND (CONTINUED)
• Update at the February 10, 2020, Real Estate, Environmental
& Planning (REEP) Committee meeting
• In reexamining existing grid purchase data, the size of the array
decreased from 3 MW to 2.5 MW
• After completing the energy efficiency audit at the Treatment Plant
campus, the size of the solar array decreased to 1 .75 MW
• In refining the financial data, the project benefits increased due to
a higher PG&E rate increase than initially modeled
• Update at the April 20, 2020, REEP Committee meeting
CFNTPAISAN
l4
May 7, 2020 Regular Board Meeting Agenda Packet- Page 127 of 166 2
Page 6 of 15
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• • PROJECT UPDATE
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Prepared for:
Central Contra Costa Sanitary District
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Agenda r)
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• Summary of February 2020 REEP Committee Update D
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• Procurement and Implementation Schedule and Approach D
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District Financial Commitments (Based on Procurement Method) o
• Economic Analysis Update
RES-BCT Program Update o
• Findings M
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Page 6
May 7, 2020 Regular Board Meeting Agenda Packet- Page 128 of 166 3
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Summary of February 2020 REEP Committee Update n
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Summarized energy D
WE
bas 61F CoA! InCrllnenW FIAI
efficiency study Ear �""` `"' '"a°"' "°'a" ""°*` 1Pa
ism pm OM scan &mf' C/l
LED Lighting Retruflc 715.833 - $70,507 $0 5620.020 $524,020 8A D
Approach and results Iwacl,�� 3 $4376 $las $ 900 Sass 181} z
0peratlonal 1.087 54 5108 $0 5250 5250 2-3 (n
Identified three project Tau, 7!1,916 50ss9y92 s7ag,600 $798.170 $1570.770 9A O
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5lmple Paybackcal.Wed on lnc emenyl PrefectM1[1 G,the Cost of the energy-reWted efflck ry pggft >
types resulting in 793,918
kilowatt hours (kWh) in
annual savings o
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• Presented updated 1.75 MW System Cumulative Benefit
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financial analysis Sn,nu0000 $4,171,952---
accounting for energy m
efficiency projects and $�°°°w
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updated utility data "..'0
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year 1
$L1.0
1.75 MW system
Modeled Power Purchase °
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Agreement (PPA) price of Pagel
0 2 3 3 6 ] 8 9 10 1] 12 13 14 15 16 1] 18 19 20 21 22 23 24 25
$0.105 per kWh
1.75 MW Solar Array
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May 7, 2020 Regular Board Meeting Agenda Packet- Page 129 of 166 4
Page 8 of 15
Summary of February 2020 REEP Committee Update (continued) n
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• Based on information D
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presented at the February 2020 D
REEP meeting, the Committee o
requested the following: _ ;; �__ _ _
_____________
➢ Analysis of different financing ___' =__ ___
options -= ==_-= ==R __ _ o
➢ Looking at the project with and - ---�--
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without the Plant's electrical grid
demands ■■�TT���T��: m
➢ A schedule assessment
identifying District financial
commitments over time
Page 9
Solar Project—Procurement and Implementation Schedule (Estimated) r,
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[D Task Name Duration 51art Finish 202p 20212022
1 Central San RFP Process 105 days 5/8120 10/1/20 r1
2 Develop Central San draft RFP documents 24 days 5/8/20 6110/20 N
3 Client review of draft RFP 10 days 6/11/20 6124/20 Z
4 Revise and Flnalite RFP documents 4 days 6/25/20 6/30/20
5 Release Central San RFP Odays 6130120 6/30120 X6/30 N
6 Conduct site walk Iday 719/20 7/9/20 O
7 RFP questions due Odays 7/15/20 7/15/20 7/15
B Pruposalsdue Iday 7/29/20 7/29/20
9 Evaluate proposals 10 days 7/30120 8/12/20
Ed Conduct Interviews 5 days 8/13/20 8119120 Ij Q
L1 Internal review and discussion 5days 8/20/20 8/26120 n
12 Prepareapproval recommendation for PEEP Meeting 17 days 8(27/20 9/18(20
0 PEEP Meeting-approval of recommendation for award Iday 9/21120 9/21/20 ry
14 Prepare materials fpr full Board Meeting 7days 9/22/20 9/30/20 r}1
LS Board Meeting-approval of recommendation for award'k Iday 10/1120 1011120 0
L6 Contratt selection 0clap 10/1/20 10/1120 ��/1 >
V Cmrcrannegotlations 44 days 10/2/20 12/2/20 Project has 71
1B BoardMecting-ContractExecution'x Iday 12/3120 12/3120 ,' approximately
19 Execute Contract/Project NTP 0days 1213/20 12/3120 6months float
20 Prefect Design 90 days 12/4120 4/8/21
21 CEQ4 rd Community Outreach 281 days 3112120 418/21
22 County Reviewand Approval of Permit Set 20 days 4/9121 5/6/21
23 solar PJConstruction 113 days 5/7121 10/12/21
24 PG&E interconnection Work 18 mons 1214120 4/21/22
25 Profen Complete 0days 4121122 4/21f22 ♦4121 Page 10
'Board action Critical path runs through
Request for Proposals(RFP) California Environmental Quality Act(CEQ4) interconnection
May 7, 2020 Regular Board Meeting Agenda Packet- Page 130 of 166 5
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Procurement Approach— Phased Process with Decision Points n
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Phased process structured with decision points prior to awarding a contract D
to a solar vendor
D
• RFP release (this meeting) Z
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• Recommended award to a solar vendor
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• Execution of solar contract/PPA
• Additional key decision point, after the project is under contract, is P
designed to minimize District obligations while additional project details
are developed in the following areas: o
• Technical design m
• CEQA
• PG&E interconnection
• The work of the solar vendor will be sequenced to minimize District
obligations until project risks relating to these areas are sufficiently page 11
mitigated
District Financial Commitments r)
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District Purchase: The table below shows District financial commitments at key project milestones
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for consultant and vendor costs for a District purchased project. N
PPA: The District has no financial commitments to the solar vendor until the system is z
operational. However,the District would be liable for costs incurred if the PPA U'
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were terminated. y
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District Financial Commitment
Milestone/Board Decision Point Description Consultant Vendor Total O
RFP Release Consultant support to develop and release RFP $ 18,000 $ $ 18,000
Solar Contract Award Consultant support of evaluation and award process $ 24,000 $ - $ 24,000 C
System Design Complete Vendor and consultant expenses for design effort $ 40,000 $ 517,175 $ 557,175 C
Construction Progress payments to vendor and consulting support $ 15,000 $ 4,447,705 $ 4,462,705
Acceptance Testing and Close-Out Final payment to vendor and consulting support $ 25,000 $ 206,870 $ 231,870 >
Total $ 122,000 $5,171,750 $5,293,750 m
Notes
• Vendor costs apply in the same way to both PPA and purchase contracts because the District would be responsible for
vendor expenses up to the point at which the project were canceled.
The key decision-making milestones in terms of District financial liability are"Solar Contract Award"and"System
Design Complete." Page 12
1,
May 7, 2020 Regular Board Meeting Agenda Packet- Page 131 of 166 6
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Economic Analysis Update n
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Examined six scenarios accounting for three different financing options (PPA, cash D
purchase, California Energy Commission (CEC) 1% loan financing) and two load
targets (with and without Treatment Plant grid demands) Z
• Revenue generation (utility savings) rates stay the same as at $0.1089/kWh in the o
first year of operation for both system sizes
• Pricing assumptions are dependent on system size o
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System Size PPA Rate*
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With Treatment Plant m
Grid Demands 1.75 $0.1050
Without Treatment Plant 1.10 $0.1150
Grid Demands
*Pricing assumes$500,000 for interconnection costs.Higher than assumed
interconnection costs will increase the PPA price or cost per Watt.Purchase pricing also Page 13
includes project contingency costs.
Economic Analysis Results r)
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Cash Purchase Z
Utility SavingsD
r
With Z
Treatment
1.75 MW plant Grid $11,059,193 $6,887,241 $6,737,406 $6,216,182 $4,843,011 0
r
Demands D
Without
1.1 MW Treatment $6,951,493 $4,741,420 f
Plant Grid $4,478,768 $4,127,314 $2,824,179 O
Demands m
*Includes Operations&Maintenance(O&M)and financing,if applicable.Cash and CEC Loan options based on construction cost of$2.75 per Wattfor the 1.75
MW system and$1.95 per Watt for the 1.1 MW system.Based on 25-year analysis period.Costs do not include project overhead and administration(e.g.,
inspections,CEQ4).
Cumulative Benefit of Systems Sized to Target Costs with and without Treatment Plant Grid Demands D
$6,000,000 — M
$6,000,000 $4,843,011
$4,171,962 $4,321,787
$4,000,000
$3,OOD,000 $2,824,179
$2,210,072 $2,472,725
$2,000,000
$1,00),000
$0 Page 14
With Treatment naM Loads With—Treatment Plant Load,
•Cumulative Benefit PPA Financing ■Cumul a live Benefit CEC Loan Purchase •C-1 tiv,Benefit Upfront Purchase
May 7, 2020 Regular Board Meeting Agenda Packet- Page 132 of 166 7
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Cash Flow for System With Treatment Plant Electrical Grid Demands n
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• The cash purchase option has the highest net benefit because there are no financing costs D
Both the PPA and CEC loan are cash flow neutral or positive starting in year 1
• Simple payback for the cash purchase isjust under 15 years z
0
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1.75 MW System for District Wide Costs assuming EE Project Implementation -Cumulative Benefit >
$6,000,000 $41843,011
$4,321,787 �1
$4,000,000 $4,171,952 O
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$2,000,000 C
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$-
0 1 2 3 4 5 6 7 8 9 10 11 12 '4 15 16 17 18 19 20 21 22 23 24 25 M
$(2,000,000)
$(4,000,000)
$(6,000,000)
Page 15
-PPA -1%CECLoan -Upfr nt Cash
Cash Flow for System Without Treatment Plant Electrical Grid Demands r,
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• Outcomes among the financing scenarios are similar to the larger system size D
Net benefits are less due to higher system costs with a smaller system size L,
• Cash purchase simple payback is now 16 years z
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r-
1.10
1.10 MW System for Non-Treatment Plant Costs -Cumulative Benefit >
$2,824,179 7
$4,004000
$2,472,725 Z7
$3,000,000 O
$2,210,072 M
n
$zoo0,000
C
$1,000,000
D
$
0 1 2 3 4 5 6 7 8 9 10 11 12 13 15 16 17 18 19 20 21 22 23 24 25 m
$11,000,000)
$(2,000,000)
$13,000,000)
$(4,000,000)
Page 16
-PPA -1%CECLoan -Upfront Cash
May 7, 2020 Regular Board Meeting Agenda Packet- Page 133 of 166 8
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Update on PG&E's RES-BCT Program r)
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• Focus on RES-BCT because it allows offsetting bills at remote pump stations and the benefits D
are not tied to plant operations
• Unallocated program capacity has increased from 20.36 MW to 23.28 MW since May 2019 z
• Likely to be capacity in the program if Central San moves forward o
r
RES-BCT Program Summary,Effective as of May 31,2019(Total cap of 105.25)
Number ofMW 43.46MW(41.29%of cap) I 20.36MW(19.35%of cap)
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■Total Counted Towards Cap[6] t7 Total Pending Projects[51 ❑Total Unallocated Program Space(Estimated)
RES-BCT Program Summary,Effective as of November 30,2019(Total cap of 105.25MW)
D
Number of MW 37.68MW(35.8%of cap) 24.15MW(22.95%ofwp) m
■Total Counted Towards Cap[6] a Total Pending Projects[5] ❑Total Unallocated Program Space(Estimated)
RES-BCT Program Summary,Effective as of Jan 31,2020(Total cap of 105.25MW)
Number of MW 38.54MW(36.62%of cap) 23.28MW(22.12%ofwp)
Page 17
■Total Counted Towards Cap[6] 0 Total Pending Projects[51 ❑Total Unallocated Program Space(Estimated)
ARC Findings r)
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• The plant's grid power demands should be included in the project, as the RES-BCT
Program is an ideal fit for offsetting the grid power purchased needed to run the
plant when Cogen is down for maintenance activities. D
Z
A larger system, sized to offset conservative estimates of plant loads,yields the o
best financial results. D
• The utility interconnection process extends the critical path of the project schedule. o
It is important to conduct the procurement work that needs to be completed for n
the interconnection work to start.There are approximately six months of float for
activities that are not on the critical path. o
D
Capacity in the RES-BCT program continues to hold steady and does not represent m
a significant project risk.
Page 18
May 7, 2020 Regular Board Meeting Agenda Packet- Page 134 of 166 9
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ARC Findings (continued) n
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• A PPA is the most beneficial path forward for the District D
The relative advantages of PPA versus District ownership are highlighted D
in the table below z
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PPA
D
Ownership
z
Net Benefit • M
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Performance Risk • C
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Ease of Implementation O
M
Contracting Mechanism O
0 Better O worse
Page 19
RECOMMENDED PROCUREMENT APPROACH
Staff recommends procuring the project via a PPA for
the following reasons:
Capital Budget dollars are in high demand.
There is very little difference in the financial benefit between
the PPA, cash purchase, and CEC 1 % loan pricing.
There is no difference in County Land Use Permitting
requirements or the assignment of the CEQA lead agency
as it relates to procurement method.
Central San already has experience with three solar PPAs.
' 20
CFNTPAISAN
May 7, 2020 Regular Board Meeting Agenda Packet- Page 135 of 166 10
Page 14 of 15
WHY PROCEED NOW
The Federal tax incentives solar vendors use to offer attractive
pricing are reducing every year.
There has been increased interest by solar vendors during these
economic times.
There may not be tax equity capital available in 2021 .
There is very little additional cost to issue an RFP and get pricing
back in order to confirm the estimated benefit of the project.
The project would result in O&M savings due to lower power costs.
Staff has innovated ways to solicit public input and procure projects
(pre-bid meeting and site walk) in compliance with the COVID-19
shelter-in-place and social distancing requirements.
21
BOARD ACTION REQUESTED 03,4
01-2w4h,
Receive the update and authorize staff to move forward
with the following actions:
Begin the environmental review (CEQA) process and ��
community outreach ���
Amend ARC Alternatives' existing contract (under staff ���
authority) to develop an RFP, support Central San ���
through the procurement process, and conduct a
performance audit of Central San's existing solar arrays
Release an RFP for a PPA for a 1 .75 MW solar array on
Central San's Lagiss Property
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CFNTPAISAN
May 7, 2020 Regular Board Meeting Agenda Packet- Page 136 of 166 11
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QUESTIONS?
May 7, 2020 Regular Board Meeting Agenda Packet- Page 137 of 166 12