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Home My WebLink About04.a. Review draft Position Paper to conduct a public hearing at the November 5, 2020, Board meeting to consider awarding a Power Purchase Agreement to REC Solar Commercial Corporation and Authorize the General Manager to execute the agreement for a sola Page 1 of 13 Item 4.a. CENTRAL SAN BOARD OF DIRECTORS . , , . POSITION PAPER . , 0 DRAFT MEETING DATE: OCTOBER 12, 2020 SUBJECT: REVIEW DRAFT POSITION PAPER TO CONDUCTA PUBLIC HEARING AT THE NOVEMBER 5, 2020, BOARD MEETING TO CONSIDER AWARDING A POWER PURCHASE AGREEMENT TO REC SOLAR COMMERCIAL CORPORATION AND AUTHORIZE THE GENERAL MANAGER TO EXECUTE THE AGREEMENT FOR A SOLAR PHOTOVOLTAIC SYSTEM 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 ISSUE 1) California Government Code (GC) Section 4217.12 requires public agencies to hold a public hearing when considering award of energy services contracts; and 2) Board of Directors (Board) authorization is requested for the General Manager to execute a proposed power purchase agreement (PPA). BACKGROUND On May 7, 2020, the Board authorized staff to proceed with procurement for a solar PPA that would offset all remaining grid power purchases across Central San's operation in a typical year. A PPA would allow Central San to contract with a third-party provider to procure, install, and maintain a solar photovoltaic system, as well as provide a minimum guarantee on production and storage in exchange for monthly payments tied to the amount of energy generated. The benefits of entering into a PPA, include: 1. Low upfront costs. 2. Electricity costs for power generated would be fixed pursuant to the terms of the PPA. 3. Provider would qualify for incentive programs that Central San, as a public agency, does not, resulting in reduced installation costs as compared to contracting directly for installation. 4. Guaranteed production/storage. The provider would be responsible for maintenance of the system over the term of the agreement to provide the guaranteed level of production and storage. 5. Monthly payments would be structured to be less than estimated energy costs through Pacific Gas & Electric (PG&E) and Marin Clean Energy(MCE). October 12, 2020 REEP Committee Meeting Agenda Packet- Page 4 of 100 Page 2 of 13 On June 30, 2020, staff posted a Request for Proposals (RFP) on PlanetB ids for a PPA for a 1.75 megawatt solar array on Central San's Lag iss Property at the north end of Blum Road in Martinez. On July 29, 2020, staff received five electronic proposals. An Evaluation Committee, comprised of representatives from both Central San and Central San's solar consultant ARC Alternatives (ARC), scored the proposals and staff invited the solar firms with the top four highest-scoring proposals to participate in a one-hour interview on Microsoft Teams on August 14, 2020. After taking the proposal scores and interviews into consideration, the Evaluation Committee recommended proceeding to award with REC Solar Commercial Corporation (REC Solar). After making that determination, staff became aware that prevailing wages would apply to the PPA. Upon discovering this requirement, staff notified the four teams and requested updated PPA pricing, in compliance with prevailing wage requirements, by the close of business on Friday, September 18, 2020. After considering the updated pricing received from three of the four vendors by the indicated deadline, the Evaluation Committee is recommending proceeding to award with REC Solar. In addition to several other strengths, REC Solar proposed a strategic implementation approach, offered a competitive PPA price that will result in nearly$6.5 million in savings over the term of the PPA, and took few exceptions to the proposed PPA that staff provided as part of the RFP. The attached presentation provides additional details on the procurement process and highlights the strengths of REC Solar's proposal. At its October 15, 2020 meeting, the Board will consider setting November 5, 2020 as the date to conduct the required public hearing to consider awarding a PPA to REC Solar. PROPOSED FACILITY Upon Central San's Board making a California Environmental Quality Act (CEQA) determination and approving the project (anticipated on April 15, 2021), REC Solar will proceed with installation of a 1.75- megawatt solar array on Central San's Lagiss property. KEY PPATERMS • Energy Pricing: $0.0866 per kilowatt-hour. • Agreement Length: 25-year term with an optional 5-year extension at mutually agreed upon terms. • Purchase Option: Central San can purchase the solar photovoltaic system prior to the termination of the P PA. • Production Guarantee: Includes minimum delivery of at least 90% of the expected annual power output. • Early Termination Fees: If Central San decides to terminate the PPA without cause prior to completion of the 25-year term, Central San would be responsible for paying an early termination fee. GC Section 4217.12(a) allows for public agencies to enter into energy service contracts and any necessarily related facility ground leases on terms that its governing body determines are in the best interests of the public agency if the determination is made at a regularly scheduled public hearing, public notice of which is given at least two weeks in advance, and if the governing body finds: 1. That the anticipated cost to the public agency for thermal or electrical energy or conservation services provided by the energy conservation facility under the contract will be less than the anticipated marginal cost to the public agency of thermal, electrical, or other energy that would have been consumed by the public agency in the absence of those purchases. 2. That the difference, if any, between the fair rental value for the real property subject to the facility ground lease and the agreed rent, is anticipated to be offset by below-market energy purchases or other benefits provided under the energy service contract. October 12, 2020 REEP Committee Meeting Agenda Packet- Page 5 of 100 Page 3 of 13 Since Central San will not be executing a ground lease for this PPA and, instead, will be handling the use of Central San's Lagiss property through a section called, "Grant of Access Rights" in the PPA, GC Section 4217.12(a)(2) does not apply. However, the intent of this provision is still met by the significant savings Central San will realize in executing the PPA. ENVIRONMENTAL REVIEW Staff has concluded that this solar vendor selection is exempt from 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 action will establish the Board's independent finding that this agreement is exempt from CEQA. Central San will conduct an environmental evaluation of any environmental-altering, physical project that is proposed in the future as a result of these studies to determine the need for any additional CEQA documentation. ALTERNATIVES/CONSIDERATIONS The Board could decide to not enter into a PPA with REC Solar and instead continue to purchase grid power from PG&E and MCE. Since this PPA is anticipated to save Central San nearly$6.5 million in 25- year energy costs, this alternative is not recommended. FINANCIAL IMPACTS As mentioned above, Central San stands to save nearly$6.5 million in power costs by executing the PPA with REC Solar. In moving to this next step in the procurement process, staff would amend ARC's as- needed professional consulting services contract (under staff authority)to add an additional $50,000 to support procurement and implementation of the project from now through the Board's consideration of a CEQA determination and project approval, which is estimated to take place in Spring 2021. Since ARC is under an as-needed contract, if the project is halted at any point prior to that milestone, staff would stop their work and discontinue spending any remaining contract budget for their assistance. I n addition to ARC's support, the cost for Central San's CEQA consultant to complete the required environmental review documentation will be an estimated $20,000. COMMUNITY OUTREACH Within one week of issuing the RFP for the PPA, Central San's Communications staff mailed out letters about the project to the residents in the Blum Road neighborhood and created a webpage (www.centralsan.org/solar)with more details about the project on Central San's website. There has been no neighborhood opposition or concerns expressed about the project. COMMITTEE RECOMMENDATION The Real Estate, Environmental and Planning (REEP) Committee reviewed this matter at its October 12, 2020, meeting and supported/did not support staff's recommendation. RECOMMENDED BOARD ACTION 1.As required by California Government Code Section 4217.12: a. Conduct a public hearing to consider award of power purchase agreement to REC Solar Commercial Corporation; b. Find that the notice of this public hearing held was given at least two weeks in advance of this public hearing; October 12, 2020 REEP Committee Meeting Agenda Packet- Page 6 of 100 Page 4 of 13 c. Find that the terms of the power purchase agreement with REC Solar Commercial Corporation are in Central San's best interest; d. Find that the anticipated costs to Central San for electrical energy provided by the power purchase agreement will be less than the anticipated marginal cost to Central San for other energy that would have been consumed by Central San in the absence of the power purchase agreement; and e. Find that Government Code Section 4217.12(a)(2) is not applicable to this agreement. 2.Authorize the General Manager to execute a power purchase agreement with REC Solar Commercial Corporation for a solar photovoltaic system on Central San's Lagiss property. Strategic Plan Tie-In GOAL ONE: Customer and Community Strategy 2—Maintain a positive reputation GOAL TWO:Environmental Stewardship Strategy 4- Reduce reliance on non-renewable energy GOAL THREE:Fiscal Responsibility Strategy 1—Maintain financial stability and sustainability ATTACHMENTS: 1. Presentation October 12, 2020 REEP Committee Meeting Agenda Packet- Page 7 of 100 Page 5 of 13 4 ' CENTRAL SAN SOLAR ENERGY POWER PURCHASE AGREEMENT Melody LaBella, P.E. Resource Recovery Program Manager REEP Committee Meeting � 1. October 12, 2020 ji Russell Driver 'k SOLAR PROCUREMENT UPDATE October 12,2020 w Central San REEP Committee Meeting k-V& rarc October 12, 2020 REEP Committee Meeting Agenda Packet- Page 8 of 100 1 Page 6 of 13 Presentation Overview • Procurement Method (Government Code 4217) • Summary of Central San's Solar Power Purchase Agreement (PPA) Procurement • Overview of proposals received by Central San • Summary of the evaluation process • The recommended PPA provider • Review of the proposed system location • Updated project financial analysis based on selected PPA pricing Updated implementation schedule 3 Procurement Method • California Government Code (GC) 4217 ➢ Code applies to government agencies in California ➢ Allows award of energy savings projects without a competitive solicitation ➢ Code requirement: projects must be found to save more than they cost at a public hearing • Central San solar Request for Proposals (RFP) process under GC 4217 ➢ Conduct competitive solicitation with more flexibility than typical public works projects— "best value" ➢ Central San can use its choice of relevant evaluation criteria, ensuring the results are in the best interests of the District ➢ Criteria set forth in RFP balance qualifications, approach,technical solution, project risks, and price/savings ➢ Evaluation considerations align with known success factors from other solar projects 4 October 12, 2020 REEP Committee Meeting Agenda Packet- Page 9 of 100 2 Page 7 of 13 Summary of Central San's Solar PPA Procurement • Central San released an RFP on 6/30/20. • The RFP asked for proposals for a solar project to be implemented on the Lagiss property. • What Central San requested/specified: Ground-mounted solar system using fixed tilt or tracking mechanism oma. , aM: � o•. � ➢ Battery storage optional �,n,rae.wwwx ra., ➢ PPA pricing for a 25-year contract term Energy production targets, not system size r Identified site constraints and preferred system locations,consistent w . �ser�•d« ..�9. "„�,, with initial CEQA work and known easements ➢ Project implementation approach recognizing interconnection and "" "• CEQA requirements and timeframes 5 What Central San Received • Five proposals were received on 7/29/20 • Variety of proposers in terms of size, location, and experience • Proposers: ➢ Distributed Solar DevelopmentENGIE �� 0 V ➢ REC solar 29 JUL 2020 ➢ Renewable Properties ➢ Safari Energy • None of the proposers offered battery storage systems • All pricing lower than what was assumed in the Feasibility Study 6 October 12, 2020 REEP Committee Meeting Agenda Packet- Page 10 of 100 3 Page 8 of 13 Evaluation Process Proposal Evaluation • Evaluation Committee determined shortlist based on initial evaluation of proposals, per the following criteria ➢ Experience and Project Team (25 points) ➢ Project Approach and Technical Solution (25 points) ➢ Economics/Project Savings (40 points) ➢ Financial Strength (10 points, scored by Director of Finance and Administration) • Conducted interviews with four shortlisted Proposers on 8/14/20 • Requested updated pricing from all vendors on 9/11/20 to clarify proposer compliance with prevailing wage requirements Recommended PPA Provider • The Evaluation Committee recommends awarding the project to REC Solar. • REC Solar's proposal was particularly strong in the following areas: ➢Their qualifications and experience are deep,with direct experience with ground-mounted systems and Renewable Energy Self-Generation Bill Credit Transfer(RES-BCT) projects in California. ➢REC Solar's approach to implementation recognizes both interconnection and CEQA challenges and phases the work to allow time to understand and mitigate project risks—offering Central Son the lowest-risk path forward. ➢Their proposed PPA price is competitive and lower than what was assumed in the Feasibility Study. ➢REC Solar is dedicating part of their stock of solar modules that have been "safe harbored" in 2019, allowing the project to take advantage of the 30%Federal Investment Tax Credit. ➢They are backed by Duke Energy and have the corporate resources and financing to deliver the project. ➢REC Solar identified a very small number of exceptions in their proposal,which will expedite the contract negotiations phase of the project. 8 October 12, 2020 REEP Committee Meeting Agenda Packet- Page 11 of 100 4 Page 9 of 13 System Location Figure 2 Benefits Of Location Designated Areas of Future Minimizes visual Solar Panels Impacts (A–C) Avoids existing R D.53Lef easements c ..37 eon. ALL ,s.ss— Not in environmentally District- ' owned sensitive areas land ` Petroleum product pipeline `Natural gas transmission pipeline NOTES'. 1.Lofatlom•M uu�unwn -Ynd al x.ems...Pw...—..., 1 3 Ereetlrr errNv�awisl mumu. M. N ••• ° 5'7110 �— FEET 9 Project Savings — REC Solar vs. Feasibility Study • Feasibility study assumed PPA price of$0.105 per kWh vs.REC Solar price of$0.0866 per kWh • REC Solar's pricing results in a total 25-year net benefit of between$4.3 and$8.8 million REL Cumulative Net Benefit Scenarios vs Feasibility Study S>o.ato,mo S5,763^3 S°p6aA6a 58AWAW S]A6]A6] 546esAas S6p6]A6] Sspmpm $6,295f39 SWmpm $6,171,952 33p6]p6] 3166]A6] SUM— So 0 1 3 3 6 5 6 1 8 9 10 11 ]3 13 ]0 15 1fi 11 IB 19 10 31 ]] 33 2A 35 reeve-ery saey —x¢ emse+n e.escena�e —•¢uwepmed Era uo vee —n¢ opurnniesxn�e 10 October 12, 2020 REEP Committee Meeting Agenda Packet- Page 12 of 100 5 Page 10 of 13 Key PPA Terms k Energy Pricing: $0.0866 per kilowatt-hour. • Agreement Length: 25-year term with an optional 5-year extension at mutually agreed upon terms. • Purchase Option: Central San can purchase the solar photovoltaic (PV) system prior to the termination of the PPA. • Production Guarantee: Includes minimum delivery of at least 90% of the expected annual power output. • Early Termination Fees: If Central San decides to terminate the PPA without cause prior to completion of the 25-year term, Central San would be responsible for paying an early termination fee. 11 Updated Implementation Schedule 4th Quarter 1st Quader 2nd Quarter 3rd Quader 4th Quader 11t Quader 2ntl Task Name Duration Start H-h Sep OR Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Ain BEEP Meeting-Approval of Recommendation for id 10/12/20 10/12/20 Award Board Meeting-Set Public Hearing* id 101]5120 10;15120 Public Hearing-Contract Executionld 1115/20 1115/20 Execute Contrast/Project NTP' (Noticeto Proceed)ad 1115120 11;5/20 1115 Project Design 129d 10/13/20 4/9121 CEQAand community outreach 24 cl 518120 4/9121 County Reviewand Approval of Permit Set ad 4/9121 4/9121 44 CEQA Determination and Project Approval' ad 4/15/21 4/15/21 4115 Solar PV Construction 100d 9/1121 1/19/22 0 Commissioning 44d 12/30/21 3/1122 1 PG&E Interconnection Work 1Bmo 10/15/20 3/3122 2 COD/Project Com Plete(Commercial Operation Date)ad 3/3122 313122 o4.V3 *Board Action 12 October 12, 2020 REEP Committee Meeting Agenda Packet- Page 13 of 100 6 Page 11 of 13 PUBLIC OUTREACH Letters were mailed to the Blum Road neighborhood concurrent with the issuance of the RFP. Communications staff created project webpages on Central San's website. Staff has not been contacted by anyone from the Blum Road neighborhood, so there appears to be no community concerns at this time. ,dCSLCENTPAL SAN RESIDENTS Central San Solar Project Poll-,r—P—annon Cennol Conn°Casio Sonirory Disvin(Central San]bas 6eg-plemung fere proposed 5-5 acre.1.75-meg h safer Sawar orerAor,Rp.ar.rian Project on central son-owr ad land of the north and of Blum Road in your neigh6arhood-Central son intends the design of Thi:b•maiatp o oe,rer-61a angy 6ihry ro minimi:e in p-a°n nearby r klansal orae.. C°nstr-tian Zane. x If here 6°r.r this w re be added to 1M a small list,send an email ee 4m Cannel San e Saler 1'°� 9�^O'ns° PfOje� Pr°le° Pnale° team at rleavin@aenrrnsan-erg Projee infanssanon and updates will he paved on this site. ' 13 CENTRAL SAN NEXT STEPS IN THE PROCUREMENT 1 . Conduct a Public Hearing California Government Code Section 4217.12 allows public agencies to execute a PPA if the public agency holds a public hearing at a regular meeting and finds that: The PPA is in the best interest of the public agency. The anticipated cost to the public agency for electrical energy provided by the PPA will be less than the anticipated marginal cost to the public agency for other energy that would have been consumed by the public agency in the absence of the PPA. 2. Execute PPA CIFINTPAISAN October 12, 2020 REEP Committee Meeting Agenda Packet- Page 14 of 100 Page 12 of 13 ANTICIPATED COSTS The following costs are anticipated to take the project from the October 1 , 2020, Board meeting to the Board's CEQA Determination and Project Acceptance in Spring 2021 : ARC Alternatives $50,000 Environmental Service (CEQA Consultant) $20,000 15 CENTRAL SAN REEP COMMITTEE ACTION REQUESTED sa= Support staff's recommendations on the N 0010 following future Board actions: October 15, 2020, Board meeting Set the public hearing for November 5, 2020, to ��` consider awarding a PPA to REC Solar �� November 5, 2020, Board meeting �� Conducthearin ublic p 9 Authorize the General Manager to execute a PPA to REC Solar l�V ' 16 October 12, 2020 REEP Committee Meeting Agenda Packet- Page 15 of 100 8 Page 13 of 13 QUESTIONS? `'y . v CFNTRAI SAN October 12, 2020 REEP Committee Meeting Agenda Packet- Page 16 of 100 9