HomeMy WebLinkAbout06. Conduct public hearing to consider Solar Power Purchase Agreement Page 1 of 14
Item 6.
CENTRAL SAN BOARD OF DIRECTORS
POSITION PAPER
MEETING DATE: NOVEMBER 5, 2020
SUBJECT: CONDUCTA PUBLIC HEARING TO CONSIDER AWARDING A POWER
PURCHASE AGREEMENT TO REC SOLAR COMMERCIAL CORPORATION,
FIND THAT THE POWER PURCHASE AGREEMENT IS EXEMPT FROM
CEQA, AND 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
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
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 atypical year. A PPA would
allow Central San to contract with a third-party provider to design, build, finance, operate, and maintain a
November 5, 2020 Regular Board Meeting Agenda Packet- Page 32 of 150
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solar photovoltaic system for the term of the agreement, while providing a minimum guarantee on
production in exchange for monthly payments tied to the amount of energy generated. The benefits of
entering into a PPA include:
• Low upfront costs.
• Electricity costs for power generated would be fixed pursuant to the terms of the PPA.
• Provider qualifies for incentive programs that Central San, as a public agency, does not, resulting in
reduced installation costs as compared to contracting directly for installation.
• Provider would be responsible for maintenance of the system over the term of the agreement to
provide the guaranteed level of production.
• Monthly payments would be less than estimated energy costs through Pacific Gas & Electric
(PG&E) and Marin Clean Energy (MCE).
On June 30, 2020, staff posted a Request for Proposals (RFP) on PlanetBids for a PPA for a 1.75
megawatt solar array on Central San's Lagiss 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 to clarify 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 recommends proceeding to award with REC Solar due to several significant
strengths in their proposal, including they:
• Proposed a strategic implementation approach resulting in the lowest-risk path forward for Central
San.
• Offered a competitive PPA price that will result in nearly$6.5 million in savings over the term of the
agreement.
• 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 voted unanimously to set
November 5, 2020 as the date to conduct the required public hearing to consider awarding a PPA to REC
Solar. A notice of the public hearing was published two weeks in advance, on October 22, 2020, in both
the East Bay Times and San Ramon Valley Times, in accordance with the public noticing requirements
in GC 4217.12.
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 be given notice to 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 with no cost escalation over the entire term of the
agreement.
• 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.
November 5, 2020 Regular Board Meeting Agenda Packet- Page 33 of 150
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• 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.
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
There are two alternatives that the Board could consider:
1. 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.
2. The Board could decide to move forward with a different purchasing mechanism for this solar array,
namely buying the system outright and implenting it as a Capital Project. In addition to high competition for
capital dollars right now, Central San, as a public agency, cannot take advantage of the tax credits available
to private providers, which would result in a higher cost for the system. For these reasons, this alternative
is also 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-
November 5, 2020 Regular Board Meeting Agenda Packet- Page 34 of 150
Page 4 of 14
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 staff's recommendations to set and conduct a public hearing to consider
award of a PPA to REC Solar.
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;
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. Find that the Power Purchase Agreement is exempt from CEQA.
3. 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
November 5, 2020 Regular Board Meeting Agenda Packet- Page 35 of 150
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GOAL THREE: Fiscal Responsibility
Strategy 1—Maintain financial stability and sustainability
ATTACHMENTS:
1. Presentation
November 5, 2020 Regular Board Meeting Agenda Packet- Page 36 of 150
Page 6 of 14
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November 5, 2020 Regular Board Meeting Agenda Packet- Page 37 of 150 1
Page 7 of 14
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
November 5, 2020 Regular Board Meeting Agenda Packet- Page 38 of 150 2
Page 8 of 14
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:�.�� a°o•. �
➢ Battery storage optional
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➢ PPA pricing for a 25-year contract term
Energy production targets, not system size
➢ Identified site constraints and preferred system locations,consistent
with initial CEQA work and known easements
r 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 Development ��� v
➢ ENGIE 29 JUL 2020
➢ REC Solar
➢ Renewable Properties
➢ Safari Energy
- - - - - - - - - - - - - - -
• None of the proposers offered battery storage systems
• All pricing lower than what was assumed in the Feasibility Study
6
November 5, 2020 Regular Board Meeting Agenda Packet- Page 39 of 150 3
Page 9 of 14
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 San 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
November 5, 2020 Regular Board Meeting Agenda Packet- Page 40 of 150 4
Page 10 of 14
System Location «J
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Project Savings — REC Solar vs. Feasibility Study arc
• 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
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November 5, 2020 Regular Board Meeting Agenda Packet- Page 41 of 150 5
Page 11 of 14
Key PPA Terms
• Energy Pricing: $0.0866 per kilowatt-hour with no escalation.
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
9rM1 Quarter lsF Quarter 2nd Quarter 3b Quarter p1M1 Quarter ISS Quarter 2ntl
Ta4rNme Dur1— Stag Finish Sep Oct Neu ❑ec lan Feb Mar Apr MaY lun lul Auq Sep Oct Nm Nec Nn Feb M1lar Apr
REEPMeeting-Appf v itf Rewmmendm,onfor ld 10/12/20 10/12/20 1
AW cl
Board Meeting.5et public Hearing• to 10/15/20 10/15120
Pubticimarmg-C.nt.d F—tmn• 1a 11/5/20 11/5/20
EAeeute Coutrzlt/Project NTP`(N.uceto Proceed)Cid 11/5/20 1115/20 �11L5
Project Design 129d 10/13/20 419/21
CEOA and Community Outreach 240d 518120 4/8/21
County Review and Approval of Permit Set Oil 419/21 4/9121
CEQA Determination a rd Project Approval` ltd 4115121 4/15121
501al PVCnnstructlon 1004 9/1/21 1/18/22
0 Commissioning 44d 12/30(21 3/1122 II!!PI
1 PG&E loteeconnecoon Work SBma 10/16/20 313122
2 COD/Project Complete ICommer loperacionoate)Od 313(22 3/3122 3/3
*Board Action
12
November 5, 2020 Regular Board Meeting Agenda Packet- Page 42 of 150 6
Page 12 of 14
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 received only one inquiry from the Blum Road neighborhood
(for more information). There have been no community concerns
expressed about the project at this time.
,&LCENTRAL SAN •
RESIDENTS Central San Solar Project
Poll•.r,on P—annon Cennol Canna Costo Sonirory Dianrice[Central Sen]hoe begun plamvng fere proposed 5-5 acre.1.75-mn—h safar
5,—r 0-46.f4p.ar.rion project on central son-o mad land oe the north and of Blom Road in year nei9h6arhood-Central son in"&the design of
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Canan-h—Zan" ■ If ka+e about r6is or re be added m the i small list,send an email m 4m Cannel San e
Saler YW queeriens Proles Ppl� Pnolee
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' 13
ANTICIPATED COSTS
The following costs are anticipated to take the project from
the November 5, 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
November 5, 2020 Regular Board Meeting Agenda Packet- Page 43 of 150
Page 13 of 14
BEEP COMMITTEE RECOMMENDATION
The REEP Committee supported staff's
recommendation to:
Set and conduct a public hearing to consider
awarding a PPA to REC Solar
t
CENTRAL SAN
' 15
RECOMMENDED BOARD ACTIONS
As required by Government Code 4217.12:
a) Conduct a Public Hearing to consider award of a PPA to REC Solar;
b) Find that the notice of this public hearing held was given at least two weeks
in advance of this public hearing;
c) Find that the terms of the PPA with REC Solar 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
Find that Government Code Section 4217.12(a)(2) is not applicable to this
agreement.
November 5, 2020 Regular Board Meeting Agenda Packet- Page 44 of 150 8
Page 14 of 14
RECOMMENDED BOARD ACTIONS - CONTINIL
Find that the PPA is exempt from CEQA.
Authorize the General Manager to execute the PPA with REC
Solar.
' 17
CFNTRAI SAN
QUESTIONS?
CFNTPAISAN
November 5, 2020 Regular Board Meeting Agenda Packet- Page 45 of 150 9
CNGie
November 5, 2020 Item 6. Public Comment
Board of Directors (also read into the record)
Central Contra Costa Sanitary District
Re: November 5 Agenda Item 06: Conduct public hearing to consider Solar Power Purchase Agreement
*********************************************
President McGill, Board of Directors, and District Staff:
Thank you for the opportunity to provide Public Comment this afternoon.
I'm Kelly Fergusson of ENGIE, a global clean energy company in 70 countries with a bold vision to decarbonize
the planet. Locally, my team works out of our downtown Oakland office,just through the Caldecott Tunnel from
your board room.
We appreciated Central San's consideration of our project during the recent RFP process, and have the utmost
respect for your agency and its staff. ENGIE has a deep track record of successful Solar PPA projects for public
agencies in California, demonstrating we are a good long-term partner. We think we would be the stronger
partner to the District than REC Solar, because of our competitive price, thoughtful legal reply, and our overall
track record in the region, including the creation of well-paying construction jobs for local tradespersons.
ENGIE's proposal would save the District's ratepayers over$300,000 more than the REC Solar proposal over 25
years, almost 5% additional project savings [as shown in Figure 1].
Cumulative PPA Savings
$6,900,000
$300,000
$6,400,000
$5,900,000
$5,400,000
22 23 PPA Year 24 25
—ENGIE Proposal _REC Solar Proposal
[Figure 1. ENGIE's proposal would benefit ratepayers by$300,000 more than REC Solar's proposal,an additional 5%in savings.]
Regarding the legal review, our response was transparent and thorough, doing what any good long-term partner
should do–point out the flaws in the draft agreement.The industry has changed substantially since this agreement
was written some years ago, and it contains items that are to Central San's disadvantage. One of the worst risk
factors on a PPA project is for the agreement to need to be modified mid-stream during construction. We've
seen examples in the industry where agencies set themselves up for problems if they don't start with a strong
foundation in the contract. As one small example, we suggested modifying Section 4.4 so that the renewable
energy credits would automatically vest in Central San's own account, greatly streamlining the process to the
benefit of the District. Evaluating the RFP responses based on the fewest exceptions to the contract may not be
in the best long-term interests of the District. And, we note this criterion was not stated in the RFP's Evaluation
Criteria.
Given our extensive experience in-state, we have an in-depth understanding of the CEQA process and
regulatory checkpoints so both parties can manage environmental compliance risk and the risk of project delay.
We suggest a third Alternative to the ones proposed in the staff report be:
"To select ENGIE as the PPA provider offering the greatest financial benefit to Central San, and to
negotiate an agreement that is fair and beneficial to both parties, minimizing project risk to District."
Thank you for your consideration.
ENGIE 500 12th Street, Suite 300, Oakland, CA 94607 415-405-6673 Kelly.Fergusson(@engie.com