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Home My WebLink About07.a. Receive follow-up information on Solar Energy Power Purchase Agreement Page 1 of 7 Item 7.a. CENTRALSAN Jdf A- hom CENTRAL CONTRA COSTA SANITARY DISTRICT January 21, 2021 TO: HONORABLE BOARD OF DIRECTORS FROM: MELODY LABELLA, RESOURCE RECOVERY PROGRAM MANAGER REVIEWED BY: JEAN-MARC PETIT, DIRECTOR OF ENGINEERING AND TECHNICAL SERVICES KENTON L. ALM, DISTRICT COUNSEL ROGER S. BAILEY, GENERAL MANAGER SUBJECT: RECEIVE FOLLOW-UP INFORMATION ON CENTRAL SAN'S PROPOSED SOLAR ENERGY POWER PURCHASE AGREEMENT At its November 5, 2020, meeting, the Board of Directors' (Board) authorization for the General Manager to execute a solar energy Power Purchase Agreement (PPA)with REC Solar Commercial Corporation (REC Solar)was contingent upon an evaluation comparing key terms of solar PPAs used by other wastewater agencies. I n response to this Board direction, staff obtained a copy of the PPA from one of the two wastewater agencies (West County Wastewater District (WCWD))that Board Member Causey raised during the Board's discussion. Staff learned that the details of the 2009 PPA of the other wastewater agency raised during the Board's discussion, Fairfield Suisun Sewer District, were the subject of a non-disclosure agreement, so it is not available for comparison. Staff shared W CW D's PPA with Central San's solar consultant, Russell Driver of ARC Alternatives (ARC), who provided a memo (see Attachment 1), which compares the key terms in Central San's PPA with WCW D's PPA, in addition to a recent PPA that ARC was involved in for the City of Lincoln's wastewater treatment plant in Placer County, California. The PPA staff proposed for execution with REC Solar was the product of the Regional Renewable Energy Procurement (R-REP), led by Alameda County. The R-REP PPA was vetted through the legal counsels at 19 different public agencies, including Central San's, and Central San executed that PPA three times in 2015 for the solar arrays at the Collection System Operations Facility in Walnut Creek and the Household Hazardous Waste Collection Facility in Martinez. I n summary, Central San's proposed PPA with REC Solar is comparable to or stronger than the PPAs executed by W CW D and the City of Lincoln. Accordingly, Central San and REC Solar fully executed the PPA on November 24, 2020. Lastly, in response to the request from Board Member Williams, ARC developed a memo (see Attachment 2)with the net present value (NPV) of the savings projected by Central San executing the PPA January 21, 2021 Regular Board Meeting Agenda Packet- Page 67 of 119 Page 2 of 7 with REC Solar. A three percent discount rate was applied to the three savings scenarios that were presented at the November 5, 2020, Board meeting. The middle option ("As Proposed/Evaluated"), at approximately$4.1 million, is the NPV of the most likely savings scenario Central San will realize in executing the PPA with REC Solar. Staff and Mr. Driver will be available to answer any further questions at the January 21, 2021, Board meeting. Strategic Plan re-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. Comparison of PPA Terms 2. Updated Savings Analysis January 21, 2021 Regular Board Meeting Agenda Packet- Page 68 of 119 Page 3 of 7 ATTACHMENT 1 Memorandum rc ALTERNATIVES To: Melody LaBella, Resource Recovery Program Manager From: Russell Driver, Principal, ARC Alternatives Date: November 19, 2020 Re: Comparison of PPA Terms Description of Work This memorandum summarizes the results of a comparison of solar Power Purchase Agreement (PPA) terms found in agreements from wastewater agencies. Agreements from the following agencies were reviewed: • Central Contra Costa Sanitary District (Central San) • West County Wastewater District (West County) • City of Lincoln wastewater treatment plant (Lincoln) Projects Reviewed The PPAs cover projects that vary by size and type. Summary information about each project covered by the PPAs being compared is shown in the table below. Central San West County Lincoln PPA Provider REC Solar Solar Power SunPower Partners Year Executed 2020 2007 2019 Term 25 years 15 years 25 years Number of Sites 1 1 1 System Type Ground Mount Ground Mount Ground Mount System Size 1.75 MW 1.2 MW 3.7 MW Year 1 PPA Price $0.0866/kWh $0.0922/kWh $0.0649/kWh Annual PPA 0% 4% 0% Escalation Rate All three of the agreements are structured in a similar way, with the "Buyer" obligated to purchase the energy generated by the system for a defined price expressed in dollars per kilowatt-hour generated. None of the agreements make provisions for changing or upgrading equipment (e.g., solar modules, inverters, controllers, monitoring systems) as a result of future improvements to technology. ARC Alternatives Page 1 of 3 January 21, 2021 Regular Board Meeting Agenda Packet- Page 69 of 119 Page 4 of 7 ARC Alternatives compared the following terms and conditions from each PPA: • Indemnification language • Assignment language • Performance guarantee level and structure • Disposition of environmental attributes • Site access structure (e.g., lease, license, or grant of access) • System removal requirements • Timing and cost of early purchase options A comparison of key PPA terms is summarized in the table below. Summary of Findings Term Discussion Indemnification Each agreement contained mutual indemnification and appear to be equivalent. The Central San agreement distinguishes "collateral assignment" and specific requirements for assignment to a financing party. It requires Assignment Central San consent for"full assignment". Other agreements either require consent by either party or allow the Seller to assign without consent. Central San's PPA includes a 90% performance guarantee combined with a limit to their obligation to purchase more than 110% of "expected production" from the solar system. The West County Performance Guarantees agreement has no guarantee. The City of Lincoln project has a 95% performance guarantee with numerous provisions for adjustment that favor the Seller. No agreements other than Central San's include a limit to purchase obligations. Central San and City of Lincoln own environmental attributes and are able to claim the environmental benefits of the project. In Central Environmental Attributes San's case, the attributes are "Green-e" RECs for the first 10 years of the agreement, which allows the Seller to monetize the bundled RECs from the project. West County owns the RECs between years 5-15 only. Site Access Central San grants the Seller access rights as part of the PPA. All other agreements grant a lease of the property to the Seller. All agreements require the Seller to remove the system at the end of System Removal the term. Only Central San's agreement further requires the Seller to establish a removal fund to ensure there are adequate resources available to remove the system and restore the site. ARC Alternatives Page 2 of 3 January 21, 2021 Regular Board Meeting Agenda Packet- Page 70 of 119 Page 5 of 7 All but one agreement offers an early purchase option, beginning in years 6-10. The West County agreement does not offer any early Early Purchase purchase options, restricting the purchase of the system to the end of term or Seller default. The Central San agreement includes purchase options at years 10, 15, and 20. Conclusion While the agreements differ on the specifics of their terms and conditions, there is a great deal in common across the documents. Indemnification and assignment are largely the same. Central San's agreement is also more robust in terms of limiting energy purchase obligations and requiring a system removal fund. ARC Alternatives Page 3 of 3 January 21, 2021 Regular Board Meeting Agenda Packet- Page 71 of 119 Page 6 of 7 ATTACHMENT 2 Memorandum rc ALTERNATIVES To: Melody LaBella, Resource Recovery Program Manager From: Russell Driver, Principal, ARC Alternatives Date: November 12, 2020 Re: Updated Project Financial Analysis with Net Present Value This memorandum provides updated financial modeling results that include the calculated Net Present Value (NPV) for the three financial scenarios presented to the Central Contra Costa Sanitary District Board of Directors on November 5, 2020. ARC Alternatives assumed a discount rate of 3% to calculate the NPV of the net benefit for each modeling scenario, resulting in the following 25-year totals for the proposed solar project. 25-Year Net Benefit for Proposed Solar Project Conservative As Proposed/ Optimistic Total Net Benefit Scenario Evaluated Scenario Scenario Nominal Dollars $4,296,539 $6,469,426 $8,763,063 Net Present Value $2,807,222 $4,118,833 $5,493,476 The full cash flow for each scenario, along with the calculated NPV, is shown in the table on the following page. ARC Alternatives Page 1 of 2 January 21, 2021 Regular Board Meeting Agenda Packet- Page 72 of 119 Page 7 of 7 Annual Net Benefit REC REC-As REC - Conservative Proposed/ Optimistic Year Scenario Evaluated Scenario D $() $0 $() 1 $88,526 $96,234 $104,017 2 $95,386 $107,660 $119,767 3 $102,254 $119,324 $136,024 4 $109,129 $131,234 $152,808 5 $116,013 $143,394 $170,136 6 $122,907 $155,813 $188,029 7 $129,810 $168,496 $206,507 B $136,724 $181,449 $225,590 9 $143,650 $194,681 $245,301 10 $150,587 $208,198 $265,662 11 $157,537 $222,CO8 $2815,1596 12 $164,501 $236,117 $38,428 13 $171,478 $250,535 $330,882 14 $178,471 $265,267 $354,084 15 $185,478 $280,324 $378,061 16 $192,502 5295,712 $402,842 17 $199,543 $311,440 $428,454 19 $206,601 5327,518 $454,927 19 $213,677 5343,953 $482,292 20 $220,772 $360,755 $510,582 21 $227AU $377,933 $539,828 22 $235,021 5395,497 $57C,C66 23 $242,177 5413,457 $601,331 24 $249,354 5431,823 $633,459 25 $256,553 $450,604 $667,088 Total $4,296,539 $6 $ " 6 $$,763,063 NPV (Discount Rate 3;'a) $2,897,232 $4,118,$33 $5,493,475 ARC Alternatives Page 2 of 2 January 21, 2021 Regular Board Meeting Agenda Packet- Page 73 of 119