Solar Power for Public Agencies & Collaborative Procurement - - PowerPoint PPT Presentation

Informational Meeting

April 21, 2011 Bingham McCutchen, East Palo Alto

Solar Power for Public Agencies & Collaborative Procurement

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Who’s Here?

26 cities/towns 5 counties 5 other public agencies 5 regional organizations

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Huge Collaboration Potential!

Meeting Materials

– Printed materials

• Agenda
• Recommended scope of work for solar site assessments

– Sent with the draft agenda

• Purchasing Power: Best Practices Guide to Collaborative

Solar Procurement

• Link to Joint Venture’s SV-REP webpage

– Follow-up information

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Solar Power for Public Agencies

Ben Foster, VP Operations

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Solar Project Benefits for Public Agencies

• Achieve agency-wide sustainability plans to meet or exceed state mandates
• Demonstrate leadership across your community
• Leverage federal, state and local programs for supporting clean energy projects
• Reduce exposure to long-term electricity price increases
• Create local jobs and economic activity
• Generate operational savings (when managed properly)
• Create a valuable hedge against carbon pricing
• Utilize idle property such as rooftops, brownfield areas and parking lots

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• Federal Tax Policy – 30% ITC grant program + 100% Depreciation in 2011
• Government Purchasing – 28% GHG Reduction by 2020
• DOE Market Transformation and Solar America Cities programs
• EPA Green Power Partnership matching green energy sellers and buyer
• California Renewable Programs, Incentives & Legislation
• CA 33% renewable sources for electricity by 2020
• California Solar Initiative Program (budget exhausted – more being requested)
• CA target for 20GW installed by 2020 (12GW distributed, 8GW utility)
• AB2466 – Virtual Net Metering (not economically feasible yet)
• AB920 – Surplus generation can be compensated (but at low prices)
• Pending legislation to improve meter aggregation and feed-in-tariffs

Policy & Program Drivers for Solar Projects

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Defining Solar Energy For Project Sponsors

6 Ways to Maximize Solar Project Impact:

• Leadership & Economic Development
• GHG Reductions
• Design Integration
• Return on Investment
• Total Energy Offset
• Total Savings

Team must agree on prioritization of these competing goals to be successful

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Clean Energy Technology Examples

Solar Photovoltaic (PV) Panels/Modules Solar Hot Water Wind Turbines Fuel Cells

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Solar Carport Structure Examples

• Addresses rooftop constraints
• Protects vehicles from weather
• Electric vehicle-ready

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Buying Solar is a Major Decision: “Once in a Lifetime”

• Rapidly Evolving industry, technology, vendors, financing, policies
• Very similar to real estate decisions
• Location (solar insolation potential)
• Location (available space and technical factors)
• Location (rate schedules and economics)
• 25+ year decision with long-term returns
• Multiple goals to balance:
• Leadership & Economic Development
• Energy Offset & GHG Reductions
• Design Integration
• Total Savings & Return on Investment
• Steep learning curve for all project stakeholders

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Solar Project Lifecycle Management

Solar Strategy Feasibility Assessments Vendor Procurement & Financing Project Commissioning System Optimization Define Right Strategic Approach Find Best Solar Sites Best-in-Class Vendors & Financing Right Components, Design, Construction Highest Long-term Returns Properly managing all phases of the project will create the greatest long-term value

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Financing Structures

Financing Impacts Project Design, Construction & Returns

• Direct Purchase
• Power Purchase Agreement
• Equipment Leases
• Bond Financing
• Enhanced Use Lease
• Utility Financing
• Energy Service Contract
• Performance Risk
• Up-Front Costs
• Long-Term Returns
• Procurement Process
• System Design & Sizing
• Project Benefits & RECs
• Operations & Maintenance

Major Impact On:

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Direct Purchase

• Ownership
• Customer owns, operates, and maintains the system
• Owner has full responsibility for performance
• Maintenance contracts and performance guarantees can be purchased
• Capital Costs
• Full cost of system due at delivery (some interim payments may be required)
• May be partially offset by rebates & incentives
• Financial Benefits
• Long-term savings generally the highest with direct purchase
• Customer retains Solar Renewable Energy Credits (SREC)
• Customer receives federal, state, and local incentives and rebates
• Non-taxable organizations cannot capture any tax benefits
• Very low operating costs, effectively capping electricity costs for 25 years

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Power Purchase Agreement

• Ownership
• PPA, LLC owns, operates, and maintains the system
• PPA receives all federal, state and local incentives, rebates and tax benefits
• System output is the responsibility of PPA, but Customer must buy ALL power produced
• Capital Costs
• No up-front capital costs
• Financial Benefits
• Fixed price per kWh with known annual escalation (2% to 5%) over 20 years
• Savings are generally very low in the early but increase over time
• PPA or Customer owns Solar Renewable Energy Credits (SREC), based on contract
• System sizing must be carefully evaluated and Performance Guarantees should be included
• Payback periods can be quite short because there is no initial capital costs
• Customer can purchase the system at the end of the PPA term for FMV

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Equipment Lease

• Ownership
• Leasing company (bank) owns the system
• Fixed monthly payments for 7-15 years
• Leasing company takes available federal tax benefits
• Customer has full responsibility for performance
• Maintenance contracts and performance guarantees can be included
• Capital Costs
• No up-front capital costs
• May be some transaction costs
• Financial Benefits
• Lease term saving generally minimal, but then very high once purchased
• End of lease buy-out for FMV or about 20% of initial value
• Customer generally retains Solar Renewable Energy Credits (SREC)
• Customer receives state, and local incentives and rebates

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Solar Site Feasibility Checklist

• Portfolio approach to site evaluation
• Independent, solar expert firm
• On-site survey & meetings
• Utility rate evaluation
• Structural & Electrical evaluation
• LCOE Financial analysis
• Funding and incentive options
• Current pricing & trends
• Technical risk assessment
• World-class tools & methods

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9 Sites in total (1.1MW Capacity) 4 Viable, 4 Potential, 1 Not Viable Challenges: Shading, electrical equipment upgrades, system sizing vs. usage Opportunities: Rate schedule change, tree relocation/trimming Financial Recommendation: Direct Purchase or Aggregated PPA with bid- alternates LESSONS: Looking across all facilities will identify projects with the highest potential returns instead of “opportunistic” development.

Example: Citywide Solar Assessment: 9 Sites

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Getting Started

• Define goals, constraints and success factors with linkage to citywide planning
• Indentify all sites across your organization for potential solar development
• Determine financing and contracting requirements, constraints and options
• Gather relevant information about energy usage and site characteristics
• Utilize internal and external expertise to assess sites and tailor procurement effort
• Recruit other departments and/or agencies to combine efforts…

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Silicon Valley Collaborative Renewable Energy Procurement (SV-REP) Project

PROJECT OVERVIEW

Ben Foster

Optony

Rachel Massaro

Joint Venture: Silicon Valley Network

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Why Collaborate?

• Challenges
• High upfront costs associated with purchase and installation
• Need to minimize transaction costs and admin time
• Lack of understanding of financing options and available incentives
• Reach greenhouse gas emissions reduction goals and meet state mandates
• Opportunities
• Collaborative effort to conserve funds, staff time
• Standardized procurement documents, PPA, and process
• Accelerate financing process and deployment
• Serve as a model for similar efforts across the USA

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Convener

Background

• Launched by Joint Venture: Silicon Valley Network’s Public Sector

Climate Task Force

• Silicon Valley cities, counties, and other public agencies
• Developing effective, collaborative, solutions for the reduction of greenhouse

gas emissions from public agency operations

Technical Advisor

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Lead Agency

Largest multi-agency project to date

Project Overview

• Complex procurement effort for 70 sites
• Collaboration of 9 public agencies
• Power Purchase Agreement (PPA) financing
• Multiple Site Types:
• Carports
• Rooftops
• Ground mounted
• 14.4MW of combined solar PV
• Includes community centers, city halls, fire

and police stations, office buildings, libraries, clinics, and other publicly-owned facilities.

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Participants

• County of Santa Clara
• City of Cupertino
• City of Milpitas
• City of Morgan Hill
• City of Mountain View
• City of Pacifica
• Town of Los Gatos
• Santa Clara Valley Transportation

Authority

• South Bayside Waste Management

Authority

rooftop, carport, and ground-mounted installation sites

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Leadership Team

Siva Darbhamulla, Chief of Design Services, County of Santa Clara Ben Foster, Vice President, Optony Caroline Judy, Assistant Director, Government Support Services, County of Alameda Jerry Lahr, Power Program Manager, Association of Bay Area Governments Kara Gross, Vice President, Joint Venture: Silicon Valley Network Rachel Massaro, Associate Director of Climate Initiatives, Joint Venture: Silicon Valley Network Steve Mitra, County Counsel, County of Santa Clara Lin Ortega, Utilities Engineer/Program Manager, County of Santa Clara Chris Schroeder, Purchasing Agent, City of Milpitas Joe Steinberger, Principal Environmental Planner, Bay Area Air Quality Management District Mary Tucker, Energy Program Manager, City of San Jose

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• How it was structured

– Initial expression of interests with site information from various agencies – Formal letter of cooperation (MOU) between partners committed to process – All sites bundled and bid out together – however final contracts at each agency

• Lead agency (County of Santa Clara) perspective

– Providing leadership across County and region – Volume discounts and better competition – Increased economic activity within and around the County

• Other participating agency perspective

– Could not easily or cost-effectively pursue this project on their own – Much better outcome and can leverage regional expertise – Competitive bids for individual site that might otherwise not be attractive to vendors

Agency Collaborative Working Structure

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Project Timeline

2009 Project Defined Agencies Recruited Sites Identified RFI Conducted 2010 RFP Issued Vendor Awards PPA Contracts Construction Begins 2011 Construction Completed Phase 2 Additional Agencies & Sites

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• Thorough review of individual site characteristics
• Consider site-specific and agency-level constraints
• Bundling sites by installation type, host facility, size and other attributes
• Incorporate solar market input
• Consider total size (MW) and number of sites per bundle

Strategic Bundling Approach

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Site Bundle Descriptions

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Santa Clara Valley Transportation Authority

SITE: Bus Depot TYPE: Bus Canopy SIZE: 1,100 kW Estimated to provide >100% of onsite power needed

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South Bayside Waste Management Authority

SITE: Shoreway Environmental Center TYPE: Roof, Standing Metal Seam SIZE: 187 kW

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City of Milpitas

SITE: City of Milpitas, Fire Stations TYPE: Roof & Parking Canopy SIZE: 308 kW total (44 – 155 kW per station)

Fire Station 1 777 South Main Street Fire Station 2 1263 Yosemite Drive Fire Station 3 45 Midwick Drive Fire Station 4 775 Barber Lane

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• Reduced greenhouse gas emissions from local government operations
• Reliable cost of electricity over 20 year term, escalation rates 2%-4.5%
• Volume and competitive pricing yielded 10-14% cost reductions
• Electricity consumption completely offset for 25% of sites
• Projected to generate $70M+ in local economic activity and 300+ jobs
• Over $30M in Federal tax benefits captured via PPA (ITC + Depreciation)
• Demonstrated leadership with large number of installations
• Capture long-term REC benefits with future potential for resale

Agency & Regional Project Benefits

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• Adoption of Best Practices in Creation of Model Documents

– Attractive agreements – Standardization of process – Communication strategy

• Strategic Bundling of Sites

– Achieving economies of scale – Competition for bids

• Vendor Outreach

– Outreach partners – Feedback and effective communication

Broad Applications of Lessons Learned

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Financing Type & Terms

• Power Purchase Agreement - created local government friendly template
• 20 Year Term
• Buy-out options after 7 – 10 years @ FMV
• Escalation rate 2.0 % – 4.0 %
• Price range $0.13 - $0.19 per kWh based on site size & California Solar

Initiative level

• Participants own the RECs @ $0.01 - $0.015 per kWh
• Performance guarantees at 90%

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Results

• 50% of sites w/approved agreements
• Collaboration resulted in prices 10 – 15% lower than go it alone
• Shifting CSI levels impacted viability of some sites
• Collaborative glue can be weak if benefits aren’t understood or realized
• Small sites challenging with PPA structure

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Conclusions

• Collaborative model works and needs

– Trusted Convener – Committed Lead Agency w/project management, legal, procurement resources & strengths – Motivated partners – Savvy technical advisor with credibility

• Good market timing and incentives help!
• Other applications: Alameda County leading $5m. EV + Charging Station

project

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• Best practices guide (World Resources Institute & Joint Venture)
• Greater Bay Area effort in 2011
• Contra Costa Council (planning stage)
• EPA launched an effort in Metro Washington DC area (www.epa.gov/cecp)
• Portland, OR evaluating the model for 2011
• Cities in China evaluating the model for domestic projects
• Potential for Phoenix, AZ in 2011

The Model is Catching On…

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Additional Information available at:

www.jointventure.org/renewableenergyprocurement

Contact Information:

Rachel Massaro massaro@jointventure.org (408) 298-9340 Ben Foster Ben.Foster@optony.com (646) 250-4241

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SV-REP Participants Panel

Steve Attinger, City of Mountain View Erin Cooke, City of Cupertino Tom Fitzwater, Santa Clara Valley Transportation Authority Christy Wolter, Town of Los Gatos

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Other Procurement Approaches

Marc McDonald

City of Hayward

Matt Muniz

County of Alameda

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Procuring Onsite PV Systems

Direct Purchase Approach

Alameda County General Services Agency April 21, 2011

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Renewable Energy System Since 2001

10 solar power installations 3.2 MW Onsite Solar

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Ultraclean 1 MW Fuel Cell Cogeneration Plant

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Developing a PV Project

Considerations and Assumptions

 Site & Size Selection  Estimate Cost $/KW (varies)  Financing Availability: CEC  Terms of Financing  Incentive Availability  Maintenance Costs  Electric Rate Schedule - TOU  Life Cycle = 25 years  Hour/Month Simulation  Elec. Rate increases = 2.5%/yr  Demand Savings = 20% of

System Size (in needed)

 Positive Cash Flow  Internal Rate of Return > 10%

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Castro Valley Library

275KW PV System

95% Electricity from Onsite Solar Power

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Project Finances Castro Valley Library

 $1.7M capital cost  $500K CSI Incentive/

Energy Fund

 $1.2M CEC Loan :

15 years @ 1%

 A6 Rate Schedule  Internal rate of

return = 10.8%

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Sunset over the Solar Power System at Santa Rita Jail

Matthew Muniz, P.E., Energy Program Manager County of Alameda, GSA/TSD, (510) 208-9518 email: matt.muniz@acgov.org

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Hayward Solar Facilities Municipal Sites April 21, 20 11

Marc McDonald, S ustainability Coordinator QuES T

In recognition of the City of Hayward for their outstanding efforts towards environmental stewardship and sustainable business practices by incorporating renewable energy into their facilities. – REC Solar, Inc.

In recognition of the City of Hayward for their outstanding efforts towards environmental stewardship and sustainable business practices by incorporating renewable energy into their facilities. – REC Solar, Inc.

SOLAR POWER Barnes Court $51,400 Electricity Generated 60,000 S quare Feet Photo-Voltaic Panels

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Getting Started

Kevin Armstrong, City of San Jose Caroline Judy, County of Alameda Mary Tucker, City of San Jose

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Possibilities for Collaborative Efforts and Next Steps

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Possibilities for Collaboration

– Geography

• Greater Bay Area or sub-regional effort
• Use of best practices, and overarching framework for consistency

– Roles & Responsibilities

• Convener(s) = regional organization(s)
• Lead agency/agencies

– Procurement

• Piggy back on SV-REP (PPA only)
• Bundle and bid sites to pre-qualified vendors
• Standard offer
• Bundle sites and bid in an open process

– Integration of other focus areas (e.g., workforce development, integration with regional efforts around solar permitting)

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Follow-Up Information

– Attendee list – PowerPoint presentation slides – Link to survey – Short list of consultants for solar site assessments (SCC RFQ, July 2010) – Additional web links and resources

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