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HomeMy WebLinkAboutStaff Report 4.D 10/21/2019I 1 • • • � DATE: October 21, 2019 TO: Honorable Mayor and Members of the City Council through City Manager FROM: Dan St. John, Director, Public Works and Utilities Department Patrick Carter, Senior Management Analyst, City Manager's Office SUBJECT: Presentation Regarding a Power Purchase Agreement for Renewable Energy Production on City Facilities RECOMMENDATION It is recommended the Council consider a Presentation Regarding a Power Purchase Agreement for Renewable Energy Production on City Facilities. BACKGROUND The City of Petaluma currently generates no renewable electricity at City facilities. Development of renewable energy while saving on overall energy costs would meet three of the Council goals developed earlier this year: "Ensure a fiscally and organizationally sustainable city," "Provide city infrastructure that is safe, sustainable, multi -use, efficient, inspiring civic pride," and "Preserve and protect Petaluma's environment with smart and efficient use of resources." School Project for Utility Rate Reduction (SPURR), a statewide Joint Powers Authority who conducted a competitive procurement process to select a contractor, Forefront Power, to develop solar electricity generation systems in exchange for long-term power purchase agreements with public agencies participating in the program, approached the City to participate in a specialized program to develop renewable energy. Many of SPURR's current program participants are school districts and universities, although SPURR also has agreements with municipalities including the cities of Paso Robles and San Diego, and San Luis Obispo County. Participation in the SPURR program requires a Power Purchase Agreement (PPA) with Forefront Power, the selected contractor. The PPA would include a twenty-year term, in which the City would agree to purchase renewable electricity from Forefront Power at a specified rate. Forefront Power would plan, design, permit, finance, purchase, and install the necessary equipment, and would maintain the equipment and guarantee output for the 20 -year term. At this time, staff has only examined City -owned sites where the cost of purchasing energy through a PPA with Forefront Power would be lower over the term of the agreement than projected PG&E and/or Sonoma Clean Power costs. As a point of reference, the City receives electricity through Sonoma Clean Power's CleanStart program which is 49% renewable, 42% hydroelectric, and 9% undefined. The City does not subscribe to Sonoma Clean Power's EverGreen program with 100% renewable geothermal energy, although staff is analyzing separately the additional costs of doing so. Sonoma Clean Power uses PG&E's grid and billing services to distribute the electricity and recover costs from its customers. DISCUSSION During project development, Forefront Power analyzed electrical billing information for all City facilities to determine feasibility for a solar installation. Many smaller electrical uses like streetlights, traffic signals, and irrigation controllers were deemed impractical for solar generation while other City -owned facilities, notably Ellis Creek Water Recycling Facility, Cavanaugh Pool, Fire Stations, Marina, City parks, and City Hall, were screened out due to shading on available sites, lack of physical (dry) ground, or too low an energy use to financially support an installation. The four feasible sites found were the Petaluma Airport, Community Center, Police Department, and Petaluma Swim Center. Combined, these projects would generate 661 kW, equivalent to the amount of power used by 111 homes, saving the City approximately $2.2 million over the 20 - year PPA term. Using the competitive pricing negotiated by the SPURR program, staff believes the City will have the advantage of significantly larger economies of scale in using these prices than would be available under a directly negotiated PPA with a City selected energy contractor. Under the terms of the proposed PPA, the City would not bear any upfront costs and would realize energy cost savings in the first year. Furthermore, energy rates in that PPA do not increase at all over the 20 -year term, and the City would not be responsible to operate or maintain the systems because repairs or replacements throughout the entire PPA term would be performed by Forefront Power. Forefront would be responsible for completing all required permitting, including CEQA. At the end of the term, the City could elect to extend the PPA, purchase the system from Forefront Power, or have Forefront Power decommission and remove the equipment from City facilities. As an alternative to participation with the SPURR program, staff considered alternative methods of project delivery including the traditional Request for Proposals process to select and negotiate pricing with its own energy contractor for procurement of renewable energy, the use of an ESCO (energy services company) agreement, or direct purchase and installation by the City. While staff believes that the selection process and economies of scale negotiated into the SPURR JPA program is advantageous to the City, staff may consider other delivery methods for City properties not considered feasible by Forefront. Staff recommends continuing with the current PPA process with Forefront, that will likely result in project completion months sooner and with less cost to the City than other delivery processes. Staff recommends a PPA as this model allows the use of Federal tax credits that would not be available if the City purchase the equipment directly. K PUBLIC OUTREACH This agenda item appeared on the City's tentative agenda document on Monday, October 7, 2019 which was a publicly -noticed meeting. Staff will plan outreach activities and information to target the operators and users of the four selected project locations. FINANCIAL IMPACTS The agreement would create a 20 -year commitment to purchase renewable energy from Forefront Power, based on energy produced, estimated to be $3.2 million. The Airport Enterprise Fund and General Fund would be the funding source for these payments. Costs are expected to be fully offset by savings from reduced payments to Sonoma Clean Power and PG&E. Cost savings are estimated to be $2.2 million over the term of the agreement. ATTACHMENTS 1. Presentation from Forefront Power