Solar Power for Public Agencies & Collaborative Procurement Informational Meeting April 21, 2011 Bingham McCutchen, East Palo Alto
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Who’s Here? 26 cities/towns 5 counties 5 other public agencies 5 regional organizations Huge Collaboration Potential! 3
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 4
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Solar Power for Public Agencies Ben Foster, VP Operations 6
Solar Project Benefits for Public Agencies Achieve agency-wide sustainability plans to meet or exceed state mandates o Demonstrate leadership across your community o Leverage federal, state and local programs for supporting clean energy projects o Reduce exposure to long-term electricity price increases o Create local jobs and economic activity o Generate operational savings (when managed properly) o Create a valuable hedge against carbon pricing o Utilize idle property such as rooftops, brownfield areas and parking lots o 7
Policy & Program Drivers for Solar Projects Federal Tax Policy – 30% ITC grant program + 100% Depreciation in 2011 o Government Purchasing – 28% GHG Reduction by 2020 o DOE Market Transformation and Solar America Cities programs o EPA Green Power Partnership matching green energy sellers and buyer o California Renewable Programs, Incentives & Legislation o CA 33% renewable sources for electricity by 2020 o California Solar Initiative Program (budget exhausted – more being requested) o CA target for 20GW installed by 2020 (12GW distributed, 8GW utility) o AB2466 – Virtual Net Metering (not economically feasible yet) o AB920 – Surplus generation can be compensated (but at low prices) o Pending legislation to improve meter aggregation and feed-in-tariffs o 8
Defining Solar Energy For Project Sponsors 6 Ways to Maximize Solar Project Impact: o Leadership & Economic Development o GHG Reductions o Design Integration o Return on Investment o Total Energy Offset o Total Savings Team must agree on prioritization of these competing goals to be successful 9
Clean Energy Technology Examples Solar Photovoltaic (PV) Panels/Modules Solar Hot Water Wind Turbines Fuel Cells 10
Solar Carport Structure Examples • Addresses rooftop constraints • Protects vehicles from weather • Electric vehicle-ready 11
Buying Solar is a Major Decision: “Once in a Lifetime” o Rapidly Evolving industry, technology, vendors, financing, policies o Very similar to real estate decisions o Location (solar insolation potential) o Location (available space and technical factors) o Location (rate schedules and economics) o 25+ year decision with long-term returns o Multiple goals to balance: o Leadership & Economic Development o Energy Offset & GHG Reductions o Design Integration o Total Savings & Return on Investment o Steep learning curve for all project stakeholders 12
Solar Project Lifecycle Management Vendor Feasibility System Solar Project Procurement Strategy Assessments Commissioning Optimization & Financing Define Right Find Best Best-in-Class Highest Right Strategic Vendors & Solar Components, Long-term Approach Sites Financing Returns Design, Construction Properly managing all phases of the project will create the greatest long-term value 13
Financing Impacts Project Design, Construction & Returns Financing Structures Major Impact On: o Direct Purchase o Performance Risk o Up-Front Costs o Power Purchase Agreement o Equipment Leases o Long-Term Returns o Procurement Process o Bond Financing o Enhanced Use Lease o System Design & Sizing o Utility Financing o Project Benefits & RECs o Operations & Maintenance o Energy Service Contract 14
Direct Purchase Ownership o • Customer owns, operates, and maintains the system • Owner has full responsibility for performance • Maintenance contracts and performance guarantees can be purchased Capital Costs o • Full cost of system due at delivery (some interim payments may be required) • May be partially offset by rebates & incentives Financial Benefits o • 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 15
Power Purchase Agreement Ownership o • 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 o • No up-front capital costs Financial Benefits o • 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 16
Equipment Lease Ownership o • 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 o • No up-front capital costs • May be some transaction costs Financial Benefits o • 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 17
Solar Site Feasibility Checklist Portfolio approach to site evaluation o Independent, solar expert firm o On-site survey & meetings o Utility rate evaluation o Structural & Electrical evaluation o LCOE Financial analysis o Funding and incentive options o Current pricing & trends o Technical risk assessment o World-class tools & methods o 18
Example: Citywide Solar Assessment: 9 Sites 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. 19
Getting Started o Define goals, constraints and success factors with linkage to citywide planning o Indentify all sites across your organization for potential solar development o Determine financing and contracting requirements, constraints and options o Gather relevant information about energy usage and site characteristics o Utilize internal and external expertise to assess sites and tailor procurement effort o Recruit other departments and/or agencies to combine efforts… 20
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Silicon Valley Collaborative Renewable Energy Procurement (SV-REP) Project PROJECT OVERVIEW Rachel Massaro Ben Foster Joint Venture: Silicon Valley Network Optony 22
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 23
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 Convener Technical Advisor Lead Agency 24
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. Largest multi-agency project to date 25
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 26
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