REPORT TO THE CITY COUNCIL
FROM: FRANCISCO PARTIDA, C.M.,C.A.E., USAP, Interim Director of Aviation
Airports Department
SCOTT L. MOZIER, PE, Director
Public Works Department
BY: ANN D. KLOOSE, Sustainability Manager
Public Works Department
SUBJECT
Title
Actions pertaining to the Parking Lot Solar and Energy Storage at Fresno Yosemite International Airport (FAT): (Council District 4)
1. Approve the First Amendment to the Energy Services Agreement-Solar with ForeFront Power (FFP) BTM Solar, LLC, for the design, financing, construction, installation, operation, maintenance of a 2,970 kW (DC) (estimated) solar photovoltaic system;
2. Approve the First Amendment to the Energy Services Agreement-Energy Storage with FFP BTM Solar, LLC, for the design, financing, construction, installation, operation, maintenance of a 2,000 kW/3,828 kWh (estimated) energy storage system;
3. Authorize the Director of Airports or designee to execute the Amended Energy Service Agreements on behalf of the City of Fresno.
Body
RECOMMENDATION
Staff recommends that the City Council approve the Amendments to the Energy Services Agreements (ESA) with ForeFront Power (FFP), Inc. to adjust the construction schedule and energy pricing, and authorize the Airports Director, or designee, to execute the First Amendment(s) on behalf of the City of Fresno.
EXECUTIVE SUMMARY
The City of Fresno Airports Department executed ESAs with FFP in July of 2021 for solar and battery storage projects to support the new Airport Parking Garage and the Airport Terminal Expansion projects. While the new parking garage solar project is completed and operational, the terminal expansion solar and battery storage project (Project) has experienced delays. Despite delays and rising construction costs, the anticipated savings on electricity bills are still expected to exceed $10.5 million over the next two decades, surpassing the initial projection of $6.85 million when Council approved the original Agreement. This enhanced savings is achievable due to a variety of factors to include FFP safe harboring federal investment tax credits (ITC) and the Project retaining its Net Energy Metering (NEM) 2.0 status, provided it is completed before the deadline of September 3, 2027. Time is of the essence for approval of the Amendment, procurement of materials and completion of the construction phase.
Since initial approval in July 2021, rising costs have impacted the Project, including construction inflation, tariff hikes, upgrades required by PG&E, phased construction and the possible loss of property tax exempt status. While most cost increases are outside the City’s control, the property tax exempt status is currently under review in the CA Legislature with AB 2389. The City is actively supporting this Bill, and if passed, AB 2389 would safeguard and preserve over $1.66 million in PG&E bill savings for this airport. The Amendment assures the City will reap financial advantages, and the resulting savings, if AB 2389 is enacted. In the original Agreement, the Council authorized modifications to the PPA rates and the energy storage system size, within the limits set by the Agreement. The Amendment acknowledges that certain development and construction milestones and energy pricing may be modified due to factors beyond the Provider's reasonable control.
BACKGROUND
The City of Fresno Airports Department executed ESAs with FFP in July of 2021 for solar and battery storage projects to support the new Airport Parking Garage and the Airport Terminal Expansion projects. These new systems are in addition to the previously installed solar systems at the Airport in 2008. While the new parking garage solar project is completed and operational, the terminal expansion solar and battery storage project has experienced delays. It was known at the time of award that both projects would need to coordinate at a future date to accommodate the ongoing construction of the parking garage and the new terminal expansion. The objective of the City’s team was to lock in NEM 2.0 favorable pricing which has proven successful.
The 401 kW parking garage project is complete and provides an additional 120 shaded parking spaces at the top garage level. The more expansive airport terminal surface lot project is 3.55 MW in combined solar and battery storage and upon completion will provide an additional 600 shaded spaces. The attached site-map provides an overview of where the solar canopies will be installed. The final location has been based on the closest proximity to PG&E infrastructure for interconnection and will not interfere with future potential airport parking structure plans.
The final airport parking lot project has encountered multiple delays which have been out of the City and FFP’s control with much of the additional time needed by PG&E. However, PG&E has worked with the team who have remained diligent and secured a NEM 2.0 project extension deadline of September 3, 2027. It is important to highlight that the allowance for the NEM 2.0 extension granted to the City is a result of prompt actions taken by both the City and FFP at the California Public Utilities Commission (CPUC), advocating for extensions to the current April 15, 2026, deadline should there be any delays caused by the utility.
Despite these delays and rising construction costs, the anticipated savings on electricity bills are still conservatively expected to exceed $10.5 million over the next two decades, surpassing the initial projection of $6 million made when the Council approved the original agreement. This enhanced savings is achievable due to a variety of factors to include FFP safe harboring federal investment tax credits (ITC) and the Project retaining its NEM 2.0 status, provided the Project is finished before the September 3, 2027, deadline.
Since gaining initial approval in July 2021, rising costs have impacted the final Project. These cost factors include construction inflation, tariff hikes, the installation of a fire hydrant at the battery site, essential upgrades required by PG&E for interconnection, construction phases aimed at reducing parking disruptions, and the possible loss of property tax exempt status. While most of these cost increases are outside the City’s control, the matter of property tax exempt status is currently under review in the CA Legislature with AB 2389. If this bill is passed and signed by the Governor, AB 2389 would safeguard and preserve over $1.66 million in PG&E bill savings for this Project over the next twenty (20) years. The City Manager has sent a letter of support to the legislature, and follow-up meetings with the Legislatures’ and Governor’s office have taken place to emphasize the significance of backing this legislation. It should be noted that the Amendment outlines in Exhibit A that if AB 2389 is enacted in its original form, the City will reap financial advantages, and the resulting savings will be allocated accordingly.
In the original agreement, the Council granted the Director of Airports the authority to approve modifications to the Power Purchase Agreement rates and the energy storage system size, within the limits set by the Agreement. This includes the ability to execute related documents necessary for the financing of the solar and energy storage systems. Since the Agreement's execution, the Project has faced delays due to interconnection issues and utility coordination, which necessitate system upgrades and adjustments. The Amendment acknowledges that certain development and construction milestones and energy pricing may be modified due to factors beyond the Provider's reasonable control.
The updated rate of $0.2107/kWh is fixed for 20 years and is significantly lower than PG&E rates which will certainly rise during this time. The projected 20-year Project savings are now over $10 million.
The City Attorney’s Office has reviewed and approved the Amendments as to form.
ENVIRONMENTAL FINDINGS
On July 29, 2021, when City Council awarded these contracts, Council also adopted a finding of Categorical Exemption pursuant to Section 15303, Class 3 New Construction or Conversion of Small Structures and Section 15311, Class 11 Accessory Structures, pursuant to CEQA Guidelines for these contracts and their subsequent Agreements.
LOCAL PREFERENCE
Local Preference was not implemented in this procurement because it is a cooperative purchase contract. However, the construction portion of the Project is being competitively bid by ForeFront with a continued commitment to hiring local labor to include IBEW Local 100.
FISCAL IMPACT
The Project is located in Council District 4 and the approval of this Amendment will have no impact to the General Fund. The projected utility bill savings will have a positive impact on FAT’s ongoing O&M costs, which supports Airports initiative to grow net revenue through prudent fiscal management.
Attachments:
ESA - Solar
ESA - Energy Storage
Project Area Map
Categorical Exemptions
FAT Proposed Parking