REPORT TO THE CITY COUNCIL
January 14, 2016
FROM: THOMAS C. ESQUEDA, Director
Department of Public Utilities
SUBJECT
Title
Approve Option-to-Lease Agreement between the City of Fresno and Amber Kinetics for 25 acres of land at the Fresno-Clovis Regional Water Reclamation Facility at 2201 South Cornelia Avenue, Fresno, California 93706 (Council District 3)
Body
RECOMMENDATION
Staff recommends the Fresno City Council approve an Option-to-Lease Agreement between the City of Fresno and Amber Kinetics for 25 acres of land at the Fresno-Clovis Regional Water Reclamation Facility.
EXECUTIVE SUMMARY
On December 1, 2014, PG&E issued a request for offers (RFO) seeking feasible energy storage project proposals from independent third-parties who would own and operate the energy storage facilities to store excess energy and return it to the transmission grid when needed.
In response to the PG&E RFO, on February 17, 2015 Amber Kinetics submitted a proposal to PG&E for a flywheel storage project to be connected to the New Kearney Substation, located at the intersection of Jensen Avenue and Cornelia Avenue near the City’s Fresno-Clovis Regional Water Reclamation Facility. This is a high-value location for PG&E for an energy storage project to be connected to the transmission grid. The flywheel technology uses electricity from the grid during off-peak hours to spin the flywheels. The energy stored in those spinning flywheels is later returned to the grid by using the kinetic energy in the flywheels to generate electricity.
On April 24, 2015 Amber Kinetics was notified by PG&E that the Amber Kinetics’ proposal for an energy storage solution was accepted by PG&E for implementation at the New Kearney Substation located at the intersection of Jensen Avenue and Cornelia Avenue. To implement the energy storage solution, Amber Kinetics requires approximately 25 acres to install a 20 megawatt (MW) energy storage facility, and accommodate a potential second phase in the future, located in close proximity to the New Kearney Substation.
On October 15, 2014 representatives from Amber Kinetics contacted the City Manager’s office and Department of Public Utilities about the possibility of installing the energy storage facility on property located at the Fresno-Clovis Regional Water Reclamation Facility. The proposed location is shown on Attachment 1, and it has been selected based on its proximity to the New Kearney Substation. The energy storage facility is scheduled to be operational no later than May 2021.
The 25-acres of land proposed by Amber Kinetics is currently under lease to a local farmer to grow alfalfa and corn and is scheduled to expire on December 31, 2016. Staff has negotiated a 25-year lease agreement with Amber Kinetics that will pay the City $2,000 per acre for the first year of the lease, which includes a 3-percent per year annual escalator for the lease payment for the entire 25-year term of the lease.
Staff recommends the Fresno City Council approve an Option-to-Lease Agreement between the City of Fresno and Amber Kinetics for 25 acres of land at the Fresno-Clovis Regional Water Reclamation Facility.
BACKGROUND
PG&E Request for Offers for Energy Storage Projects
On December 1, 2014, PG&E issued a request for offers (RFO) seeking feasible energy storage projects. PG&E's goal was to contract with independent third-parties who would own and operate energy storage projects that can store excess energy and return it to the transmission grid when needed. The PG&E RFO was required by Assembly Bill 2514 (2010) that mandated that the major public utility companies in California acquire 1.325 gigawatts of energy storage.
On October 7, 2015, Senate Bill 350 was signed into law, increasing California’s Renewable Portfolio Standard (RPS) from 33% by 2020 to 50% by 2030. This increased mandate will greatly increase the utility-demand for grid-connected energy storage. PG&E has conducted an analysis showing that energy storage can allow large amounts of solar power to be cost-effectively integrated onto the grid. The storage that can make solar power available when the sun is not shining will significantly reduce greenhouse gas emissions from natural gas-fired plants that are now needed at times when the sun does not shine.
Since February 2015, PG&E staff has been reviewing and evaluating applications from numerous vendors interested in participating in the storage market. In evaluating offers for energy storage projects, PG&E targeted projects which met at least one of three goals - grid optimization, renewable energy integration and greenhouse gas reduction. Upon completing the review and evaluation process, PG&E selected seven projects for implementation: four Lithium Ion Battery projects, two Zinc/Air Battery storage facilities and one flywheel project (a first of its kind for PG&E).
Amber Kinetics
Amber Kinetics, Inc. is a vertically-integrated, flywheel energy storage system manufacturer and project developer. Their mission is to accelerate global adoption of energy storage by commercializing their advanced, cost-disruptive flywheel technology, to provide a lower cost and higher performing alternative to fossil fuel generation. Amber Kinetics was founded in 2009, and is headquartered in Union City, California.
On February 17, 2015 Amber Kinetics responded to a request for offers issued by PG&E to provide a cost-effective, multi-hour duration, energy storage solution for interconnection to PG&E’s New Kearney Substation. The project will store renewable power (primarily solar) from the time it is generated until it is needed. The storage will allow the use of an increasing percentage of renewable power, reducing greenhouse gas emissions. Importantly, the storage contributes to stabilize the PG&E transmission grid, as operated by the California Independent System Operator (CAISO).
In response to the PG&E RFO, Amber Kinetics proposed a flywheel storage project to be connected to the New Kearney Substation, located at the intersection of Jensen Avenue and Cornelia Avenue near the City’s Fresno-Clovis Regional Water Reclamation Facility. This is a high-value location for PG&E for an energy storage project to be connected to the transmission grid. The flywheel technology uses electricity from the grid during off-peak hours to spin the flywheels. The energy stored in those spinning flywheels is later returned to the grid by using the kinetic energy in the flywheels to generate electricity.
On April 24, 2015 Amber Kinetics was notified by PG&E that the Amber Kinetics’ proposal for an energy storage solution was accepted by PG&E for implementation at the New Kearney Substation located at the intersection of Jensen Avenue and Cornelia Avenue.
Option-to-Lease Proposal
To implement the energy storage solution, Amber Kinetics requires approximately 25 acres to install a 20 megawatt (MW) energy storage facility, and accommodate a potential second phase in the future, located in close proximity to the New Kearney Substation.
On October 15, 2014 representatives from Amber Kinetics contacted the City Manager’s office and Department of Public Utilities about the possibility of locating the energy storage facility on property located at the Fresno-Clovis Regional Water Reclamation Facility. The proposed location is shown on Attachment 1, and it has been selected based on its proximity to the New Kearney Substation. The energy storage facility is scheduled to be operational no later than May 2021.
The 25-acres of land proposed by Amber Kinetics is currently under lease to a local farmer to grow alfalfa and corn and is scheduled to expire on December 31, 2016. Staff has negotiated a 25-year lease agreement with Amber Kinetics that will pay the City $2,000 per acre for the first year of the lease, which includes a 3-percent per year annual escalator for the entire 25-year term of the lease.
Staff recommends the Fresno City Council approve an Option-to-Lease Agreement between the City of Fresno and Amber Kinetics for 25 acres of land at the Fresno-Clovis Regional Water Reclamation Facility.
ENVIRONMENTAL FINDINGS
Amber Kinetics will be responsible for securing all environmental approvals and permits for the energy storage project prior to any construction being initiated. Facility operations will use no water, produce no emissions, have no noise outside project perimeter, and have a minimal visual impact, since the structures containing the flywheels will be no more than approximately 10 feet above grade. Because they are 98% steel by weight, Amber Kinetics flywheel systems pose no risk of fire, explosion or hazardous materials release. These steel materials are valuable commodities and highly recyclable at end of facility life, for maximum environmental sustainability.
LOCAL PREFERENCE
Local preference was not considered because this Option-to-Lease Agreement is not bid or award of a construction or services contract.
FISCAL IMPACT
The Department of Public Utilities has negotiated an annual lease payment of $50,000 based on a negotiated lease rate of $2,000 per acre per year for the 25-acre parcel and will accrue to the Wastewater Management Division. While there is no direct financial benefit to the General Fund from lease revenues, it is expected that the General Fund will benefit from the project from additional sales tax and property tax payments which will result from the Project. Amber Kinetics estimates that this project will pay an additional $2.3 million in sales tax (based on the 8.225% sale tax rate), and another $427,000 in property tax during the first year of operation. The property tax revenue will decline over time due to depreciation, but will remain positive.
Attachments:
Option to Lease Agreement
Site Map