REPORT TO THE CITY COUNCIL
FROM: GREGORY A. BARFIELD, Assistant City Manager
Interim Director
Department of Transportation
BY: KRISTOPHER GREY, Projects Administrator
Department of Transportation
SUBJECT
Title
Actions pertaining to solar projects proposed at Department of Transportation/Fresno Area Express (FAX) sites including the FAX Employee Parking Lot and Bus Yard
1. Adopt findings pursuant to the California Environmental Quality Act (CEQA) Guidelines:
a. Adopt a finding of Categorical Exemptions pursuant to Sections 15303/Class 3; 15304/Class 4; and 15311/Class 11 of the California Environmental Quality Act (CEQA) Guidelines and exempt pursuant to Section 21080.35.(a) of the California Public Resources Code (PRC);
2. Approve the award of a cooperative purchase Energy Services Agreement-Solar with FFP BTM SOLAR, LLC, for the design, financing, construction, installation, operation, and maintenance of a 1.07 mW (DC) (estimated) solar photovoltaic system at the FAX Bus Yard;
3. Approve the award of a cooperative purchase Energy Services Agreement-Solar with FFP BTM Solar, LLC, for the design, financing, construction, installation, operation, and maintenance of a 219 kW (DC) (estimated) solar photovoltaic system at the FAX Employee Parking Lot;
4. Authorize the Director of Transportation or designee to execute subsequent documents, instruments, estoppel and acknowledgement certificates, etc. related to securing a financing party;
5. Authorize the Director of Transportation or designee to approve of any changes to the PPA rates up to the maximum amount authorized in the agreements;
6. Authorize the Director of Transportation or designee to execute the Pacific Gas & Electric (PG&E) Interconnection Agreement required for the project(s).
Body
RECOMMENDATION
Staff recommends Council perform the following actions:
1. Adopt findings pursuant to the California Environmental Quality Act (CEQA) Guidelines:
a. Adopt a finding of Categorical Exemptions pursuant to Sections 15303/Class 3; 15304/Class 4; and 15311/Class 11 of the California Environmental Quality Act (CEQA) Guidelines and exempt pursuant to Section 21080.35.(a) of the California Public Resources Code (PRC)
2. Approve the award of a cooperative purchase Energy Services Agreement-Solar with FFP BTM SOLAR, LLC, for the design, financing, construction, installation, operation, and maintenance of a 1.07 mW (DC) (estimated) solar photovoltaic system at the FAX Bus Yard;
3. Approve the award of a cooperative purchase Energy Services Agreement-Solar with FFP BTM Solar, LLC, for the design, financing, construction, installation, operation, and maintenance of a 219 kW (DC) (estimated) solar photovoltaic system at the FAX Employee Parking Lot;
4. Authorize the Director of Transportation or designee to execute subsequent documents, instruments, estoppel and acknowledgement certificates, etc. related to securing a financing party;
5. Authorize the Director of Transportation or designee to approve of any changes to the PPA rates up to the maximum amount authorized in the agreements;
6. Authorize the Director of Transportation or designee to execute the Pacific Gas & Electric (PG&E) Interconnection Agreement required for the project(s).
EXECUTIVE SUMMARY
The proposed solar projects include the construction of on-site Solar Photovoltaic (PV) Systems at two locations on the FAX’s bus yard located within the Municipal Service Center (MSC) complex. The sites recommended for Council consideration include the highest electricity load locations, highest yield for electricity bill savings, and require no tree removal. The proposed projects will include a total capacity of 1.3 megawatts (mW) of solar generation across the two project sites, resulting in a 82% total energy offset, which provides more than $115,883 in first year utility bill savings and over $6.4 million in savings over the life of the 20-year agreement.
FAX is conducting these projects in order replace an existing PV system located on the existing “A” and “B” bus parking canopies at the bus yard and expand total system output. The existing system has reached the end of its useful life and now far underproduces not only what FAX’s electrical demand requires of the system, but also what the system was capable of when first installed. The new system will provide new PV equipment on “A” and “B” canopies and also provide the construction of covered parking at “C” and “D” parking pads. The output from this upgraded system will serve to offset FAX’s compressed natural gas (CNG) station, the largest existing electrical load at the yard.
FAX will also be receiving new solar canopies in the renovated employee parking lot. These new canopies will provide for additional shaded parking for staff and serve to offset the electrical demands of the administration facilities at FAX. These new canopies in the employee lot are not a replacement and represent entirely new PV functionality for FAX.
The City will utilize the School Project for Utility Rate Reduction (SPURR), a joint powers authority which offers the Renewable Energy Aggregated Procurement (REAP) Program, an aggregated solar procurement program that leverages the collective purchasing power of SPURR’s large membership to secure transparent and pre-negotiated solar project pricing and terms. The City, as an Eligible Entity, can again piggyback on SPURR’s competitively-bid request for proposals (RFP). The City has worked on this next phase with ForeFront Power (FFP), which was awarded the REAP Program’s Master Contract, to propose Power Purchase Agreement (PPA) rates for the two sites. Included in the PPA rate calculations are all costs to design, finance, construct, implement, operate, and maintain the Solar PV Systems at the sites. All construction costs are built into the PPA rates, and there are no upfront costs to the City.
The PPAs again provide rate stability and protection as it includes a 0% escalator, meaning rates will remain the same for the entire 20 years of the agreement. The proposal also includes system operations and maintenance for the life of the agreement to support an annual performance guarantee of 95%.
BACKGROUND
The City of Fresno remains committed to renewable energy goals in both the update to the City’s General Plan and recently approved solar projects throughout the City, with the purpose of reducing energy consumption and costs. Our local energy utility, PG&E, was directed by the CA Public Utilities Commission (CPUC) to transition to “time of use” (TOU) hours and rates, which could impact the energy costs at City facilities operating beyond normal business hours. PG&E has also increased electricity rates by nearly 22% since 2021. As a result, City staff has been exploring opportunities to offset energy costs through alternative energy sources, efficiencies, and rate analysis adjustments.
The Sustainability Division of the Public Works Department has extensively researched and reviewed SPURR, a California-based joint powers authority of over 300 public agencies, which operates a variety of cooperative procurement programs including electricity, renewable energy and storage, as well as energy demand response. Through this research, SPURR has been determined to be the most cost effective strategy for proceeding with vital PV infrastructure upgrade.
REAP Program and the RFP Process
The REAP Program is an aggregated solar procurement program established in 2014. On July 19, 2017, SPURR issued a Request for Proposal (RFP) seeking responsive proposals for solar energy and energy storage services from over 70 vendors and industry consultants statewide.
Following a robust response and extensive work from the diverse RFP team, SPURR awarded the bid to FFP, a wholly-owned subsidiary of Mitsui & Co. The pricing and terms accepted by SPURR have been confirmed in the REAP Master Contract dated October 26, 2017 (RMC). An amended and restated RMC dated September 2019 replaced the previous RMC and resulted in even lower available pricing for public agencies, and remains active and in effect through September 2022.
The RMC is available for use as a cooperative or “piggyback” procurement vehicle by public agencies who wish to streamline the procurement process, take advantage of excellent pricing achieved through a highly competitive statewide solicitation, and enter into a fully vetted contract with favorable project terms and conditions that result in reduced project risk. The REAP Program is a safe and proven procurement vehicle that has already been vetted and used by the City of Fresno and over 50 other public agencies across the state including the Cities of Paso Robles, San Luis Obispo, Bakersfield, and San Diego. In addition to Fresno Unified School District, several other public agencies in the Fresno Metropolitan Area have entered into agreements for solar projects with FFP under the REAP Program, including Fresno County, Clovis Unified School District, Central Unified School District, CART, and State Center Community College District.
Utilizing the REAP Program will result in significant project confidence and cost savings to the City over the life of the project and includes favorable contract terms and conditions such as an annual 95% performance guarantee, a fixed 20-year PPA rate, lifetime system operations and maintenance, City ownership of all project environmental attributes, and no money out-of-pocket from the City. The pricing and terms secured through the REAP Program are the best available in the marketplace and will allow the City to save time and money by not having to duplicate efforts, and benefit from a large-scale statewide buying power.
The process undertaken by SPURR for the REAP Program RFP meets or exceeds the City’s requirements, and the purchasing power behind the REAP Master Contract provides the City access to the lowest rates possible.
Solar Projects Overview
In maintaining the City’s goal of increasing our renewable energy commitment and reducing our Greenhouse Gas (GHG) emissions, the proposed new City facilities solar project(s) encompasses the construction of Solar PV systems at two FAX sites:
|
Site |
System Size |
PPA Rate |
Year 1 Savings |
Energy Offset |
20 Year Savings |
|
FAX Bus Yard |
1,073 kW |
$0.1396 |
$105,572 |
81% |
$5,698,585 |
|
FAX Employee Lot |
219 kW |
$0.1689 |
$10,311 |
87% |
$715,825 |
|
Total |
1,292 kW |
$0.1447 |
$115,883 |
82% |
$6,414,410 |
Under the recommended ESA-Solar, FFP would provide electrical energy to these City facilities at the final negotiated blended PPA rate of $0.1447/kWh.
Included in the rate calculations are all costs to finance, design, construct, implement, operate, and maintain the Solar PV Systems. Since all costs are built into the PPA rates, there are no upfront costs to the City. Therefore, these facilities will be able to realize savings in the first year of operation. The PPA includes a 0% escalator, so rates will remain the same for the entire 20 years of the agreement, while PG&E rates are certainly expected to continue to rise.
There could be limited situations in which the negotiated PPA rates may be increased, up to a maximum pre-negotiated rate. Should PG&E require distribution upgrades to interconnect the solar systems to the PG&E power grid, the City will be required to bear all upgrade costs. Additionally, if changes in the scope of the project occur, such as adverse geotechnical conditions, the inclusion of additional spare conduit, or ADA compliance requirements not related to the solar system, the City will be responsible for the associated costs.
Should any or all of these unexpected costs arise, the City could: 1) choose to bear the distribution upgrades or reasonably documented scope change costs, and the PPA rates will remain unchanged; or 2) choose to incorporate such associated costs into the PPA rates, with a maximum increase for each type of cost. The maximum (cap) negotiated PPA rate for each facility is outlined below:
1. FAX Bus Yard: $0.05156 per kWh
2. FAX Employee Lot: $0.03632 per kWh
Even if the PPA rates are increased to the maximum negotiated PPA rate, the rates remain below the anticipated PG&E utility rates and the project still offers the City significant savings over the course of 20 years. The City’s total estimated savings over the duration of the agreement at the maximum negotiated PPA rate is conservatively estimated at over $6.4 million.
Performance Guarantee
As a result of a 95% performance guarantee, FFP will remain motivated to ensure the proper functioning of the system. To avoid owing the City a credit under this guarantee, they will test or arrange for meter inspection and testing bi-annually when performing system operations and maintenance.
Climate and Environmental Attributes
Equally important are the environmental attributes which amount to 2.2 million kilowatt hours (kWh) of renewable energy annually, which is equivalent to taking 333 gas powered vehicles off the road every year or powering 300 homes annually. This staff recommendation aligns with the City’s GHG Reduction Plan (Climate Action Plan) Municipal Strategies section 5.1.7 which targets GHG emissions generated at City facilities. The policy strategy is to “install renewable energy systems in City owned facilities” for the purpose of reducing the city’s GHG emissions.
Additional Information
The City Attorney’s Office has reviewed all agreements and approved to form.
ENVIRONMENTAL FINDINGS
Staff has determined that Categorical Exemptions from the provisions of CEQA exist for these Projects based on Sections 15303/Class 3; 15304/Class 4; and 15311/Class 11 of the California Environmental Quality Act (CEQA) Guidelines and exempt pursuant to Section 21080.35.(a) of the California Public Resources Code (PRC).
LOCAL PREFERENCE
Local Preference was not considered as this is an existing “piggyback” contract based on a competitively bid RFP.
FISCAL IMPACT
There is no impact to the General Fund by this project. There are no up-front costs to be paid; all design, construction, and operational costs are incorporated into the negotiated PPA rates.
Attachments:
1. ESA - Special Conditions - Solar; FAX Employee Parking Lot
2. ESA - Special Conditions - Solar; FAX Bus Yard
3. Categorical Exemptions Pursuant to Sections 15303 Class 3; 15304 Class 4; and 15311/Class 11