BOARD AGENDA MEMORANDUM
SUBJECT:
Title
Rate Agreement with the Power and Water Resources Pooling Authority for Participation in Westlands Solar Park Project.
End
RECOMMENDATION:
Recommendation
A. Authorize the Chief Executive Officer to negotiate, and after making the necessary CEQA responsible agency findings, execute a 20-year Rate Agreement with the Power and Water Resources Pooling Authority (PWRPA) for the purchase of solar power from the Westlands Solar Park Project;
B. Receive a report on results from PWRPA-SCVWD Solar Generation RFP Phase II; and
C. Provide direction to staff for local solar development.
Body
SUMMARY:
During the December 19, 2017 Board of Director’s meeting, staff reported the solicitation by the Power and Water Resources Pooling Authority (PWRPA) to participate in the 200MW Westlands Solar Park Project (Project), a utility-scale solar project located in Westlands' Competitive Renewable Energy Zone (CREZ) as designated by the California Energy Commission. Per direction from the Board, staff proceeded with pricing negotiations and contract development for the Project, and continued to evaluate district facilities for opportunities to develop additional local solar projects. The Project developer had prepared an EIR to evaluate the environmental impacts of the project and the CEQA document was certified on January 16, 2018.
Westlands Utility-Scale Solar Development
Through Project negotiation, the District has secured a 1.5MW allocation of the solar development and will receive the carbon-free, renewable energy generated by the allocation for a price less than $41 / megawatt-hour (MWh) with 0% annual rate escalator through a 20-year power purchase agreement (PPA). Including transmission and distribution charges to transport the power, the estimated price of energy delivered to district facilities is expected to be less than $66-71 / MWh.
Participation in the Project through PWRPA would secure low-cost renewable power for use at district facilities, while contributing to the board governance policy to reduce greenhouse-gas (GHG) emissions and significantly increasing the percentage of renewable energy in the District’s energy portfolio.
PWRPA is subject to the State of California “Renewable Portfolio Standard” (RPS) mandate, whereby electric utilities must serve an RPS percentage of retail sales with renewable resources within a given Compliance Period. Thus, the District is required to procure 33% of its power from renewable sources by 2020 and 50% by 2030. Staff estimate that 19.55% of the District's energy was from renewable sources and 100% were carbon free in 2017. Once the Project is complete in 2021, staff estimate that 39-42% of the District energy portfolio will be supplied from renewable sources. This significant increase will need to be supplemented by additional renewable projects to meet the 50% RPS requirement by 2030.
Local Solar Development
To support local solar development, Staff released a Request for Proposals (RFP) through PWRPA in January 2018 to solicit interest in developing solar installations at the District’s Almaden Campus, Rinconada Water Treatment Plant (RWTP), and Silicon Valley Advanced Water Purification Center (SVAWPC).
The RFP requested multiple purchase options including a 20-year PPA, a 5-year PPA with system buyout following the 5th year of production, and an upfront buyout immediately following construction.
After evaluating the RFP responses and the various purchase options, the most financially competitive option for the District to develop local solar projects is through a long-term, 20-year (or 25-year) PPA. While proposals vary by developer, the generalized results and anticipated challenges for each facility are described below:
• Almaden Campus has two existing solar installations, a 105kW carport system and a 100kW rooftop system on the Administration Building. Due to solar panel defects identified by the panel manufacturer, the RFP proposed a rehabilitation to replace the existing defective panels. To maximize allowable site production, developers also proposed to add additional carport structures and rooftop systems at the Water Quality Lab, which would significantly increase the solar installation size at the Almaden Campus to between 500kW - 1200kW total. The proposed cost to upgrade and expand the existing system ranges from approximately $115-125 / MWh with a 2-3% annual rate escalator when structured as a 20-year PPA.
• RWTP is currently undergoing the Reliability Improvement Project (Reliability) and has limited area available for solar development during construction activities. Since the large vacant land to the southeast of the treatment plant is required for Reliability Oak Woodland Mitigation planting, the treated water reservoir rooftop provides the most immediate and cost effective location for solar development. The proposed system sizes vary from 500kW to 1000kW and will depend on the structural capability of the reservoir roof. The associated price to develop a solar installation at RWTP is approximately $75-95 / MWh with a 2-3% annual rate escalator when structured as a 20-year PPA. Solar development will require additional structural evaluation of the reservoir rooftop and approval from operations and maintenance staff. The Reliability construction schedule may also inhibit immediate solar development. Once construction is complete, additional opportunities for solar installations at the RWTP may be considered
• SVAWPC has available space for solar development on the Process Building rooftop, however the site is considered too small to be developed as a stand-alone solar installation site. When developed in concurrence with the Almaden Campus or RWTP, the price to install an estimated 300kW rooftop solar installation ranges from 95-110/ MWh with a 2-3% annual rate escalator when structured as a 20-year PPA. With the future expansion of the facility, solar development may be impacted by any future modification to the Process Building or alteration to the electrical system. Additionally, SVAWPC is owned by the City of San Jose and operated and maintained by the District through a 40-year lease agreement. While tentatively feasible, solar development at this location may require additional approval from the City of San Jose.
From the results of the RFP, the PPA cost to develop local solar installation is approximately 20-30% higher than developing an equivalent utility-scale solar project. These estimates do not include the District labor costs to support local solar project development, including contract negotiations, design and construction activities, and long-term site coordination.
In addition to evaluating these utility-scale and local solar projects, staff also evaluated the Anderson Hydroelectric Facility (Hydro Facility) for opportunities to maximize the effective revenue while managing uncertainties for renewable power generation during the five- year construction phase of the Dam Seismic Retrofit Project. Staff plan to transition the current PG&E Qualifying Facilities (QF) power purchase agreement (PPA) which expires at the end of the year, to the PG&E Renewable Energy Self-Generation Bill Credit Transfer (RES-BCT) tariff to prepare for construction activities.
The RES-BCT allows local governments to generate electricity at one account and transfer the energy credit to another PG&E account owned by the same local government. By transitioning to the new tariff with PG&E, the District can significantly reduce utility interconnection costs during the contract transition phase and provide a flexible, minimal risk approach to maximize the effective revenue during the anticipated periods of reduced generations. As the Seismic Retrofit Project progresses, staff will continue to develop a long-term plan for the Hydro Facility to maximize system generation and the resulting revenue.
FINANCIAL IMPACT:
Staff estimates a $41,800 annual cost savings with approval to participate in the Westlands utility-scale Project through PWRPA. Funding for PWRPA electricity charges are including in various annual project budgets for major district facilities. Local solar development will likely result in a slight increase to PWRPA electricity charges. Further financial evaluation would be required once pricing is finalized during contract negotiations.
CEQA:
NOT A CEQA PROJECT
The recommended action does not constitute a project under CEQA because it does not have a potential for resulting in direct or reasonably foreseeable indirect physical change in the environment.
ATTACHMENTS:
None
UNCLASSIFIED MANAGER:
Manager
Kurt Arends, 408-630-2284