Report to Mayor and City Council
Tuesday, July 16, 2019
Discussion
SUBJECT:
Title
CONSIDER APPROVAL OF A MEMORANDUM OF UNDERSTANDING FOR THE EPIC CHALLENGE PHASE 2 PROPOSAL DEVELOPMENT AND PROJECT IMPLEMENTATION BETWEEN THE CITY, CHARGE BLISS, INC. AND 127 ENERGY, LLC. (CITY COUNCIL)
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I. SUMMARY
In 2016, the California Energy Commission (CEC) launched a two phased grant application, titled, GFO-15-312 - The EPIC Challenge: Accelerating the Deployment of Advanced Energy Communities (AEC). The purpose of the solicitation was to fund a competition that would challenge project teams to develop innovative and replicable approaches for accelerating the deployment of AEC in Investor-Owned Utility (IOU) service territories.
Phase One focused on the planning and permitting of an AEC. Phase Two would fund the build out of the AEC that was planned in Phase One.
Under Phase One, the CEC awarded $1.5 million to Charge Bliss to develop an AEC in the City of Carson. The AEC project in Carson was part of Group 4, Advanced Energy Community located in a disadvantaged area of Southern California.
At the conclusion of Phase One, the CEC amended the solicitation to provide additional details on how to apply for Phase Two. During the initial Phase Two application window, the City and Charge Bliss were not able to reach agreement and therefore did not submit an application.
Earlier this year, the CEC reopened the Phase Two application window because no projects within Group 4 were awarded (Exhibit No. 1). The grant application is due to the CEC on July 25, 2019 and Carson would be competing against three projects that are also located in a disadvantaged area of Southern California. Staff has been working with Charge Bliss to restructure a project that works for both parties and meets the CEC Phase Two guidelines.
A Memorandum of Understanding (MOU) between the City, Charge Bliss and 127 Energy (the investor) memorializes the major project deal points (Exhibit No. 2). If the grant is submitted and selected for an award, the City, Charge Bliss, and 127 Energy will work together to develop a Project Labor Agreement (PLA), Power Purchase Agreement (PPA), and other engineering and construction documents that would be needed before construction could begin.
As part of the grant application the City would need to provide commitment and support letters (Exhibit Nos. 3 and 4). The commitment letter must identify the source(s) of funds for the project, justify the dollar value claimed, guarantee the availability of the funds for the project, provide a strategy for replacing the funds if they are significantly reduced or lost, and provide City sites for deployment activities. II. RECOMMENDATION
Recommendation
TAKE the following actions:
1. AUTHORIZE the Mayor to execute the Memorandum of Understanding with Charge Bliss and 127 Energy.
2. AUTHORIZE the Mayor to execute a commitment letter to provide matching funds and sites for deployment activities.
3. AUTHORIZE the Mayor to submit a letter of support.
1.
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III. ALTERNATIVES
TAKE another action the City Council deems appropriate, consistent with the requirements of the law. IV. BACKGROUND
The Electric Program Investment Charge (EPIC) Challenge
The CEC is looking to fund projects that implement a set of innovative planning, permitting, and financing approaches at the local and regional levels. Funded projects will serve as models for local governments that want to encourage sustainable development. Replicability and the transfer of knowledge gained from these projects are a stated goal. An EPIC-funded project must also benefit electricity ratepayers, and lead to technology advancement and breakthroughs to overcome the barriers that prevent the achievement of the state’s statutory energy goals.
Project Description and Cost
The revised project includes canopy and/or roof top solar panel systems, battery storage, and Level II electric vehicle charging infrastructure at 8 to 9 City sites. The replacement of chillers at City Hall and the Community Center; conversion of lighting systems to LED; and, replacement of the roof and heating, ventilation, and air conditioning (HVAC) units at City Hall are also components of the project.
The total project cost is estimated at $18.2 - $20.1 million. If the Carson project is selected for an award, the CEC would fund $10 million, the City would provide $3.2 million in matching funds and 127 Energy would provide $5 - $6.9 million in matching funds.
Project Benefits
The benefits associated with AECs include the opportunity to minimize the need for new energy infrastructure costs such as transmission and distribution upgrades, supporting grid reliability and resiliency by incorporating technologies such as energy storage, providing stable and affordable access to renewable energy generation and proving energy savings through energy efficiency upgrades. Carson will continue to lead by example and be seen as a regional leader in sustainable initiatives. The project also has the potential to create long term reduction in energy costs associated with City facilities.
Project Team
The purpose of the CEC’s solicitation is to fund a competition that will challenge project teams comprised of developers, local governments, researchers, and other project partners to create innovative and replicable approaches for accelerating the deployment of AECs.
The project team currently includes the City of Carson, Charge Bliss, Charge Bliss Construction, 127 Energy, Clean Coalition, Adopt-a-Charger, Sun Power, Skelly Electric, and Powerflex Systems. Additional vendors will be solicited for services in engineering, trenching, tree removal, tree replanting, site restoration, security, fencing, traffic control, networking, and other trades and will be introduced to the project at a later date.
Pricing Terms
The initial PPA price was not-to-exceed $0.11/kWh, with a 2% annual escalator, however with the addition of the PLA requirement by the City, the PPA price for the first year was increased to a not-to-exceed price of $0.14/kWh, with a 2% annual escalator.
Project Labor Agreement (PLA)
The development team has committed to working with the labor unions to develop a project-specific PLA.
Other Contract Terms
The term of the PPA will be limited to ten years. The energy system, specifically the solar and battery components will be owned, maintained, and operated by 127 Energy during the ten year term; however, at the conclusion of the term, the energy system will be donated to the City at no cost. The City will own, operate, and maintain the other project components (chillers, HVAC, and lighting). The City will also own and control the operation of the electric vehicle charging stations; however, Powerflex will maintenance, manage, and provide networking in exchange for the low carbon fuel credits. The City will retain the environmental attributes associated with the production of the solar energy and renewable energy certificates (RECs).
Proposed Schedule
A project schedule is included in the MOU. A few important dates are noted in this report: (1) the grant application is due to the CEC on July 25, 2019; (2) the CEC may release the Notice of Proposed Award (NOPA) the week of September 2019; and, (3) the anticipated CEC business meeting in which the final awards will be made is scheduled for December 11, 2019.
V. FISCAL IMPACT
If the grant application is submitted to the CEC, the project is selected to receive an award, and the City decides to proceed with the project, the City would need to provide matching fund in an amount of $3.2 million. The funds provided by the City would be used to fund the chiller, HVAC, and LED lighting project scope. This would come from the Fund Balance of the General Fund.
VI. EXHIBITS
1. GFO-15-312 Phase 2 - NOPA (pgs. 5-11).
Under Separate Cover
2. Memorandum of Understanding.
3. Commitment Letter.
4. Letter of Support from the City Council.
Prepared by: Reata Kulcsar, Sustainability Administrator - Utilities