DATE: October 15, 2024
TO: Mayor and City Council
FROM: Director of Public Works
SUBJECT Critical Municipal Facilities: Adopt a Resolution Authorizing the City Manager to Negotiate and Execute a Power Purchase Agreement with Ava Community Energy to Install Solar and Battery Storage at Four City Facilities
RECOMMENDATION
That Council considers the proposed Power Purchase Agreement (PPA) and associated solar and battery installations; conducts a Public Hearing; and adopts a resolution authorizing the City Manager to negotiate and execute the PPA with Ava Community Energy.
SUMMARY
City staff have been working with Ava Community Energy to prepare plans and agreements for the installation of solar and batteries at four City facilities: Fire Station 1, Fire Station 7, Corp Yard, and the Cinema Place parking structure. The installations would be financed through a Power Purchase Agreement (PPA) between the City and Ava Community Energy. The PPA would allow a third-party developer to own, operate, and maintain the generating equipment and the City would agree to host the systems and purchase the electric output for 25 years. The Council Sustainability Committee (CSC) voted on September 16, 2024, to recommend approval of the project.
BACKGROUND
East Bay Community Energy (EBCE) formed in 2016 as a joint powers authority to provide cleaner, greener energy at lower rates to Alameda County customers. EBCE started providing electricity to customers in 2018 and has expanded to include communities in San Joaquin County. In 2023, the name was changed to Ava Community Energy to better reflect the larger service territory. EBCE/Ava’s goals include local control and oversight, lower rates, driving investment in renewable energy, and improving resilience of local communities. To help advance these goals, Ava is offering a procurement program, called the Critical Municipal Facilities program, to deploy solar and battery energy storage systems at member agencies’ facilities.
On May 10, 2021, the Council Sustainability Committee (CSC) considered a report about the proposed procurement partnership with Ava Community Energy. The Committee voted unanimously to recommend that Council support the City’s participation in the program. On June 15, 2021, Council adopted Resolution 21-107, authorizing the City Manager to pursue deployment of solar and battery energy systems at critical municipal facilities in partnership with Ava Community Energy.
Across Ava’s service area more than 300 critical municipal facilities were analyzed to determine the feasibility of solar and battery energy storage systems to meet critical loads in time of grid outages. Hayward staff contributed to this initial portfolio by submitting approximately twenty potential critical municipal facilities. From that list, eight sites in Hayward were initially considered as part of the Phase I procurement project portfolio.
Staff negotiated a PPA in 2021-2022 and Ava’s engineers did initial site visits in the spring of 2022. In 2023 and early 2024, Ava selected and negotiated with a financing entity, Green Bridge Energy, and a developer, Gridscape Energy Solutions. The project schedule will have the solar and battery equipment operational by April 2026, which is the deadline to retain NEM 2.0. Under Net Energy Metering 2.0, sites will receive 1-to-1 credits for every kWh of solar electricity delivered to the grid, which is financially favorable compared to the newer Solar Billing Plan that sites would otherwise fall under. To maintain the current schedule, the PPA must be executed by the end of 2024.
On September 16, 2024, the CSC considered the project and asked questions about:
Construction schedule;
Ava staff explained that construction will occur as fast as possible, however, Hayward is one of eight cities included in the portfolio of projects so there are many moving pieces.
Cost savings;
Staff responded that the project will save the City money over the 25-year term of the agreement.
Future expansion to include additional facilities;
Ava staff indicated they would like to have additional phases with additional cities and more projects.
Potential interconnection delays with PG&E; and
Ava staff explained that the deadline to maintain the NEM 2.0 tariff requires that construction be completed by April 2026 and if PG&E has delays on their side, it will not impact the project or the tariff.
Potential impacts with future improvements to the Corp Yard.
Staff will ensure that the proposed solar and battery does not conflict with future improvements to the Corp Yard.
With two members present, the Committee voted unanimously to recommend that Council approve the PPA and the four solar and battery installations.
DISCUSSION
There are 61 project sites across eight cities participating in this program. In addition to Hayward, the cities are Berkeley, Emeryville, Fremont, Livermore, Oakland, Pleasanton and San Leandro. Ava designed the Resilient Municipal Critical Facilities program to reduce barriers for local governments for the deployment of solar and storage by providing technical expertise and staff time and aggregating cities’ small solar projects into a larger portfolio to take advantage of bulk purchasing, streamlined contracting process, and better pricing. Recognizing these barriers, this procurement has the following goals and benefits:
Reduce the burden and associated costs for both local governments and vendors by having Ava and its third-party engineering firms conduct initial site identification, evaluation, and design work prior to going out for contractor bids.
Reduce equipment costs by aggregating a higher volume of sites across multiple cities into a larger portfolio.
Reduce vendor contracting costs by having Ava serve as a single counterparty for all participating local governments and sites in the portfolio.
Provide resiliency back-up for critical loads in the event of grid outages for sites with battery storage.
Reduce the City’s energy bills through Time-of-Use (TOU) energy and demand charge reductions.
Manage battery discharge during TOU periods to reduce both customer bills and Ava wholesale energy procurement requirements.
Reduce reliance on existing diesel-powered generators, minimizing CO₂ equivalent emissions.
In addition to the above benefits, the proposed PPA would benefit Hayward in the following ways:
Increase the City’s on-site solar generation capabilities and advance Hayward’s goal of achieving ZNE across its portfolio of facilities.
No up-front or out-of-pocket costs to the City.
Save money (compared to current and forecasted utility bills.
Electrical upgrades at the Corp Yard and Fire Station 1 will be included and paid for in the City’s monthly rate.
Ava began the site assessment process with a comprehensive list of Hayward’s critical facilities and excluded sites that already have solar. Adding batteries to sites that have solar is not cost effective at this time. Hayward staff excluded sites that are due for significant retrofitting, rebuilding or electrical upgrades. The four sites proposed for upgrades are:
Site
PV Size (kW DC)
% of Demand Offset by PV
Battery Size (kWh)
Hours of Battery Backup*
Fire Station 1
62 66%
154.8
5 Fire Station 7
72 70%
154.8
5.25 Corp Yard
51 92%
77.4 4.3
Cinema Place Garage**
49 92%
NA
0 * Note: Hours of battery backup are based on average load. The batteries could potentially provide infinite hours of backup if load is reduced to “essential operations”. ** Due to the lower electrical demand at the Cinema Garage, it was determined that battery storage is not feasible.
The primary objective of this program is to add resilience to municipal facilities, allowing them to operate emergency loads using solar and storage technologies during a grid outage. Battery systems will also allow facilities to “island”, or isolate, from the grid during a Public Safety Power Shutoff (PSPS) event or other grid outage. For the Fire Stations and Corp Yard, if electrical demand can be curtailed, the solar and storage can provide full back-up power. If electrical demand cannot be curtailed, the existing generators will operate to support the solar and storage. Microgrid controllers will be included to allow for the optimization of the solar and storage generation, reducing overall CO2 emissions as well as annual fuel cost savings.
Power Purchase Agreement (PPA) – With a PPA model, a PPA provider pays for the installation, operations and maintenance of the solar and battery energy storage systems, and the City pays an agreed upon price per kilowatt-hour (kWh) for power generated. Staff has negotiated the key terms of the PPA between the City and Ava Community Energy. Ava will contract with Green Bridge Energy as the project owner and contractual counterparty. Green Bridge Energy has in turn selected Gridscape Solutions, based in Fremont, as its developer. With support from Gridscape, Green Bridge Energy will install, own, operate and maintain the solar and battery systems.
Key Terms of the PPA:
There are no upfront costs to the City.
The City will make monthly payments to Ava for the kilowatt hours of electricity received from the solar and batteries.
The City’s total payments over the 25-year contract, in combination with regular electricity and natural gas bills, will be less than they would be without the project.
Electrical upgrades at the Corp Yard and Fire Station 1 are needed in order to make them ready for solar and battery storage ready. The improvements will made by Gridscape and the cost will be included in the City’s monthly payments to Ava.
The City will only pay for the electricity received from the systems. Furthermore, if the equipment delivers less than 85% of the expected annual power output from the system, Ava would make cash payments to the City to offset the City’s costs in procuring needed power. This provision provides additional incentive to Ava and in turn GreenBridge/Gridscape to maintain the systems in good working order.
Gridscape will ensure that all contractors, subcontractors, and employees hired or contracted by Gridscape which will perform work on the projects will be paid prevailing wages.
Single Source Procurement – The proposed PPA with Ava Community Energy, described above, is a single source procurement. Staff recommends that the City utilize California Government Code Section 4217.10, which allows for the expedited procurement of energy conservation projects by municipal agencies as long as the energy project is determined to provide financial savings over the operating lifetime.
Specifically, Code Section 4217.10 et seq authorizes public agencies to enter into an energy service contract without competitive bidding, provided that there is a two-week public notice before the authorization of the procurement and the cost of the conservation services provided by an energy conservation facility will be less than the anticipated marginal cost of energy that would have been consumed in the absence of the project.
FISCAL IMPACT
The proposed projects will have a positive impact on the City’s General Fund. The City currently pays approximately $147,000 for electricity at the four sites annually. Assuming rates increase at three percent per year, the City would pay approximately $5.4 million for electricity for the four sites over the next 25 years. Ava estimates the four proposed projects will generate savings between $600,000 and $800,000 over the life of the PPA.
ECONOMIC IMPACT
The Critical Municipal Facilities Program is not expected to have a significant impact on the local economy; however, contractors involved in the construction of the projects will be required to pay prevailing wages. The primary developer of the projects will be Gridscape Solutions, a company based in Fremont.
STRATEGIC ROADMAP
This agenda item supports the Strategic Priority to Champion Climate Resilience & Environmental Justice, and specifically relates to implementation of the following Projects:
Reduce Greenhouse Gases and Dependency on Fossil Fuels:
Project CP1: Implement Year 1 Programs from the adopted GHG Roadmap (Climate Action Plan).
SUSTAINABILITY FEATURES
Increasing solar and battery energy storage system deployment supports Hayward’s long term GHG reduction goals and other General Plan policies. In 2016, Council adopted Resolution 16-219 stating a goal to “achieve zero net energy (ZNE) for electricity and natural gas use on a portfolio-wide basis by 2025”. Across the City’s portfolio of municipal facilities, Hayward currently produces approximately 65% of total electricity demand. With the four proposed projects, staff estimates that total renewable generation will be approximately 68% of total municipal electricity use.
On a day-to-day basis, the onsite solar will reduce GHG emissions and batteries will shift energy usage from peak times, thereby reducing the need for gas-fired power plants to come online to meet demand. During power outages, the solar and battery energy storage systems will increase community resilience and lessen the need for diesel generators for back-up power.
ENVIRONMENTAL REVIEW
The proposed project is categorically exempt from environmental review in accordance with the California Environmental Quality Act (CEQA) pursuant to Section 15301, Class 1 (Minor Alteration of Existing Facilities), of the CEQA Guidelines.
PUBLIC CONTACT
Agencies utilizing the expediated procurement process allowed by California Government Code Section 4217.10 requires the City to hold a public hearing that is posted two weeks in advance. A public hearing notice was published in the Daily Review newspaper on September 27, 2024.
NEXT STEPS
Upon Council’s approval, staff will work with Ava Community Energy to complete the projects per the following tentative schedule.
November 2024 Submit Permit applications
December 2024 Execute PPA
Q1 2025 Permits issued
Q2 2025 Materials delivered onsite
Q2 2025 - Q1 2026 Construction
April 2026 Systems Operational
Prepared by: Erik Pearson, Environmental Services Manager Recommended by: Alex Ameri, Director of Public Works
Approved by:
_____________________________________________
Dustin Claussen, Interim City Manager
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