STAFF REPORT
Meeting Date:
December 9, 2025
CONSENT
21 SUBJECT: CONTRACT FOR MICROGRID DEPLOYMENT AT FIRE STATIONS 2 AND 3 RECOMMENDATION: It is recommended that the City Council:
1. Authorize the City Manager to enter into agreements with Staten Solar for Solar Photovoltaic Direct Purchase and Battery Energy Storage Systems Lease for Fire Stations 2 and 3; and
2. Find that the proposed solar panel installations are statutorily exempt pursuant to Public Resources Code § 21080.35 for installing solar energy systems on existing building roofs or in existing parking lots.
SUMMARY OF THE MATTER
This report presents final agreements with Staten Solar Corporation for the installation of solar photovoltaic (PV) and battery energy storage systems (BESS) at Fire Stations 2 and 3. The total cost for direct purchase of the solar systems is $141,452, which is funded through the Capital Improvement Program. This project supports the City’s climate resilience goals by ensuring emergency power reliability and reducing greenhouse gas emissions.
Staff recommend proceeding with a hybrid model: the City will own the solar systems (direct purchase), while Staten Solar will lease, operate, and maintain the BESS for 20 years. The City is eligible for a 30% federal Investment Tax Credit (ITC) through direct pay, with an estimated reimbursement of $42,436.
The BESS lease is $27,148 annually for Fire Station 2 and $12,286 annually for Fire Station 3. This will result in a total cost of $788,680 over the twenty (20) year lease term.
The proposed installations are categorically exempt from the California Environmental Quality Act (CEQA) under Public Resources Code Section 21080.35, which applies to solar systems installed on existing building rooftops.
DISCUSSION
The Capital Improvement Program includes $300,000 for the Fire Station 2 Emergency Generator project.
The generator design was never initiated because the intent is to replace the generator with the microgrid installation. On April 8, 2025, the City Council received a presentation regarding microgrid deployment on City properties. Following the presentation, public comments, and council discussion the City Council directed staff to proceed with microgrid implementation under the Solar Direct Purchase + Battery Lease model, for Fire Stations 2 and 3, authorized staff to prepare an agreement with Staten Solar for microgrid deployment at Fire Stations 2 and 3, and directed staff to monitor changes in technology costs, grant opportunities, and site conditions, and return to Council with updates or proposed adjustments to the deployment strategy as needed. Staff has completed the negotiations with Staten Solar for the acquisition and implementation of microgrid systems at Fire Stations 2 and 3, with options to add additional sites over time, and the agreements are ready for City Council consideration. A microgrid system ensures continuous power during grid outages, supporting operations for a specified period.
CONTRACT FOR MICROGRID DEPLOYMENT AT FIRE STATIONS 2 AND 3 December 9, 2025
A 90% confidence level means there is a high likelihood the microgrid will maintain operations for the designated time without failure. To achieve a 90% confidence level, a microgrid must include enough energy storage and backup generation to meet peak loads and nighttime demand.
A request for proposals for Solar PV Microgrid Design, Installation and Operation was posted on the PlanetBids online portal on July 1, 2024, and closed on August 20, 2024. Two proposals were received.
After conducting interviews in September 2024, Staten Solar Corporation was selected as the most qualified vendor.
Based on the April 8, 2025, City Council direction, staff has been working on agreements with Staten Solar for the installation of solar PV systems and BESS at Fire Station 2 and Fire Station 3 to reduce long-term energy costs and greenhouse gas emissions as well as increase resilience at the sites. The proposed site map is included in Attachment 1. The proposed Master Agreement for Installation of Solar PV & Battery Energy Storage System Microgrids (Master Agreement) is included in this report as Attachment 2, the April 8 2025, staff report is provided in Attachment 3, and the related minutes are included as Attachment 4.
The Master Agreement consists of four companion agreements: Engineering, Procurement, and Construction Services Agreement (EPC Agreement), Solar Operation and Maintenance (O&M) Agreement, BESS Lease, and a BESS Site License. The direct purchase of the solar PV means that the City will pay upfront costs and will own the solar PV systems outright. The BESS lease means that Staten Solar will own, operate, and maintain the BESS for a term of 20 years, and the City will not have any maintenance obligations for the batteries. The solar PV direct purchase and BESS lease are further defined below.
Solar PV Direct Purchase
The EPC Agreement attached as Exhibit C to the Master Agreement details the purchase and installation of the solar panels at Fire Stations 2 and 3. Pursuant to the agreement, Staten Solar will be responsible for engineering, designing, constructing, and installing the rooftop solar panels and all the necessary ancillary systems at each site. The City’s initial investment for the direct purchase of the solar systems is $94,090 for Fire Station 2 and $47,363 for Fire Station 3 as shown in the table below.
No. Site Name Solar Size
(kW-DC) Solar Price
1 Fire Station 2 24.20 $ 94,090
2 Fire Station 3 10.45 $ 47,363
Total Project Price: $ 141,452
As a public agency making a direct upfront investment, the City is eligible to receive a 30% federal ITC through direct pay, which would return approximately $28,227 for Fire Station 2 and $14,209 for Fire Station 3, provided that at least 5% of the total project costs are incurred by December 31, 2025 to maintain eligibility under the non-Foreign Entity of Concern (FEOC) safe harbor requirements.
CONTRACT FOR MICROGRID DEPLOYMENT AT FIRE STATIONS 2 AND 3 December 9, 2025
The O&M Agreement requires the City to begin making annual O&M payments for the specified term once the systems receive permission to operate and are fully commissioned. The term of the O&M Agreement is Ten (10) years with an option to extend an additional Ten (10) years. The Year 1 O&M cost is $2,500 with a 2.5% annual escalation each subsequent year thereafter.
The terms and responsibilities for each party as detailed in the EPC Agreement are summarized below.
Solar EPC Agreement Responsibilities:
• Staten Solar (Contractor):
o Complete full system design, engineering, and permitting. o Procure all materials (modules, inverters, racking, wiring, etc.). o Perform all construction and installation at both fire stations. o Maintain onsite safety, supervision, and project management. o Conduct all testing, commissioning, and utility interconnection tasks. o Provide as-built drawings, manuals, and closeout documents. o Meet all schedule milestones for construction.
o Deliver the systems with a 90% performance guarantee to ensure projected savings. o Correct any defects or punch-list items within warranty periods. o Provide quarterly reports detailing system operations, any significant issues and planned corrective actions, major upcoming activities.
o Provide annual reports providing a comprehensive summary of project activities and operating data.
• City (Owner):
o Provide site access and coordinate with fire station operations. o Review and approve design plans, submittals, and schedules. o Attend kickoff, progress, and commissioning meetings. o Support utility interconnection documentation and approvals. o Make milestone payments upon verified completion.
o Provide available site/utility information needed for design. o Review final testing and execute Placed-in-Service Certificates.
Battery Energy Storage System (BESS) Lease
The BESS Lease requires the City to begin making monthly lease payments when the system becomes fully operational for a total of $27,148 annually for Fire Station 2 and $12,286 annually for Fire Station 3. This will result in a total cost of $788,680 over the twenty (20) year term. The first payment will not occur until the systems have permission to operate and are fully commissioned. The monthly BESS Lease payments remain fixed for the full term, providing predictable budgeting for both fire stations. Upon conclusion of the contract term, the City is required to pay a Termination Value of $38,584 for Fire Station 2 and $19,732 for Fire Station 3.
BESS Lease Responsibilities:
Staten Solar (Lessor):
o Design, engineer, deliver, and install the BESS at Fire Station 2 and Fire Station 3. o Obtain all permits, complete construction, and manage all utility coordination.
CONTRACT FOR MICROGRID DEPLOYMENT AT FIRE STATIONS 2 AND 3 December 9, 2025
o Own, operate, and maintain the BESS for the full 20-year lease term. o Provide all repairs, replacements, monitoring, and ongoing operational support. o Maintain all insurance coverage required under the Lease. o Keep the site free of liens and ensure compliance with all laws and safety requirements. o Provide required quarterly performance and operations reporting to the City. o Cover all costs of capital repairs and equipment failures (not the City). o Ensure system operates per manufacturer standards and industry best practices. o Provide documentation for system testing, acceptance, and commissioning. o Notify City of any shutdowns, emergencies, or operational issues. o Remove the BESS and restore the site at end of term unless City exercises purchase option. o Support City’s audit requests and provide financial transparency as required. o Handle all federal incentive (i.e., ITC) filings as system owner; City bears no responsibility.
City (Lessee):
o Pay monthly lease payments per the Payment Schedule.
o Provide Staten with site access for installation, operation, maintenance, and inspections. o Review and execute Placed-in-Service Certificates to initiate the formal lease term. o Support documentation reasonably required for Staten's ITC and incentive filings (no City cost). o Provide notice of funding non-appropriation, if applicable, according to standard government leasing rules.
o Notify Staten of any site conditions, constraints, or facility operational impacts. o Ensure the BESS area remains available as the Licensed Area under the Site License Agreement. o Maintain coordination with fire station operations to enable Staten's access. o Exercise City’s discretion regarding end-of-term options (purchase, extension, or removal). o Review Staten’s quarterly reports and raise any concerns. o Execute reasonable documents required for interconnection or regulatory compliance. o Provide timely responses to Staten’s notices, requests, and documentation submissions.
CONCLUSION
The solar PV direct purchase and BESS lease provide operational resilience and peak load management, with all monitoring, repairs, replacements, and performance responsibilities handled by Staten Solar. The proposed procurement model will also ensure the City retains long-term flexibility, including the option at Contract Year 20 to purchase the BESS or require full removal and site restoration. The overall project structure ensures clean energy benefits, increased resilience, and minimized operational and financial risk for the City. Therefore, staff recommend City Council authorize the City Manager to enter into the required agreements for Solar PV direct purchase and BESS lease with Staten Solar.
FINANCIAL ANALYSIS
There is sufficient funding in the Fire Station 2 Emergency Generator project (C2507) to fund the solar panel purchase and the first year of the battery lease and O&M. General Fund allocations will be required in future annual budgets to fund the lease and O&M through the life of the lease agreement.
The proposed solar PV and BESS are anticipated to provide a positive financial outcome due to the avoideddowntime benefits associated with improved resilience during Public Safety Power Shutoff (PSPS) events CONTRACT FOR MICROGRID DEPLOYMENT AT FIRE STATIONS 2 AND 3 December 9, 2025
and other outages. These avoided-downtime savings are based on the facility’s annual operating income and the average number and duration of PSPS events in the area, reflecting the economic value of services the City would otherwise be unable to provide during grid interruptions. When combined with the additional value of solar energy generation, battery demand-shaving, and the anticipated 30% federal ITC, the total projected benefits exceed the system’s installation and operating costs, resulting in net savings.
ENVIRONMENTAL ANALYSIS
Public Resources Code § 21080.35 exempts installing solar energy systems on existing building roofs or in existing parking lots from CEQA review.
ATTACHMENTS
1. Site Map (Pgs. 6-7)
2. Master Agreement for Installation of Solar PV & BESS Lease Microgrids (Pgs. 8-261)
3. April 8, 2025 Staff Report Microgrid Deployment
https://lagunabeachcity.granicus.com/MetaViewer.php?view_id=3&clip_id=2633&meta_id=220647
4. Minutes April 8, 2025, City Council Meeting (Pg. 262) Submitted By: Mark McAvoy Approved: .David A Kiff
Mark McAvoy, Director of Public
Works & Utilities Dave Kiff, City Manager
Report Prepared By: Coordinated With:
Thomas Perez, City Engineer Patrick Donegan, Assistant City Attorney