Title
Renewable Energy Purchase (Ordinance S-47178)
Description
Request to authorize the City Manager, or his designee, to enter into a Solar Services Agreement (SSA) with Ameresco Inc. (Ameresco) to purchase renewable energy at a fixed price for 25 years in exchange for granting Ameresco site access to build, own, operate and maintain a 500 kilowatt solar photovoltaic generation facility (solar carport) at an employee parking lot at a Public Works Department facility.
Report
Summary
On Feb. 7, 2018, City Council authorized establishment of a Qualified Vendor List (QVL) to develop solar projects at various City sites. Four vendors, including Ameresco, were selected by Council to be on the QVL.
In 2019, the City issued a request for quotation to construct a solar canopy array over the employee parking lot at the 22nd Avenue Public Works facility based on a predefined list of assumptions. Vendors from the QVL were informed that the City would only accept bids that had a positive Net Present Value (NPV) and could provide a positive cash flow in all years of the agreement.
Ameresco provided the lowest bid, and earned the right to prepare a detailed bid based on actual conditions found at the site including soil testing results, utility rates, and 15-minute interval energy use data. Although the vendor encountered several challenges in preparing the final agreement, such as multiple parcels, multiple meters and rates, sizing limitations by the utility, and special permissions required by the Roosevelt Irrigation District (that has a right-of-way in the project area), Ameresco was still able to meet the project limitations of a positive NPV and positive annual cash flow. The resulting SSA includes the following components:
- A fixed price of 8.88 cents ($0.0888) per kilowatt hour for all energy produced by the solar array;
- A guarantee that the array will produce the Guaranteed Annual Electric Output (adjusted annually for degradation); and
- A license agreement to allow Ameresco to enter the Property to design, build, own, operate and maintain the facility for the life of the 25-year agreement, and remove the facility upon termination of the agreement.
The SSA structure was authorized by the Arizona Corporation Commission in Decision #71795 on July 12, 2010. The City used a third-party owner representative, Celtic Energy, to review the overall project proposal, and McKinstry Inc, to review the utility cost assumptions to ensure that the cost of energy in the agreement was below the current average cost the City pays the utility during the times of solar production.
By entering the SSA, the City is agreeing to pay Ameresco 8.88 cents ($0.0888) for every kilowatt hour of renewable energy produced by the solar photovoltaic generation facility over the life of the agreement. This project will lower the carbon footprint of the associated buildings by approximately 500 metric tons of CO2 per year and become the 49th solar project constructed on City property.
Financial Impact
The price of energy to be purchased from the solar array is marginally below the current utility cost of energy and will result in nominal cost savings in the first year, however, it is anticipated that utility rates will rise over the 25-year agreement and likely result in significant cost savings in the latter years.
Concurrence/Previous Council Action
The City Council approved Solar Energy Projects QVL on Feb. 7, 2018.
Location
2631 S. 22nd Ave.
Council District: 7
Department
Responsible Department
This item is submitted by Deputy City Manager Karen Peters, the Public Works Department and the Office of Sustainability.