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California’s Path to 12,000 Megawatts of Local Renewables
Governor’s Local Renewable Power Working Conference
Renewables on Public Buildings
This policy paper attempts to tackle specific barriers associated with the siting and
construction of renewable electricity projects located on public (city, county, state,
federal, and military) buildings and properties. It is in no way inclusive of all the
barriers for these types of projects, but highlights some key issues that warrant further discussion.
California has the potential to develop renewable electricity systems on publically owned buildings, properties, and right-of-ways to help meet the state’s renewable energy goals, create green jobs, and reduce greenhouse gas emissions and other harmful air pollutants. Making public properties available to renewable developers could reduce existing energy costs in buildings, create new revenue streams by leasing vacant or unused lands and rights-of-way, and realize cost savings by eliminating the obligation to maintain lands leased to developers.
However, the installation of distributed generation on public buildings and lands faces many of the same adoption hurdles as on commercial buildings: high upfront costs, including audit and design; a steep learning curve for a non-core business functions;
and technology and performance risk. Public entities also face additional hurdles including the volatility of annual government budgeting process, debt constraints, and a complex procurement process.
The expert panelists who developed this paper represent a cross-section of those entities and communities involved in the development of localized electricity generation on public buildings and property. This paper is a compilation of input from panel members and moderators and represents both individual and organizational viewpoints and perspectives. This panel has representatives from - a publicly owned utility, specifically the Sacramento Municipal Utilities District; the public finance community, specifically the State Treasurer’s Office; the United States Military, specifically the U.S. Navy; a leading engineering firm that has worked on installing solar PV technologies at public schools (Psomas); and the State of California, specifically the California Department of Corrections, the California Energy Commission and the Office of the Governor.
BACKGROUND Renewables on Public Buildings, Page 2 of 11 Depending on the type of renewable energy project and its application, it could face significantly different challenges. The panel has identified four major categories that represent a majority of the type of public projects. The renewable system applications are as follows: buildings in load centers,property with potential for wholesale generation and onsite consumption, remote buildings with potential for energy independence, and land leases for wholesale generation. The applications were broken up by amount of electricity load on site, type of interconnection, the location, amount of space available, the size of the system, and the type of energy product. This table is not inclusive of all the applications, but is a starting block to categorize projects and identify specific barriers to each application.
While we do not currently have a full inventory of public property in California, there is one for state property. As will be discussed in the “Potential Solutions” section the more information that can be gathered and consolidated into one place, the easier it will be to, have a sense of the potential, establish goals, and actually get the projects built. The Renewables on Public Buildings, Page 3 of 11 California Energy Commission went through this exercise with state property and found that there is huge potential to develop renewables on state property.
A renewable energy target of 2,500 megawatts installed on state properties by 2020 reflects a 33 percent renewable energy target for state buildings by 2020, Governor Brown’s goal of 20,000 megawatts of new renewable capacity by 2020, and builds on staff’s inventory of the potential for renewable development on state buildings and properties. Table 1 shows the goal allocated across the property types identified in staff’s inventory of opportunities on state property. As shown in Table 2, 14 to 26 megawatts could be installed on state buildings in load centers, 54.5 to 195 megawatts on properties with potential for wholesale generation, and 14,460 to 26,030 megawatts on land leased for wholesale generation.
* The megawatt ranges reflect staff’s assumption that 1 megawatt of photovoltaics can be developed on 5 to 9 acres.
Implementation of the target should be consistent with the Loading Order, California’s energy policy that identifies energy efficiency as the top priority for meeting the state’s energy needs and renewables as the highest ranking supply side resource.
Consequently, when developing renewables on state buildings, priority should be given to buildings that have already undergone energy efficiency upgrades.
There are a number of challenges to significantly increasing the localized electricity generation (LEG) capacity on public property; many of which are challenges for all LEG projects. LEG systems can potentially provide opportunities for increasing electricity system reliability, but can also complicate a utility’s ability to provide reliable and high quality power. The best place to locate generation and voltage support depends on the Renewables on Public Buildings, Page 4 of 11 location-specific load and the design of the distribution system. It is the utilities that must plan the manner in which load, generation, and distribution facilities interact. The variety of LEG technologies, the different ways in which they interact with customer load and the intermittent nature of some of the renewable LEG sources (e.g., wind and solar) make it difficult to integrate these resources while maintaining high system reliability and power quality. While most biomass LEG systems (e.g., dairy digesters, LFG systems) are baseload systems and do not create variable generation grid issues, they can be constrained in interconnection to the distribution system by other LEG systems (e.g., solar PV) that produce significantly less energy (MWh) but require access to a significant amount of capacity (MW) on the distribution system.
Interconnecting renewables located within networked grids proves difficult, because network protection devices can be damaged by electricity back-feeding from the LEG system. Further, because the infrastructure of the distribution grid and many public buildings is aging, there may be a need for costly upgrades of the grid, new roofs and upgrading wiring and conduit, which could significantly impact the economics of a project. Voltage regulation is another technical barrier that can become a significant concern when high LEG generation output and minimum local load coincide. Voltage regulation is of particular concern on bus regulated substation transformer banks (one regulating device for multiple distribution feeders). It is becoming apparent that local voltage issues are likely to precede protection, load, fault, harmonic, and stability issues as penetration increases.
There are also, financing and cost challenges associated with LEG projects. Net Energy Metering rules can be prohibitive for projects with large loads, because full retail net energy metering is limited to projects that are 1 MW or smaller. Additional cost barriers that place a substantial burden on LEG projects are departing load charges and standby fees.
The point of this paper and panel is to dive into the challenges that are solely unique to projects on public property. This paper identifies four challenges unique to public property projects.
1. Project Funding: The lack of access to capital, coupled with no appetite for tax credits, forces public agencies to utilize alternative financing. Building energy infrastructure rather than relying solely on the utility to provide electricity comes with large upfront costs. Financing from non-public sources can require public institutions to deviate from standard practice in the ways they manage their real estate (e.g., relocating a system if the contracting public agency relocates). Some possible alternatives are private-public partnerships through a power purchase agreement (PPA) or tax-exempt bond financing, both of which come with their own challenges. These are discussed further, below.
Renewables on Public Buildings, Page 5 of 11
2. Lack of Long-term Consistency: Government leadership changes every few years and, many times, the turn over comes with a change in policy. For projects, that are still considered to have a high degree of risk, it is important to send the right signal of stability. Exacerbating this issue is the annual budgeting process.
Funds to pay utility bills are routinely approved through a public entity’s annual budget process. It is simply much easier and less risky for a government agency to seek budget approval for a utility bill than to seek approval for the development of a new energy source with unknown technology and performance risks as well as increased maintenance costs.
3. Long and Complicated Permitting, Contracting, and Approval Process:
Permitting: Permitting of renewable energy can be a burden in general, however public schools have a unique issue raised by the Field Act of 1933, which sets high standards for new school design. The Division of the State Architect (DSA) is the jurisdictional authority within the State of California that provides enforcement of the Field Act in order to provide safe schools. DSA has not given clear and consistent messages through their approval process. See the solar Case study in the appendix for more information.
Contracting: While contracting in general can be complicated, government entities have their own onerous and often outdated rules that make it especially difficult to enter into new types of contracts. Further, typical commercial terms in a PPA conflict with federal acquisition regulations for military applications and will force financiers to conform to government regulations. Other public agencies have similar issues making it difficult for private developers, because the standard language required by public agencies does not allow the flexibility that private companies need. The length of time to complete an agreement can be burdensome, as even immaterial changes of the contract trigger lengthy review and processing by state entities. Since most government agencies do not have energy as their core objective, it adds new levels of complexity if assets are locked up under long-term contracts. Public agencies tend to be risk averse for this reason. For example, Caltrans is concerned about placing solar PV panels on their rights-of-way, for fear that the land may be needed for transportation improvement in the future, or because of traffic safety concerns Transportation agency needs assessments only look forward ten years, and most renewable projects need longer term agreements, often in a 20 year time frame.
Approval: The approval process is not consistent among public agencies. The military needs sign off from the Secretary of Defense’s office, while the California Department of Corrections and Rehabilitation (CDCR) only needs sign-off from a deputy director. It can save a lot of time if project approval can stay more localized.
Renewables on Public Buildings, Page 6 of 11
4. Government Agencies Lack Knowledge in Energy Arena: Most government agencies do not have specific positions dedicated to working through contracts, financing and engineering of renewable energy projects. Each agency that takes on the challenge of including renewables in its portfolio usually does so without experience. The resulting steep learning curve and concerns about unknown challenges create many inefficiencies. This must change if public agencies want to take a leadership role in this area.
In order to make real progress to increasing government’s role of installing renewable energy capacity on its property, it will take motivated energy pioneers within each agency at the staff level all the way to the Executive Office. Further, it would be extremely useful if there was a dedicated office or department offering advice to agencies and leading the charge. What follows is a brief discussion of some ways to overcome a number of the challenges set forth above. Additional solutions will be fleshed out during the panel discussion at the conference.
Power Purchase Agreements Discussion
PPA agreements may create an opportunity for the public government to save money.
However, they may not create sufficient incentive for a specific public agency to pursue renewable electricity development on its property. Further, penalties such as early termination fees may also raise concerns about future and unknowable risks to staff responsible for managing public budgets. A well-constructed PPA can help solve government’s lack of energy knowledge and risk adverse tendencies.
If an agency or building incurs savings via third-party owned projects (purchasing renewable electricity below retail rates) its utility budget in future years would be reduced because it will need less funds for utility payments. These savings may go back to the general fund and not to the agency that is housing the renewable system, significantly reducing incentives for managers to invest time and staff resources in such efforts.
Similarly, this issue may also occur with land leased arrangements that do not filter the money generated from leasing property back into the programs from which it is being generated. Funds get filtered back to operations or into the general fund and subsequently spent on other projects, or allocated for items unrelated to either the host agency or renewables.
Public Private Partnership Discussion
their own. The current state of public budgets limit new hiring in most agencies, including those, dedicated to maintenance and construction. Partially because of the inability to hire new kinds of experts or simply to add workers to plan, procure and maintain new energy resources, public private partnerships will remain an important factor in state renewables development.