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HomeMy WebLinkAbout2015-10-07 Utilities Advisory Commission Agenda Packet NOTICE IS POSTED IN ACCORDANCE WITH GOVERNMENT CODE SECTION 54954.2(a) OR 54956 I. ROLL CALL II. ORAL COMMUNICATIONS Members of the public are invited to address the Commission on any subject not on the agenda. A reasonable time restriction may be imposed at the discretion of the Chair. State law generally precludes the UAC from discussing or acting upon any topic initially presented during oral communication. III. APPROVAL OF THE MINUTES Approval of the Minutes of the Utilities Advisory Commission Meeting held on September 2, 2015 IV. AGENDA REVIEW AND REVISIONS V. REPORTS FROM COMMISSIONER MEETINGS/EVENTS VI. DIRECTOR OF UTILITIES REPORT VII. UNFINISHED BUSINESS None. VIII. NEW BUSINESS 1. Update on the Implementation of the Local Solar Plan and Recommendation Action to End the PV Partners Program, as Planned, Once the State Legislative Requirements set Forth in the California Million Solar Roofs Bill Have Been Fulfilled 2. Conversion of the PaloAltoGreen Gas Program From an Opt-In Program Discussion to an Opt-Out Program 3. Concept & Establishment of UAC Work Plan and Related Subcommittees Discussion 4. Selection of Potential Topic(s) for Discussion at Future UAC Meeting Action 5. Update and Discussion on Impacts of Statewide Drought on Water and Discussion Hydroelectric Supplies IX. COMMISSIONER COMMENTS X. NEXT SCHEDULED MEETING: November 4, 2015 INFORMATIONAL REPORTS - A complete list of informational reports provided to the UAC can be viewed at http://www.cityofpaloalto.org/gov/boards/uac/reports.asp?code=CAPALO_8 and at City Hall, 3rd Floor, Utilities Administration office. Information reports cannot be discussed during UAC meetings, in compliance with Govt. Code Section 54954.2(a)(2 UTILITIES ADVISORY COMMISSION WEDNESDAY, OCTOBER 7, 2015 – 7:00 P.M. COUNCIL CHAMBERS Palo Alto City Hall – 250 Hamilton Avenue Chairman: Jonathan Foster  Vice Chair: James F. Cook:  Commissioners: Arne Ballantine, Michael Danaher, Steve Eglash, Garth Hall, and Judith Schwartz  Council Liaison: Gregory Scharff Utilities Advisory Commission Minutes Approved on: Page 1 of 11 UTILITIES ADVISORY COMMISSION MEETING MINUTES OF SEPTEMBER 2, 2015 CALL TO ORDER Chair Foster called to order at 6:08 p.m. the meeting of the Utilities Advisory Commission (UAC). Present: Commissioners Cook, Ballantine, Danaher, Eglash, Chair Foster, Schwartz, and Council Liaison Scharff. Commissioner Hall arrived at 6:10 pm. Absent: None ORAL COMMUNICATIONS None. APPROVAL OF THE MINUTES Commissioner Eglash noted that on Item 1, as recorded in the minutes for the UAC’s August 5, 2015 meeting, he recused himself and left the meeting. However, the minutes did not state when he returned to the meeting. Commissioner Eglash suggested that the minutes be corrected to reflect that he returned and participated in the rest of the meeting. The minutes are updated to note Commissioner’s Eglash’s return after four minutes of elapsed time. Commissioner Eglash also noted, on Item 3, an incomplete sentence that reads, “Commissioner Eglash agreed.” He suggested the minutes be corrected. The complete sentence should read, “Commissioner Eglash agreed that the communication challenge around achieving the required water use reduction is complicated by the fact that winter use is primarily restricted to indoor use (cooking and washing), and a seasonal correction that encourages significant water reduction in the summer is necessary. Vice Chair Cook moved to approve the minutes from the August 5, 2015 UAC meeting as modified with the changes suggested by Commissioner Eglash and Commissioner Eglash seconded the motion. The motion carried unanimously (6-0 with Commissioners Cook, Danaher, Eglash, Hall, Foster and Schwartz voting yes and Commissioner Ballantine abstaining). AGENDA REVIEW AND REVISIONS None. DRAFT Utilities Advisory Commission Minutes Approved on: Page 2 of 11 REPORTS FROM COMMISSION MEETING/EVENTS None. UTILITIES DIRECTOR REPORT 1. Community Outreach Events, Workshops and Staff Speaking Engagements Events this past month:  August 5–Drought materials giveaway with the Santa Clara Valley Water District.  August 12–City hosted public meeting about the drought, CPAU and PWD staff presented.  August 13–Water Conservation 101 workshop.  August 24–CPAU Communications Manager Catherine Elvert spoke to the Rotary Club about water and drought conditions.  August 25–Catherine Elvert spoke about water and drought conditions to SAP employees at their Lunch and Learn Sustainability Series.  August 30–CPAU Senior Resource Planner Karla Dailey participated in a panel discussion about environmental issues at Project Enybody’s Green Fest. CPAU also tabled at the event. Upcoming events:  September 8–Catherine Elvert will speak to a San Jose State University Energy Policy Class about water policy, usage, drought and the connection to energy.  September 13–CPAU will be at Midtown Residents Association Ice Cream Social.  September 17–Maintaining Existing Landscape Design during Drought workshop.  September 26 - Rainwater Harvesting and Graywater Reuse workshop.  October 4-10 is Public Power Week. CPAU staff will organize a social media campaign, news releases and outreach events to raise awareness about the benefits of public power utilities. 2. Drought Update Cumulatively since June 1, Palo Alto's water savings are about 34% compared to 2013 levels, the year established for benchmarking water use reduction targets. Palo Alto must achieve a citywide 24% water use reduction from June through the end of February. Water savings will be much more difficult to achieve in the winter months, so it is very important to maximize our water savings during the warm summer and fall months. Utilities staff are attending many speaking engagements and community outreach events to emphasize the importance of continued conservation. Find details on free workshops and track our water - saving progress at cityofpaloalto.org/water 3. Marketing Services Update PaloAltoGreen Gas: This program allows customers to pay a small premium each month on their utility bill to have the carbon emissions associated with their natural gas usage neutralized through carbon emissions offset projects. As of last week, 9 40 customers have signed on to the program, including all City accounts. Utilities Advisory Commission Minutes Approved on: Page 3 of 11 4. Other Communications Updates The American Public Power Association (APPA) is supporting the #ILookLikeAnEngineer social media campaign, in which female engineers are encouraged to p ost a photograph of themselves in social media, highlighting the work they do as engineers. The intent is to empower future generations of young women to pursue careers in the Science, Technology, Engineering and Mathematical (STEM) industries. CPAU female engineers are now also promoted through this campaign. Follow the story through #PublicPower and #ILookLikeAnEngineer! UNFINISHED BUSINESS ITEM 1: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City Council (1) Adopt a Resolution to Certify the Final Environmental Impact Report for the Proposed Recycled Water Distribution Project, 2) Adopt a Resolution to Accept a Modification to the City’s Long Range Facilities Plan for the Regional Wastewater Quality Control Plant which Includes the Recycled Water Project; and 3) Direct Staff to Seek Funding for the Project (CONTINUED FROM AUGUST 5 UAC MEETING) As an employee of the Santa Clara Valley Water District (SCVWD), Commissioner Hall recused himself from the discussion. As an employee of Stanford University, Commissioner Eglash recused himself from the discussion. Karin North, Watershed Protection Manager and Phil Bobel, Assistant Director Public Works, made the staff presentation. North reminded the commission that staff is only requesting that the UAC recommend that Council certify the E nvironmental Impact Report (EIR) at this time. North summarized the history of recycled water in Palo Alto. She said that the Water Quality Control Plant treats wastewater from a number of cities including Los Altos, Los Altos Hills, Stanford, Mountain View and part of East Palo Alto. Currently the City of Mountain View receives the majority of the recycled water right. North said that the large customers in the Stanford research p ark are most feasible customers for an expansion of the recycled water system because large landscaped areas are present. She stated the project objective is to improve the potable water supply reliability for the City and reduce reliance on imported water. North pointed out that the timing of this project is good because the drought highlights the shortage of potable water during some periods. She added that expanding the use of recycled water also helps the Water Quality Control Plant reduce discharges to the bay. North said the main issue addressed in the EIR is salinity and the impact on landscapes, the groundwater basin, and urban forest. The EIR provides exemptions for redwood trees and identifies blending or further water treatment as options if the salinity reduction goals of 600 total dissolved solids are not met. Although North did not focus on the financial aspects of the project, she said the project is estimated to cost $35M. North said San Francisco Public Utility Commission wholesale water Utilities Advisory Commission Minutes Approved on: Page 4 of 11 rates are going up, so the City’s potable water supply is becoming more expensive . She reminded the Commission that the EIR is needed for the City to apply for grant funding. North described the potential risks to the project including stranding the asset due to other graywater or groundwater uses for landscaping and/or reduced demand for irrigation due to landscape conversions. She assured the Commission that other options exist in the future to make the project valuable in the future. Then North summarized staff’s request. Gary Kremen, Chair of the SCVWD Board of Directors, made comments thanking Palo Alto for its water conservation efforts and said he is excited about Palo Alto’s dedication to recycled water. He stressed the need to secure Proposition 1 funds. Chair Kremen pointed out that two Palo Alto City Council members are working with the SCVWD and other agencies on recycled water issues through a new committee. Oral Communications Hossein Ashktorab from the SCVWD made public comments supporting the recycled water project. He said the project will help the District achieve county-wide goals. He said recycled water is a drought-proof and locally-controlled resource and the new joint committee represents a new era for recycled water. Commissioner Danaher asked whether this project is just for Stanford’s benefit. Bobel said it was not and cited the reduction in effluents to the bay which is a benefit to all of the City’s partners. Bobel pointed out that Stanford was the most vocal opponent of the project and reminded the Commissioner that the buildings in the project area are largely not occupied by Stanford. Utilities Director Valerie Fong said there may be a benefit to the customers receiving the water during a drought, but the rates and cost to the City for the project are currently unknown before seeking funding. Bobel said we will work out finances later. He said the project will make more potable water available for someone else. Bobel projected that, in the future, many types of water will likely be produced to match the right water with the right need. Bobel added that growth and the need for water will increase, so recycled water will benefit all. Chair Foster asked why staff does not propose going straight to purified water. Bobel said the asset will be used in the future for some purpose, possibly for some form of purified water. Commissioner Ballantine pointed out the purified water is much more expensive and more energy intensive. Commissioner Schwartz commented that the trucking water businesses could indicate where there is a need for recycled water. North responded that 4 companies currently deliver the City’s recycled water to residents and that the City is collaborating with t hose very entrepreneurial businesses. Schwartz complemented staff for taking that approach. North added that water is heavy and it generally makes more sense to move by pipeline. Utilities Advisory Commission Minutes Approved on: Page 5 of 11 Vice Chair Cook reminded the other commissioners that staff is asking for approval of the EIR and said he would not ask all his questions about the technical and financial issues surrounding this project. Councilmember Scharff questioned staff about water use going down over time even though growth in population has grown. Bobel agreed. Commissioner Ballantine asked about blending. Bobel said blending is our least favorite solution, but it still saves potable water overall. ACTION: Vice Chair Cook moved and Commissioner Schwartz seconded staff’s recommendation. The motion passes unanimously (5 -0) with Commissioners Cook, Ballantine, Danaher and Schwartz voting yes and Commissioners Hall and Eglash recused. Commissioners Hall and Eglash returned to the meeting at 7:10 pm. NEW BUSINESS ITEM 1: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City Council Defer Issuing a Request for Information on Partnership Opportunities for a Fiber-to-the-Premise Network; Issue a Request for Proposal(s) to Expand Wi-Fi Coverage to City Facilities and Public Areas, and Improve Wireless Communications for Public Safety and Utilities Chief Information Officer Jonathan Reichental presented an update on the technological advancements in the telecommunication marketplace. There has been a lot of broadband and Internet activity since 1999 when the initial FTTP study was completed. There is an emergence of cellular technologies. Currently, 4G service allows download speed up to 12MB. There is a consortium developing 5G service, which will enable download speed of 1GB to 10GB, but 5G will probably not be available until 2020. Smart cities are paying attention to the emergence of the so-called “Internet of Things” (“IoT”), which connects people and various applications and devices (e.g. thermostats, traffic signals and multiple household appliances) to the Internet over ultra-high speed broadband connections. These innovations will change how people live and navigate within their everyday environment and will require the support of next -generation fiber networks, in addition to ubiquitous wireless connectivity in an increasingly mobile society. Todd Henderson, Senior Technologist from the Information Technology Department and Jim Fleming, Senior Management Analyst from the Utilities Department made the staff presentation. Todd provided an update on Google Fiber. Palo Alto is one of 34 cities around the country being considered for Google Fiber. In May 2014, the City completed the Google fiber checklist. The City continues to have meetings with Google regarding a potential fiber deployment in Palo Alto. These meetings are currently focused on the California Environmental Quality Act (CEQA) and the City’s permitting processes for use of the public rights -of-way, utility pole attachments, conduit usage and dark fiber licensing. Staff anticipates Google wi ll make a Utilities Advisory Commission Minutes Approved on: Page 6 of 11 final decision on the San Jose metro area (Palo Alto, Mountain View, Santa Clara, Sunnyvale and San Jose) sometime this fall. In May 2015, AT&T approached the City with intentions to bring GigaPower to Palo Alto. GigaPower will provide gigabit broadband and voice-over-IP services to residents, but will not include television programming, which will stay on their existing U -Verse system. The first phase of AT&T’s GigaPower deployment will install 27 new cabinets in Palo Alto that will be placed next to existing U-verse cabinets. AT&T has provided a sample permit application to the Public Works Department for review. AT&T plans to begin construction in Q4 2015 and offer service sometime next year. Fleming presented the scope of work, findings, and recommendations for the Fiber-to-the- Premises (FTTP) Master Plan study conducted by CTC Technology & Energy (CTC). Fleming highlighted some of the key findings from the report. The required customer take rate is between 57% - 72% depending on whether or not the City elects to use $20 million from the Fiber Reserves to build and operate a city-owned FTTP network on a positive cash flow basis. The total capital investment to build the network is $77.6 million over three years. Several factors make the required take rate and build costs higher in the Bay Area for an FTTP overbuilder (e.g. high cost of labor and materials, utility pole “make ready” requirements and replacement of utility poles). The report recommended the City not pursue a “for choice ” retail broadband service. Traditional cable TV service should not be part of any offering due to the high cost of cable TV programming and consumer migration away from traditional pay-TV services offered by multi-channel video providers to “over-the-top” streaming video offerings such as Netflix. Incumbent telecommunications providers will use aggressive tactics to undermine a municipal network and customer acquisition initiatives. FTTP overbuilds by public or private entities generally do not offer an adequate return on investment, particularly in communities already well-served by the incumbent Internet service providers (ISPs). Using a public-private partnership model for FTTP deployment takes advantage of each entity’s strengths and may reduce the risk of an overbuild in a competitive market. Through a RFI process, the City should explore three potential public-private partnership models. Fleming presented the scope of work, findings, and recommendations for the wireless network plan conducted by CTC Technology & Energy. CTC made four recommendations: 1. Expand existing City Wi-Fi to other City facilities and adjoining public areas not currently served. 2. Install dedicated wireless facilities to address communication needs of Public Safety and Utilities. 3. Deploy a citywide mobile data network for public safety and other authorized users. 4. Consider citywide Wi-Fi for general public use, but deployment dependent on citywide fiber expansion. Wireless provides a mobility component to the fiber-optic At the end of the presentations, staff made two recommendations. First, defer issuing an RFI to evaluate public-private partnership opportunities for FTTP until after December 31, 2015. Second, issue RFP(s) to expand Wi-Fi to improve wireless communications for Public Safety and Utilities Advisory Commission Minutes Approved on: Page 7 of 11 Utilities and to expand coverage to City facilities and public areas not currently served by the City’s existing Wi-Fi network. Public Comment Jeff Hoel sent comments on the first 111 pages of the FTTC report. One week is not e nough time for the public to provide comment due to the length of the reports. Hoel does not agree with the estimated cost and some of the details in the report. The estimated cost is too high. The estimated cost for premise connections is five times too high. The cost of living in the Bay Area does not support those estimates. Herb Borock recognized the importance of data and is glad the City is addressing it. He does not agree with CTC’s recommendation to provide Active Ethernet to small businesses , instead it should be targeting homes. This approach may cannibalize the existing “value added resellers” currently licensing dark fiber from the City. Google hired CTC to conduct a study on streamlining cities processes. Herb does not agree with a pa rtnership model. The City should use the Fiber Fund to pay for drop cables and customers can pay for home connections. Active Ethernet is better than GPON for residents. A wireless survey was recently conducted and less than 10% of respondents thought it was important for the City to provide Wi-Fi service. Bob Harrington presented a memorandum addressed to the UAC and the City of Palo Alto titled “FTTP is critical to Palo Alto infrastructure.” This memorandum was written by Harrington, Andy Poggio and Christine Moe, members of the City’s FTTP/Wireless Citizen Advisory Committee. In summary, FTTP is critical to Palo Alto because the City is situated in Silicon Valley with many startups; city-owned utilities is valuable and cost effective; emergency services and utilities can perform and respond better; universal access guaranteed by the City; and, City independence for fiber infrastructure will foster competition. Metcalfe’s Law says that the number of Internet users is growing exponentially; redundancy will provide fail-safe protection. Harrington recommended that FTTP’s goals are to provide universal access to all City residents and businesses. The memorandum recommended that the Council direct staff to immediately negotiate with potential private partners to build a city-owned FTTP network, and limit wireless investment to Public Safety and Utilities. Commissioner Comments Chair Foster asked Harrington, “Do you not fully agree with staff’s recommendations?” Harrington replied that the City should start to negotiate immediately with the providers for a “co-build with a private network” approach. Commissioner Schwartz asked Harrington about universal access and if he has any research regarding the percentage of homes in Palo Alto that do not have access to internet access. Harrington replied that he thought it was about 10 percent, but he does not really know for sure. Commissioner Schwartz said the subcommittee meetings and reports provided a thoughtful review including what happened historically, what is different now, and emerging technologies. The fiber subcommittee supported staff’s recommendation of waiting a few months because it Utilities Advisory Commission Minutes Approved on: Page 8 of 11 will provide time for the major players to make their decision on whether or not they’re really coming to Palo Alto. We also need to evaluate the cost of providing universal access. Would it be less expensive for the City to assist low income residences with broadband access rather than building its own network? Commissioner Schwartz stated that the idea to upgrade fiber for Utilities and Public Safety is good. There is a feeling that the City may not have a lot of leverage to negotiate with providers; we may not be able to get anything out of them. Commissioner Schwartz asked a question about VTA rolling out fiber. Fleming replied that many transportation agencies are upgrading their systems with Wi-Fi capabilities for use by riders. Commissioner Danaher agreed with Harrington that there is a need for high-speed Internet. The report was well done, but it was completed in June. The market has changed since then. Staff should get more information in the next 60 days. It makes sense to wait and collect more information. Commissioner Danaher also asked what the City can do to assure citywide coverage and affordable rates. Since connection fees may be expensive, can customers pay off the cost over time through their utility bills? Commissioner Eglash stated that broadband is an important subject. He is impressed that we agree on the vision and goals of gigabit service, entrepreneurship and quality of life, but disagree on tactics. There is an open question about what the City does and what the private sector does. It’s hard to know what the right line is between the public and private sectors. Utilities provides uniform service. Most of the City has access to broadband. Commissioner Eglash believes the recommendation to support Public Safety is terrific. Commissioner Eglash stated he has no concern about the extended delay for issuing the RFI to evaluate a pu blic- private partnership. Everyone is committed and the delay could be valuable. There needs to be an assurance that gigabit broadband is available to the entire city. Staff should look at cities where Google has already deployed fiber in that regard. Commissioner Eglash asked how universal access works in these Google cities. Fleming replied that Google has done a good job with “digital inclusion” programs in all of the cities they’ve worked with to deploy fiber optics (e.g. slower speed, low cost broadband service tier for low-income residents). Google’s goal is to serve all communities with their networks. Vice Chair Cook stated that it’s no longer 1999 or 2012 and we have to move forward. It is time for a consensus to take some action as Council Member Kniss has previously suggested. There is a risk of obsolescence with any technology. City may commit funds and then the network is obsolete. Don’t want to create a stranded asset. Vice Chair Cook asked a question about what appears to be contradictory information about Wi-Fi versus 5G. Reichental answered that they are two separate technologies and that the projected target date for implementation of 5G is 2020. Vice Chair Cook asked about the concept of a fiber build -out being married to undergrounding of electric utilities. Vice Chair Cook asked whether we could ensure that when fiber is installed underground, the electric utility could also be undergrounded. Fong explained that generally the electric utility leads and the fiber utility follows so when electric facilities are undergrounded, fiber follows underground, and when electric facilities are constructed overhead on utility poles, fiber is also constructed overhead. This is because the construction Utilities Advisory Commission Minutes Approved on: Page 9 of 11 of electric utilities tends to be far more involved than construction of fiber facilities. Vice Chair Cook is in favor of the public safety and emergency service Wi-Fi recommendations. Vice Chair Cook agrees with Harrington’s memo advocating utility independence and limiting wireless investment until the fiber issue is resolved. He prefers to see the fiber initiative move as quickly as possible. Commissioner Hall asked if the FTTP model in the report is similar to the electric transmission open access network where the City or some entity would own the pathway and end-lighting but not be involved with the content. The content provider s would be allowed to compete with one another. Commissioner Hall asked what the $70 per month charge mentioned in the report is for fiber access only and not content. Fleming clarified that in a closed network, the customer would pay a flat fee for both access and co ntent. Commissioner Hall asked how we would ensure universal access for everyone. Fleming replied that within the RFI, services will be costed out and may depend on which private partner the City negotiates with for FTTP. For example, Google provides a low end service for those who cannot afford the regular service. It’s essentially free for seven years but the customer is required to p ay a connection fee which can be spread out over time. Some models only build where there is a high rate of return on investment. Commissioner Hall said that it is his sense the UAC wants a pathway to universal access. Commissioner Hall asked if the City had to contribute a significant amount of money to ensure universal access which would eventually be recovered on utility bills, would it require a public poll or referendum or does City Council have the authority to mandate? City Attorney Molly Stump replied that more research needs to be done depending on the type of model and partnership. Commissioner Ballantine stated that he was torn on several points. Universal access makes sense but how do we achieve it. In terms of point #8 on Harrington’s memo (“The right thing to do right now”), is there an opportunity to capitalize on a public private partnership or would this be a missed opportunity. How does the City set up infrastructure like fiber and maintain it? Pipes and power lines do not change out very often. Internet infrastructure is typically replaced every 2 to 3 years. If residents are disappointed by wired connections they may go to wireless services. The better purchased wireless device offers better connectivity, so it’s not universal access. There needs to be a fourth bullet on slide 9 of staff’s presentation or CTC’s recommendation to ensure universal access while exploring the partnership models. Commissioner Danaher said that we’re still gathering a lot of new information. By end of the year, we may decide a partnership model may not make sense. In the meantime, we should think of ways to incent providers who are currently interested in building out a network we want. We have an opportunity to think creatively over the next few months. Chair Foster stated that in 2012, staff and the UAC concluded that FTTP build costs and required take rate were too high, and that financial risk worried people. What is different now is that Google, AT&T, etc. are changing the market. If AT&T and Google come to Palo Alto it may be the end of municipal FTTP in Palo Alto. The only way to proceed is if the Council does something bold such as approaching FTTP as a “public benefit” by issuing a referendum of a city Utilities Advisory Commission Minutes Approved on: Page 10 of 11 funded FTTP and letting the voters decide. This approach would eliminate concerns about the take rate issue. How do we get to resolution? The staff report recommends delaying the issuance of an RFI for a municipal FTTP and expanding Wi -Fi to emergency responders and City facilities including public areas. However, Harrington’s memo is significantly different which states the goal of FTTP is to connect all households to a city-owned network, negotiate immediately with private partners to build a city network, and limit Wi-Fi to emergency responders only. Commissioner Eglash stated that the RFP for Wi-Fi for Public Safety and Utilities should be separate from city facilities and parks. ACTION: Two motions were passed as follows: On the matter of municipal Wi-Fi, Vice Chair Cook moved and Chair Foster seconded a motion to recommend that Council direct staff to: Issue Request for Proposal(s) (RFP) to add dedicated wireless facilities to improve communications for Public Safety and Utilities departments; and optionally for expanding Wi-Fi coverage of City facilities and public areas. The Commission’s vote was 7-0 in favor of the motion with all Commissioners participating. On the matter of municipal FTTP, Chair Foster moved and Vice Chair Cook seconded the recommendation that Council direct staff to recommend that the Council (1) adopt the goal of making FTTP connections to a fiber network available to all Palo Alto premises as soon as reasonably possible (potentially negotiate co-build with a private network); (2) defer issuing a Request for Information (RFI) until after December 31, 2015 to determine interest from the private sector in partnering with the City to build and operate a citywide fiber-to-the-premises (FTTP) network. The intervening time between now and the end of the yea r should enable emerging gigabit broadband services from the private sector to be settled; (3) during the time between now and end of year, direct staff to look at possibility of offering a city -owned FTTP as a public benefit; 4) direct staff to negotiate with private ISPs to obtain their assistance with a build out of a city-owned network while City assists them with their private network build out. Commissioner Eglash moved and Commissioner Hall seconded a substitute motion to recommend Council direct staff to: 1) Defer issuing a Request for Information (RFI) until after December 31, 2015 to determine interest from the private sector in partnering with the City to build and operate a citywide fiber - to-the-premises (FTTP) network. The intervening time between now and the end of the year should enable emerging gigabit broadband services from the private sector to be settled 2) During the time between now and end of year, direct staff to evaluate the public benefit option of offering a city-owned FTTP. Utilities Advisory Commission Minutes Approved on: Page 11 of 11 The substitute motion passed on a 4-3 vote in favor with Commissioners Eglash, Hall, Danaher and Schwartz voting for the motion and Chair Foster, Vice Chair Cook and Commissioner Ballantine voting against the motion obviating the need for a vote on the origina l FTTP motion. ITEM 2. DISCUSSION: Update and Discussion on Impacts of Statewide Drought on Water and Hydroelectric Supplies Fong offered to answer any questions and mentioned to Commissioner Ballantine that in addition to the impacts on the water ut ility, we also include information on the impacts of the drought on our hydro-dependent electric utility at the suggestion of Commissioner Eglash. COMMISSIONER COMMENTS None. Meeting adjourned at 10:40 p.m. Respectfully submitted, Marites Ward City of Palo Alto Utilities 1 1 MEMORANDUM TO: UTILITIES ADVISORY COMMISSION FROM: UTILITIES DEPARTMENT DATE: OCTOBER 7, 2015 SUBJECT: Update on the Implementation of the Local Solar Plan and Recommendation to End the PV Partners Program, as Planned, once the State Legislative Requirements set forth in the California Million Solar Roofs Bill Have Been Fulfilled RECOMMENDATION Staff recommends that the Utilities Advisory Commission (UAC) recommend that the City Council end the PV Partners program, as planned, for rebates for customer-sited solar photovoltaic (PV) systems once the state legislative requirements set forth in California Million Solar Roofs Bill (SB1) have been fulfilled. EXECUTIVE SUMMARY On April 22, 2014, Council adopted the Local Solar Plan, which establishes the goal of meeting 4% of the City’s energy needs from local solar by 2023 and outlines a set of diverse strategies to achieve it within a set of guiding objectives. The Local Solar Plan provides a holistic framework incorporating all market segments and short- and long-term approaches. The plan further seeks to do so in a cost-effective manner. Prior programs, incentives, and policies involving solar installed in the City are integrated into the Local Solar Plan strategies, and new prog rammatic areas are identified for staff research and development. This report provides an update on the state of solar installed in Palo Alto and a detailed status of all Local Solar Plan implementation efforts to date, including the status of three program initiatives (a community solar program, a solar group-buy program, and a solar donation program) and current efforts towards implementing net energy metering (NEM) incentives. Preliminary results from a solar potential analysis confirm that the overarching Local Solar Plan goal of meeting 4% of the City’s electricity needs is achievable with current programs (PV Partners, Palo Alto CLEAN program, and NEM), continued falling solar system prices, and the planned community solar and solar donation programs. The City’s progress toward meeting the Local Solar Plan goal will be re-evaluated and communicated on an ongoing basis as current and future programs are brought forward for UAC, Finance Committee, and Council review. 2 The PV Partners program was first established in 1999 to provide rebates for customer-sited solar PV systems for both residential and commercial customers. In 2006, California adopted the Million Solar Roofs Bill (Senate Bill 1 or SB1), and funding for PV Partners was increased by $13 million to meet the City’s legislative obligations. Currently, all residential rebate funds have been completely reserved and limited funds remain available for commercial customers. S taff recommends discontinuing the program once all legislative requirements have been fulfilled and not shifting any remaining rebate funds designated for commercial customers to residential customers in the meantime, for four primary reasons: 1) the goals of SB1 to facilitate statewide deployment of 3,000 megawatts (MW) of solar and create a self-sustaining solar market have already been achieved, 2) alternate solar procurement models such as a group-buy program model have resulted in lower system prices for customers than systems installed with PV Partners rebates, 3) the administrative costs of the rebate program for both City staff and solar installers are substantial compared to alternate solar procurement models, and 4) re-opening rebates to residential customer would result in disruptive market dynamics and messaging . BACKGROUND The City has been a leader in local solar development starting in 1980 when it launched a solar hot water heating program. California State law (Assembly Bill 1470) established a requirement in 2007 for all natural gas utilities to offer rebates for solar water heating systems. In 2008, the City of Palo Alto Utilities (CPAU) launched the Solar Water Heating (SWH) Program which provides rebates to customers who install qualifying solar water heating systems that offset energy used by an existing water heater or boiler for domestic water heating uses. The State’s goal is to install 200,000 solar water heating systems by 2017, and CPAU’s proportionate share is approximately 530 systems. The City’s 2007 Climate Protection Plan established a goal of achieving 1,000 systems by 2020. As of August 1, 2015, $281,370 in rebates have been issued under the program for a total of 58 systems. The slow uptake is due in part to the poor customer economics. The program is expected to continue through 2017 with incentive levels decreasing over the program lifetime. In 1999, the City launched its first solar PV system rebate program called PV Partners to encourage residents and businesses to install solar PV systems. In 2006, California adopted SB1, the “Million Solar Roofs” bill, which requires that all load serving entities such as CPAU provide incentives in the form of rebates to meet the goal of installing 3,000 megawatts (MW) of solar PV systems in California by 2017. The City’s proportionate share of the statewide goal is 6.5 MW by 2017. To meet the SB1 requirements, the CPAU increased the PV Partners Program budget to $13 million over ten years, with proportions of the funding allocated across four customer classes: residential, small and medium commercial, large commercia l and non- profit/public sector. Table 1 provides a summary of the solar PV installations through the PV Pa rtners program through August 1, 2015: 3 Table 1: PV Partners Program Summary PV Partners Program Capacity (MW) Installed Between 1999 and 2006 (Prior to SB1) Installed Under SB1 as of 8/1/15 Pending Projects/ Reserved Capacity Unreserved Capacity Total PV Partners Program Residential 0.62 1.89 0.05 0 2.56 Commercial 0.31 3.76 0.52 0.91 5.50 TOTAL 0.93 5.65 0.57 0.91 8.06 As of August 1, 2015, 6.7 MW of solar PV has been installed1 on 785 customer sites and an additional 0.57 MW of new solar PV installations at 14 customer sites have confirmed PV Partners rebates and are pending completion. All residential rebate funds were reserved as of August 2014. Currently, $1.1 million in funds remain unreserved for commercial solar PV systems. In the unlikely event that any of the PV Partners funds remain unreserved at the end of 2017, marking the end of the 10-year SB1 program, the funds will return to the Electric Fund. In 2012, the City launched the Palo Alto Clean Local Energy Access Now (CLEAN) program (Staff Report 2548, Resolution 9235), a feed-in tariff program. Through Palo Alto CLEAN, building owners may lease their roof tops to solar developers, or develop solar themselves, and sell the energy and renewable attributes to the City under a standard Power Purchase Agreement (PPA) at a fixed rate over a specified term. The current Palo Alto CLEAN PPA price for solar PV systems is $0.165 per kilowatt-hour (kWh) for a 20- or 25-year contract term for up to a maximum of 3 MW total of capacity. On May 27, 2015 (Staff Report 5756), Council opened the program to eligible non-solar generation technologies under a separate 3 MW cap at a rate of $0.09 3/kWh or $0.094/kWh price for a 20-year, or 25-year PPA, respectively. There have been no applications for the Palo Alto CLEAN program to date. On April 22, 2014, the City Council adopted the Local Solar Plan (Attachment A, Staff Report 4608, Resolution 9402), which set the overarching goal of meeting 4% of the City’s total energy needs from local solar by 2023 and unified the City’s approach toward local solar and described a set of diverse strategies for meeting the set goal. The Local Solar Plan provides a holistic framework and incorporates all market segments and short- and long-term approaches. The plan further seeks to do so in a cost -effective manner that does not create a burden on non- solar customers. Prior programs, incentives, and policies involving solar installed in the City— including specifically PV Partners, NEM, and CLEAN—are integrated into the Local Solar Plan strategies, and new programmatic areas are identified for staff research and development. The strategies range from supporting research and development partnerships supporting solar innovation to establishing programs for underserved market segments, such as residents in multifamily homes and renters. 1 This total includes the 0.93 MW installed under PV Partners prior to SB1, the 5.65 MW installed after SB1 and the systems that have been installed after PV Partners rebates for residential customers were no longer available. 4 DISCUSSION Status of Local Solar Plan Implementation Efforts A strategy-by-strategy update of all implementation efforts that have been completed to date and that are planned for the near term is provided as Attachment B. Detail about program development, the status of net energy metering, and the future of PV Partners is included below. Updated Local Solar Penetration, Forecast, and Goal Figure 1 shows cumulative solar PV installations in Palo Alto from 1999 through August 13, 2015. An estimated 785 systems and 6.7 MW of capacity are currently installed representing over 1% of the City’s annual energy needs. Figure 1: Cumulative Solar PV in kW CEC-AC2 Installed in Palo Alto through August 13, 2015 Solar Potential Assessment As a part of the Local Solar Plan, staff is completing a detailed GIS-based (geographic information system) solar potential assessment for Palo Alto. The analysis takes into account an assortment of factors affecting solar deployment, including:  Latitude/longitude of Palo Alto  Typical meteorological conditions  Land-use constraints  Orientation and slope of rooftops  Shading from surrounding trees and buildings  Industry average solar system performance 2 The California Energy Commission Alternating Current, or CEC-AC, rating is the product of the number of PV panels, the Practical Test Conditions (PTC) rating per panel, and the inverter efficiency. - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 - 100 200 300 400 500 600 700 800 900 19 9 9 20 0 0 20 0 1 20 0 2 20 0 3 20 0 4 20 0 5 20 0 6 20 0 7 20 0 8 20 0 9 20 1 0 20 1 1 20 1 2 20 1 3 20 1 4 20 1 5 In s t a l l e d C a p a c i t y ( k W C E C -AC ) Sy s t e m C o u n t CEC_AC kW Count 5  Forecast of solar system costs  Federal, state, local financial incentives  Assumption for expected financial return  Federal, state, local policies and regulations  Assumption for local adoption rate  Renters versus owner-occupied households Table 2 shows updated values for all installed, planned and forecasted solar PV. The overarching Local Solar Plan goal is that solar PV provide 4% of the City’s 2013 load, which translates to about 23 MW of installed local solar PV capacity. After accounting for 8 MW from the PV Partners program, 3 MW through the Palo Alto CLEAN program and 2 MW for new community solar and solar donation programs that are under development, almost 10 MW of additional solar capacity is required to meet the Local Solar Plan’s 2023 goal. Staff believes that this is feasible given existing incentives and realistic forecasts for falling solar system prices. The solar potential analysis supports the conclusion that the City can meet the 23 MW goal without expanding rebates or net energy metering incentives. Table 2: Updated Installed, Planned, and Forecast Solar PV and Local Solar Plan Goal Program Status as of August 2015 Capacity (MW) Energy (MWh/yr) % of City’s Energy Use PV Partners Program (Installed and Remaining Capacity) 8.0 13,600 1.4% CLEAN Program, Planned Capacity for Solar PV 3.0 5,100 0.5% Non-Rebated Solar Installed to Date 0.3 510 0.05% Anticipated Capacity for Community Solar and Solar Donation Programs 2.0 3,400 0.4% Additional Solar PV to Meet Local Solar Plan Goal 9.7 16,500 1.7% Solar Penetration Goal in 2023 23.0 39,100 4.0% It is important to emphasize that the City is much less certain to achieve the Local Solar Plan goal without successfully deploying 3 MW through the CLEAN program and 2 MW through the future community solar and solar donation programs. Program Development Update Three programs were identified in the Local Solar Plan as having potential to spur solar adoption and broaden participation: 1) community solar program; 2) a solar group-buy program; and 3) a solar donation program. 1. Community Solar Program: Community solar programs (aka shared solar) typically enable an electric utility’s customers to buy or lease solar panels in a centralized solar PV array and receive regular credits for electric output via their uti lity bills. Community solar programs are growing rapidly across the U.S. because they enable residents and businesses to experience and derive the benefits from cost -effective local solar deployment, even if they 6 are unable to install solar at their own premises, for example because of shading, ownership, structural or financial reasons. Staff attempted to seek a partner to implement a turnkey community solar program and issued a request for proposal (RFP) in July 2014 from a program administrator/solar developer. The turnkey proposal did not materialize and staff terminated the RFP. More information was provided to the UAC in July and to Council in August 2015 (Staff Report 5971). Staff is currently evaluating other methods to provide community solar for Palo Alto, which include utilizing municipal facilities to host community solar. In July 2015, an inter- departmental committee formed to develop a work plan for installing solar on City facilities and, in the near term, identify a municipal site to host the solar system for the community solar program. The committee is currently completing a comprehensive database that combines site information for all municipal facilities with other solar-relevant data, such as rooftop technical potential, on-site electricity consumption, and building lease and use constraints. Upon completing the database, staff will retain the services of a solar procurement specialist and adopt a work plan for installing solar on all viable facilities. Staff expects to finalize the community solar site selection and begin the solar PV system procurement process by Fall 2015. 2. Solar Group-Buy Program: Solar Group-Buy programs (aka group-discount or bulk buy) have historically been successful in driving down system costs by aggregating purchasing power and simplifying the process of solar adoption across a community. The City was fortunately able to participate in Peninsula SunShares, a large, regional group-buy effort led by the City of Foster City. An informational report about the program was provided to the UAC in October 2014 and to City Council in November 2014 (Staff Report 5144). Peninsula SunShares launched on April 31, 2015, and was open to all residents in the nine Bay Area counties who registered by August 10. The entire program is expected to result in over 800 kW in new solar installations across the Bay Area. Palo Alto led the region in number of enrollments with an estimated 28% of total participation. 54 Palo Alto residents signed contracts to install 236 kilowatts (kW) of solar systems. Given the success of the program, staff plans to seek opportunities to join future regional group-buy efforts. 3. Solar Donation Program: In a solar donation program, participants would contribute funds towards building solar PV systems on schools and other non -profit facilities. The projects could be funded in a variety of ways, including via donations from participants through monthly contributions (e.g., $5 to $10 per month) through their utility bills. This program is estimated to take the least amount of staff time to develop. Research and development of the program is planned for Winter 2015/2016 leading to a program launch in Spring 2017. Table 3 is a tentative timeline for the review, approval and launch for the three programs. 7 Table 3: Tentative Review and Approval Timeline for Major Programs Program Development UAC Review Fin. Comm. Review Council Review Program Launch 1. Group-Buy Program (Complete) Summer 2014 Oct 2014 N/A Nov 2014 April 2015 2. Community Solar Program May 2014 – Present Spring 2016 Spring 2016 Summer 2016 Winter 2016/2017 3. Solar Donation Program Winter 2015/2016 Summer 2016 Summer 2016 Fall 2016 Spring 2017 Net Energy Metering In 1996, California state law required all electric load serving utilities to offer net energy metering (NEM) to eligible customers on a first-come, first-served basis up to a maximum cap based on the utility’s aggregate customer peak demand. NEM is a special billing arrangement that provides a bill credit to customers with eligible solar PV or other net metered systems for based on the full retail rate for the electricity that their system generates. Palo Alto’s NEM cap is set at 5% of the City’s 2006 peak electric demand or 9.5 MW. Current installations total 6.7 MW, representing 3.5% of the utility’s aggregate customer peak demand. Staff estimates that the City will meet the 9.5 MW NEM cap by the end of 2016. To date, all local solar installations utilize NEM and all net energy metered systems are solar PV3. Staff plans to seek Council approval of the NEM cap to memorialize the calculation methodology and clarify any ambiguity related to Palo Alto’s NEM cap. Additionally, as the City approaches its NEM cap, staff will begin reporting progress towards meeting the cap in order to further support market certainty and inform customer decision-making. After the cap has been reached, customer-sited systems will be subject to a different set of terms and conditions, referred to as the NEM successor program. Staff is preparing proposed design guidelines for the NEM successor program in Palo Alto to supplement the electric cost of service analysis (COSA) guidelines approved by Council on September 15, 2015 (Staff Report 6061). Staff plans to further clarify terms and conditions for existing NEM participants (aka “grandfathering” provisions) and a NEM successor program for UAC, Finance Committee and Council consideration by early 2016. Future of PV Partners As of August 2014, all residential rebate funds for solar PV systems through the PV Partners program were reserved. Limited funds remain available for commercial customers. On March 17, 2015, the Finance Committee requested that staff return to the Committee for a discussion about the options for continuing PV Partners rebate funds for residential use —either by adding 3 In principal, customers may install a variety of distributed energy technologies on -site that would be eligible for NEM, including, for example, geothermal electric, fuel cell, wind, biomass, and anaerobic digestion technologies. In practice, staff expects the vast majority—if not all—of on-site generation and NEM participation to be solar PV. 8 new funds for rebates or by shifting the remaining rebate funds not yet reserved by commercial customers to residential customers. Members of the Committee questioned whether additional rebates for residents might yield more solar deployment than funds directed to solar developers through the Palo Alto CLEAN program. Staff recommends discontinuing the PV Partners after the City’s legislative requirements set by SB1 have been achieved, and not shifting funds from the commercial customer class to the residential customer class for four primary reasons. 1. SB1 Goals Will Have Been Met The explicit goal of SB1 is to aid the deployment of 3,000 MW of solar PV across the state by the end of 2018. In Palo Alto, staff expects all PV Partners rebate funds to be fully reserved by the end of the 10-year program, so that the City will meet its contribution toward the statewide goal. Additionally, the implicit goal of SB1 is to create a self-sustaining solar market, a goal that was reinforced through a program design that ratcheted down incentive levels with increased deployment so as to encourage solar installers to continually seek cost-reductions. Even though the SB1 rebates through Pacific Gas & Electric (PG&E) and other investor owned utilities (IOUs) have been nearly completely reserved4, solar deployment has continued such that California as a whole has already exceeded the statewide SB1 deployment target of 3,000 MW5. In Palo Alto’s service territory, residential installations have not slowed down absent rebates. All data support that the implicit goal to create a self-sustaining solar market has already been achieved. 2. The Objective of Lowering the Cost of Solar Can be Achieved in Other Ways Alternative solar adoption models can result in lower overall systems costs and at a substantially reduced cost to electric utility ratepayers compared to continuing the PV Partners rebate program. Specifically, group-buy programs that aggregate the purchasing power of many households across an organization or region have achieved substantial reductions in system costs by lowering the customer acquisition costs for solar developers and facilitating economies of scale. The system price offered through the Peninsula SunShares group-buy program for the most basic installation was $3.50/Watt-Direct Current (DC) (approx. $4.40/Watt CEC-AC) for a 3 to 9 kilowatt system for a cash purchase (i.e. not including any financing option). Prices for similar-sized customer-owned systems that applied for a PV Partners rebate in the last two years were $4.70/Watt-DC (approx. $5.90/Watt CEC-AC) prior to receiving the rebate, and $4.02/Watt-DC (approx. $5.00/Watt CEC-AC) after receiving the rebate. Therefore, a solar system purchased through the Peninsula SunShares program was over 10% cheaper than the post-rebate solar system cost through the PV Partners program and 25% cheaper than the pre- rebate solar system cost. Figure 2 shows the historical average annual system cost of solar PV installed through the PV Partners program. The base price for the Peninsula SunShares program is included for comparison. 4 As of August 19, 2015, less than 1 MW worth of rebate funds remain for all IOUs combined. (http://csi- trigger.com/) PG&E ceased accepting applications for residential rebates in Fall 2013. 5 As of August 19, 2015, solar deployment in California is 3,216 MW (http://www.gosolarcalifornia.org/). 9 Figure 2: Average System Cost Installed through PV Partners 3. PV Partners Administrative Costs are High Finally, the rebate and administrative costs of the PV Partners program are high, including the administrative costs borne both by the City and by solar installers that are completing the paperwork on behalf of utility customers. The California Energy Commission (CEC) set onerous requirements for the implementation of SB1. Staff estimates that each residential rebate application requires about 3 hours total of administrative work by City staff and solar installers, in addition to a $50 per application cost for rebate processing software. The administrative costs combined with the rebate value is over $2 per Watt -DC averaged over the program’s history, which are costs paid for by all electric utility ratepayers. By comparison, staff estimated the administrative costs of a solar group-buy program for residential systems to be less than $0.07 per Watt-DC. Of course, a new residential solar PV rebate program could avoid the onerous requirements set by the CEC for SB1 eligibility, but it’s still instructive to realize the administrative cost advantage that a group-buy program offers. However, shifting the remaining rebate funds not yet reserved by commercial customers to residential customers under PV Partners would not avoid the CEC requirements. $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 Av e . S y s t e m C o s t ( N o m i n a l $ / W C E C -AC ) Pre-Rebate Post-Rebate Group-Buy, Base Price 10 4. Making Rebate Funds Available Again to Residential Customers Will Result in Disruptive Market Dynamics Residential rebate funds have been fully reserved for over 13 months. Making rebate funds available again to residential customers will result in disruptive market dynamics and confusing messaging to customers. Furthermore, it may have the unintended consequence of alienating the dozens of households who have already installed systems without receiving rebates. Alternatives for PV Partners Alternatives to the staff recommendation to discontinue PV Partners after solar legislative mandates have been met include: 1) transferring the remaining PV Partners rebate funds not yet reserved by commercial customers to residential customers; 2) adding new rebate funds for residential customers from Electric Fund ratepayers; and 3) adding new rebate funds for residential customers from the City’s General Fund. Staff does not recommend any of the alternatives. The rate of residential installations has not slowed since rebates for residential customers were fully reserved, indicating that rebates are not required for customer adoption. A program providing rebates would therefore very likely result in a high proportion of “free-ridership”, a hallmark of an ineffective incentive program design. NEXT STEPS Table 4 is a tentative timeline of all activities planned in the near future for the continued implementation of the Local Solar Plan. Table 4: Tentative Timeline for Near-term Implementation of the Local Solar Plan Time Period Description Fall 2015  Develop a strategy for solar on municipal facilities  Complete implementation of AB 2188 (Development Center)  Clarification of NEM cap calculation methodology to Council  Design guidelines for the NEM successor program to the UAC, Finance Committee, Council  Incorporate solar perspective throughout the electric COSA process Winter 2015/2016  Begin reporting progress toward the NEM cap in Utilities Quarterly Update and on CPAU solar website: http://www.cityofpaloalto.org/solar  Complete study of distribution system impacts of high penetrations of solar PV and EV  Incorporate solar perspective throughout the electric COSA process (cont.)  NEM successor program and grandfathering provisions to the UAC, Finance Committee, Council  Continuation of community solar program research and development  Begin solar donation program research and development Spring 2016  Community solar program design to the UAC, Finance Committee, Council RESOURCE IMPACT There is no change to budgets, planned exp enditures or staff re so urces as a result of staff's recommendation to discontinue the PV Partners program once solar legislative mandates have been met. Administering the PV Partners program requires dedicated staff re sources through at least 2020 to disperse all remaining rebate funds6 • Once all program funding ha s been reserved by customers and no more new applications are being processed , the ongoing staff resource impact is anticipated to be 0 .02 FTE to process performance-based incentive (PBI) payments that are paid out over a five year time frame. After all program funding has been reserved , available staff resource s will be reallocated to other solar program initiatives. If, however, Council desires to add new rebates for residential solar PV, th ere would be a budget and rate impact for the Electric Fund . POLICY IMPACT The recommendation to discontinue the PV Partners program once sola r legislative mandates have been met does not conflict with any City policy. The Local Solar Plan supports the City's environmental sustainability goals, including those set out in the Council-approved 2011 Utilities Strategic Plan and the City's Sustainability and Climate Protection Plan . Fulfilling our SB1 le gis lative mandates through PV Partners will help promote solar development and is consistent with the Carbon Neutral Plan , the Local Solar Plan , and State and local efforts to promote distributed solar projects. ENVIRONMENTAL IMACT Discontinuing the PV Partners program once solar legis lative mandates have been met does not meet the California Environmental Quality Act's (CEOA) definition of "project" under California Public Resources Code Sec. 21065, thus no environmental review is required . ATIACHMENTS A. Adopted Local Solar Plan B. Summary of Local Solar Plan Implementation Efforts PREPARED BY: REVIEWED BY: APPROVED BY: 6 For PV Partners reservations that are already approved, the last estimated performance-ba se d incentive (PBI) payment date is 2020. However, if staff receives an application for a~I or a portion of the remaining re bate funds as a part of a new construction project, then the project may require PBI payments through 2022. 11 Attachment A A-1 Exhibit A to Resolution No 9402 Adopted by City Council on April 21, 2014 City of Palo Alto Utilities – Local Solar Plan Goal To increase the installation of local solar photovoltaic facilities to provide 4 percent of the City’s total energy needs by 2023. Objectives 1. Facilitate the development of local, safe and cost-effective solar in Palo Alto to meet the diverse needs of the community 2. Reduce the cost of installing solar in Palo Alto and become a leader in promoting renewable distributed generation through solar installations 3. Understand the community’s solar potential and diverse needs and develop solar programs accordingly 4. Remove internal obstacles to minimize cost and achieve greater solar potential 5. Promote solar installations in a cost effective and safe manner 6. Leverage industry resources to the extent possible 7. Deploy industry best practices Strategies 1. Remove internal system and institutional barriers which increase “soft” costs and may impede adoption of solar in Palo Alto a. Work with the Development Center, Planning and Utilities to identify further improvements to streamline the solar permitting process. b. Promote advancements in the City’s permitting process to community and solar developers. 2. Develop proper policies, incentives, price signals and rates to encourage solar installation a. Solar Policy and Rate Design – explore rate structures that balance cost of service with the City’s policy to promote the development of new solar systems in Palo Alto. i. When evaluating new solar policies, evaluate the impact, if any, on non-solar ratepayers. b. City of Palo Alto Utilities (CPAU) Billing System – explore modifications to the billing system and/or evaluate: i. Incorporating net metering information on the monthly bills ii. Virtual net metering to allow the sharing of net metering bill credits across accounts c. CPAU Incentives – assess providing rebates or other incentives after the SB1 mandated expenditures are exhausted, the Federal Investment Tax Credit has been reduced from 30% to 10% and the net-metering cap has been met, to continue to encourage local solar installations. Attachment A A-2 d. Leverage available resources for solar policy and program development i. Participate in the Federal Department of Energy’s American Solar Transformation Initiative to receive free services including development of a customized solar road map ii. Request assistance from existing membership in Solar Electric Power Association and ESource iii. Consider partnering with regional cities, counties and the State of California in developing solar programs e. Advocate at a local, regional and state level for effective rules, regulations and legislation to promote cost effective and fair solar development i. Coordinate with other municipal utilities through the Northern California Power Agency (NCPA) and the California Municipal Utilities Association (CMUA) on state legislation related to solar 3. Assess technical and market potential of solar in Palo Alto a. Review commercial and residential sites to determine solar technical potential b. Determine cost drivers for installing solar in Palo Alto c. Utilize other industry studies to develop a feasible and marketable potential d. Develop a database of solar potential e. Assess the impacts of PV on CPAU’s distribution system 4. Implement policies and programs to increase solar system installations on CPAU customer sites with good solar access a. Continue to promote the PV Partners program to achieve the 6.5 MW of installation by 2017, per CA SB1 b. Continue to promote the Palo Alto CLEAN (feed-in-tariff) program and revamp the marketing of Palo Alto CLEAN to facilitate the coordination of potential sites with developers and property owners/managers to achieve some level of participation i. Annually re-assess the avoided cost of local renewable energy and recommend adjustments to the CLEAN offer price and contract terms, as appropriate ii. Investigate developers’ concerns with Palo Alto CLEAN program rules iii. Continue to educate commercial property owners about the CLEAN program c. Evaluate solar project financing options i. Coordinate with the California FIRST Property Assessed Clean Energy (PACE) program which allows solar system owners to borrow funds for the PV installation and pay it back on their property tax bills over a term equal to the expected system life (20 years). ii. Partner with local lenders to offer solar financing1 1 See an example of such a program from New Jersey’s Public Service Enterprise Group her: http://www.pseg.com/home/save/solar/index.jsp Attachment A A-3 5. Facilitate and/or develop new programs to encourage new participants to develop local solar installations. a. Develop a solar donation program for community members to donate to public sector and non-profit organizations which may benefit from solar, but can’t afford the investment on their own. i. Work with PAUSD and other non-profits to identify sites. Potential installation sites include public sector and non-profit locations which are ineligible to receive federal tax subsidies. ii. Evaluate alternative mechanisms to provide donations to sustain the program, including: (1) Reformulating the suspended PaloAltoGreen electric program as a mechanism to provide ongoing donations; (2) Developing a bill donation mechanism to raise funds; or (3) Developing on-line or crowd-funded sources to raise ongoing funds. b. Develop a community solar share program for the benefit of community members that do not have good solar access but have the desire to invest in local solar . i. Evaluate program design options that allow CPAU customers to invest in a share of a new larger-scale solar PV installations located in Palo Alto ii. Evaluate options for providing value back to customer investors, including: (1) Evaluate CPAU’s ability to provide monthly payments (in $) on the customer’s Utilities bill (2) Evaluate CPAU’s ability to offer “virtual net metering” so that energy produced (in kWh) from a solar system could be reflected on customers’ Utilities bills. [Note that the billing system challenges may be substantial for this option.] (3) Evaluate providing payments to customers via a third -party administrator separate from the Utilities bill. iii. Evaluate outsourcing the administration of the community solar program to provide the following: (1) Develop the community solar program (2) Perform program marketing (3) Identify installation sites (4) Manage the solar installation contract (5) Own, operate and maintain the PV installation (or contract with a third- party) c. Investigate group-discount solar PV program options to allow/facilitate Palo Alto residents to pool their buying power to secure significant discounts, making installing solar on their home simple and more affordable. i. Leverage existing group-discount programs offered to regional residents and company employees. 6. Maximize solar installations on City-owned facilities a. Assist Public Works in evaluating leasing City-owned facilities with low electric consumption (elevated garages and surface parking lots) to a solar developer who Attachment A A-4 could install solar PV systems and would be compensated under the Palo Alto CLEAN program. b. Assist Public Works in investigating installing net-metered solar on City-owned sites to reduce the City’s annual electric costs (and benefit the General fund). 7. Educate the community on the benefits of solar through information and demonstration projects a. Develop solar demonstration projects on City and public facilities b. Promote the benefits of PV systems together with fuel switching (replacing end-of- life gas appliances with electric appliances or replacing a gasoline vehicle with an electric vehicle or a plug-in hybrid vehicle) strategies to reduce greenhouse gas emissions. c. Investigate developing a “one-stop-shop” model (e.g., Wave-one). d. Develop "how to go solar" promotional materials which allows customers to evaluate several solar options. e. Develop direct marketing for small commercial/business customers. f. Develop a database of solar projects installed throughout the community as “case studies” and promote them through CPAU’s web site. g. Promote new innovative solar technologies using the CPAU Emerging technology Program i. Thermoelectric paint ii. PV & batteries iii. Building-integrated PV (BIPV) iv. White roofs v. Microgrids vi. Solar shingles vii. Solar thermal Attachment B: Summary of Local Solar Plan Implementation Efforts 1 Strategy-By-Strategy Update of Local Solar Plan Implementation Efforts Strategy Achievements to Date Ongoing/Future Plans Strategy 1: Remove internal system and institutional barriers which increase “soft” costs and may impede adoption of solar in Palo Alto Pre-dating the Local Solar Plan, Development Services implemented a streamlined permitting process for residential solar PV systems. Palo Alto received the 2014 Best Solar Collaboration Award for the improved permitting process. Staff is publicizing the streamlined solar permitting process on an ongoing basis. Staff plans to continue streamlining of permitting, inspection, and interconnection processes as necessary to comply with the recently enacted AB2188 which mandates a standardized procedure for solar permitting across the state. (Fall 2015) Strategy 2: Develop proper policies, incentives, price signals and rates to encourage solar installation As described in detail in this report, staff evaluated increasing the funding for PV Partners beyond compliance obligations and recommend not expanding the program after all legislative mandates have been met. Staff is currently incorporating local solar considerations in the electric rate analysis discussions. (Ongoing) Staff will bring forward a clarification for the methodology used to calculate the City’s NEM cap for Council adoption (Fall 2015) Staff members from multiple departments are coordinating to integrate and improve the permitting, inspection, and interconnection processes to ensure the City has visibility of all systems being installed within Palo Alto and to accurately and electronically track progress towards the NEM cap. (Fall 2015) Staff seeks regular technical and non-technical assistance from the Solar Electric Power Association, E Source, and the U.S. Department of Energy funded American Solar Transformation Initiative. (Ongoing) The City coordinates with the Northern California Power Agency (NCPA) and the California Municipal Utilities Association (CMUA) on an ongoing basis on effective rules, regulations, and legislation to promote cost-effective and fair solar development. (Ongoing) Solar considerations are being incorporated in the ongoing discussions for adopting new billing and customer information Attachment B: Summary of Local Solar Plan Implementation Efforts 2 Strategy-By-Strategy Update of Local Solar Plan Implementation Efforts Strategy Achievements to Date Ongoing/Future Plans systems. Staff plan to research and evaluate a NEM successor program, which will be coordinated with the electric rate discussion and analysis. Guidelines for the NEM successor program design will be brought to the UAC, Finance Committee, Council in Fall 2015, and a program will be brought for review by Spring 2016. A clear path to securing a host site is critical to successfully launch a community solar program. Staff is in the process of selecting a municipal site to host the solar system, which could facilitate the process of launching the program and enhance associated education and outreach efforts. Strategy 3: Assess technical and market potential of solar in Palo Alto Completed a GIS-based solar technical potential assessment for rooftops and published a map of the potential online for interested community members1 (Summer 2014) Staff is broadening the solar technical potential assessment to incorporate surface parking. (Fall 2015) Staff is completing the economic and market potential assessment and documentation. Preliminary results of the potential assessment are incorporated in the memo. (Fall 2015) Staff plan to coordinate with the Planning Department on the impact of current zoning rules for carport installations Staff plan to conduct a study of distribution system impacts from high penetrations of solar and EV (FY16) Strategy 4: Implement policies and programs to increase solar system As described in detail in the full report, Palo Alto’s PV Partners program providing rebates for customer-cited solar systems has spurred over 6.5 MW of local solar PV adoption to Staff is currently evaluating joining the HERO program, which would give residents another PACE financing option 1 https://cityofpaloalto.org/solarmap Attachment B: Summary of Local Solar Plan Implementation Efforts 3 Strategy-By-Strategy Update of Local Solar Plan Implementation Efforts Strategy Achievements to Date Ongoing/Future Plans installations on CPAU customer sites with good solar access date. All residential rebate funds have been reserved and commercial rebate funds are nearly depleted. Staff recommends that the program not be expanded once all legislative obligations have been fulfilled. The Palo Alto Clean Local Energy Accessible Now (CLEAN) program is a feed-in tariff program for renewable generation facilities sited within Palo Alto. To date, the program has not generated a project. However, staff continues to market the program. Furthermore, after a recent solar developer survey, the feedback provided led staff to propose the recommendation to offer a 25- year power purchase agreement (PPA) option, instead of only the 20-year PPA. Council subsequently approved this change. The City is currently a member of California FIRST, which give residents a Property Assessed Clean Energy (PACE) financing option to pay for on-site renewable energy installations through their property tax bill Strategy 5: Facilitate and/or develop new programs to encourage new participants to Palo Alto joined a regional solar group-buy program called Peninsula SunShares. The solar system prices resulting from the Aggregating the purchasing power of the community resulted in solar system prices Staff plans to begin the research and development of a solar donation program (Winter 2015/2016) Staff provides ongoing support to PAUSD and the Sustainable School Committee in their efforts to evaluate the costs and Attachment B: Summary of Local Solar Plan Implementation Efforts 4 Strategy-By-Strategy Update of Local Solar Plan Implementation Efforts Strategy Achievements to Date Ongoing/Future Plans develop local solar installations approximately 15-25% below current market prices across all nine Bay Area counties. Registration for the program ran from April through August 2015. Palo Alto households made up approximately 40% of the total program participation. benefits of solar PV installations on school facilities (ongoing) Staff provided an informational report to the UAC in July 2015 regarding the status of the community solar program development efforts. At present, staff is selecting a municipal site to host the community solar facility. Staff will return to the UAC with a proposed program design in Spring 2016. Strategy 6: Maximize solar installations on City-owned facilities Public Works released an RFP in May 2014 to lease the top levels of five downtown City multi-level parking structures for solar PV facilities applying through the Palo Alto CLEAN feed-in tariff program. Currently, staff and the selected developer are negotiating a site lease for the installations. A committee was formed to inventory all municipal facilities and their suitability for solar PV and to develop a work plan for installing solar on viable sites. (Fall 2015) Strategy 7: Educate the community on the benefits of solar through information and demonstration projects Pre-dating the Local Solar Plan, in 2008 Public Works and Utilities installed solar demonstration projects at the Municipal Service Center, Baylands Interpretive Center, and Cubberley Community Center. Staff hosts workshops on a variety of topics, including customer-sited solar energy. The last solar energy workshop was April 25, 2015, and was coordinated with the program administrator for the solar group-buy program Peninsula SunShares. Staff routinely evaluates innovative solar technologies through the Program for Emerging Technologies (PET). Through PET, a 6- month pilot project was launched in partnership with Petra Systems to evaluate and demonstrate distributed solar PV on street light poles. The pilot project concluded in May, and staff is in the process of completing an evaluation report. Staff is evaluating issuing an RFP for customer-facing tools to aid in solar decision-making (Fall 2015)