HomeMy WebLinkAboutStaff Report 4511
City of Palo Alto (ID # 4511)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 3/18/2014
City of Palo Alto Page 1
Council Priority: Environmental Sustainability
Summary Title: Local Solar Plan
Title: Utilities Advisory Commission Recommendation that the City Council
Adopt a Resolution Establishing a Local Solar Plan to Provide Four Percent of
the City's Total Energy N eeds by 2023
From: City Manager
Lead Department: Utilities
Recommendation
Staff and the Utilities Advisory Commission (UAC) recommend that the Finance Committee
recommend that the City Council approve the attached resolution establishing the Local Solar
Plan to increase the installation of local solar photovoltaic facilities in order to provide 4
percent of the City’s total energy needs by 2023.
Summary
The City of Palo Alto desires to be a leading city in sustainability efforts and, as such, has set
significant goals to reduce greenhouse gas (GHG) emissions. Individual homeowners and
businesses desire to do their part to reduce GHG emissions, want to control the cost of meeting
their energy needs, and often look to solar energy as a means to achieve those goals.
Besides being carbon-free, local solar systems achieve many benefits for Palo Alto, including:
reducing the amount of renewable energy the City must buy for the community, which helps
keep everyone’s rates down; avoiding the cost of losses from transmitting and distributing the
electricity from distant power facilities; and reducing the need to build expensive transmission
lines throughout the state, thus improving grid reliability.
The proposed Local Solar Plan identifies a set of strategies and initiatives to continue promoting
solar in a cost-effective and sustainable manner by accelerating and increasing solar
City of Palo Alto Page 2
penetration in Palo Alto. The City’s PV Partners program, which provides rebates to City
electric customers who install rooftop photovoltaic (PV) solar systems, has been very
successful, but is expected to run out of funds by the end of 2014. State and national efforts to
expand the installation of solar energy systems have grown exponentially. The cost of installing
solar on rooftops has fallen and many third-party entities offer creative ways for residents and
businesses to install systems. However, the benefits to potential solar owners locally are lower
due to Palo Alto’s relatively low electric retail rates. Further, with the ado ption of the City’s
Carbon Neutral Plan for the electric supply portfolio, installing solar in Palo Alto may be less
compelling for some customers than it once was.
The City is able to fill a unique role by eliminating some of the hurdles and barriers which are
impeding the cost-effective installation of solar systems in Palo Alto. Implementing the Local
Solar Plan allows the City to continue to be a leading solar community and a leader in
environmental sustainability.
At its February 12, 2014 meeting, the UAC unanimously recommended Council approve the
proposed Local Solar Plan.
Background
The City of Palo Alto Utilities (CPAU) has been a leader in local solar development starting in
1980 when it first launched a solar hot water heating program, which reduced the cost of
systems through a bulk buy effort and provided low interest loans to home owners payable
through their Utilities bill. In 1999 CPAU launched its first solar PV system rebate program to
encourage residents and businesses to install solar PV systems. Since then, CPAU’s menu of
solar offerings has expanded and the City has been ranked in the top ten nationally based on
the number of local solar installations per utility customer since 2008. A detailed description of
the City’s existing solar programs is presented in Attachment C. Table 1 provides a summary of
local solar installations through the PV Partners program.
City of Palo Alto Page 3
Table 1: Solar PV Installations in Palo Alto through the PV Partners Program
Year
System Count
per Year
Capacity (kW-AC)
per Year
1999 4 16
2000 6 16
2001 27 100
2002 22 73
2003 16 40
2004 17 45
2005 20 74
2006 54 233
2007 77 213
2008 85 1,347
2009 57 340
2010 48 503
2011 51 444
2012 40 204
2013 * 42 254
Total 566 3,904
Data through September 30, 2013.
Discussion
California has adopted several key pieces of legislation to promote renewable energy and the
installation of rooftop solar. A description of these legislative initiati ves is included in
Attachment C. The two key initiatives are state laws that require utilities such as CPAU: 1) to
provide rebates to encourage solar PV; and 2) to offer net energy metering (NEM)1 up to a cap
of 5% of the utility’s peak load. These state mandates have been successful in building the
market and lowering the installed cost for solar in California.
1 Net energy metering (NEM) allows a customer generating energy via a rooftop solar facility to receive a financial
credit for power generated by their onsite system and fed back to the utility. The credit is used to offset the
customer's electricity bill.
City of Palo Alto Page 4
CPAU has played an important role in promoting solar within Palo Alto through its offering of
financial incentives under the PV Partners program. CPAU’s PV Partners program, along with
NEM, provides sufficient incentives to promote solar for businesses and homeowners with
good solar access. However, the incentives do not provide sufficient inducement for customers
who desire to be part of the solar movement, but do not have good solar access, or the
financial means to install solar equipment, and/or the information necessary about available
incentives. In addition, by the end of 2014 staff expects that customers will have reserved all
funds available under the City’s PV Partners program and that the City will have reached its net
energy metering participation limit by 2017.
The cost of installing solar on rooftops is at an all-time low nationwide2 prompting many third-
party entities to develop and market solar locally. A host of solar marketers have sprung up
offering many creative ways in which to finance and/or coordinate the development of solar to
either receive solar directly to the premise, receive financial benefits or other non -direct
benefits. Many of these programs encourage community development of solar ene rgy through
group-discount purchases or leases, crowd funding and virtual net metering. Solar leases and
power purchase agreements (PPA) are also rising in popularity. These financial instruments are
offered by companies who own, operate, and maintain th e PV system and provide generation
guarantees over a 20-year term. Customers are not required to pay any money up-front, and
monthly payments to the financing companies are often lower than the cost to purchase the
electricity from the customer’s electric utility. In addition to solar leases and power purchase
agreements, customers may finance their PV system on their property tax bill through
California’s Property Assessed Clean Energy (PACE)3 program. PACE is currently available to
commercial customers, including CPAU’s customers, and is expected to expand to the
residential sector in 2014.
CPAU’s customers are looking to the City to assist them in making decisions to install and/or
invest in solar for their homes or community facilities. As such, th e City is in a unique position
to facilitate the process of bringing more solar systems to Palo Alto.
Local Solar Penetration, Forecast and Potential
Staff conducted a technical potential assessment by reviewing the total rooftop square footage
in Palo Alto, adjusted for several factors including existing penetration rates, shading, and roof
setbacks. A total of 100 megawatts (MW) of solar PV technical potential was identified,
representing 170,000 MWh/year of energy. The technical potential was developed by assessing
2 See Lawrence Berkeley National Lab and the Department of Energy SunShot Program’s July 2013 report: Tracking
the Sun VI: An Historical Summary of the Installed Price of Photovoltaics in the United States from 1998 to 2012
(http://emp.lbl.gov/sites/all/files/lbnl-6350e.pdf)
3 See California First’s program here: https://californiafirst.org/overview.
City of Palo Alto Page 5
total commercial and residential rooftop area in the City and applying factors for coverage,
orientation, and shading. Staff does not yet have a good estimate of how much of the technical
potential can actually be achieved. As part of the Local Solar Plan, staff will develop a better
estimate of the technical potential and assess the achievable potential, given the local costs and
benefits and existing penetration levels in Palo Alto.
As shown in Table 1 above, local solar installations through the PV Partners Program total about
3.9 MW of capacity. The annual energy generated by these installations is 6,630 megawatt
hours MWh) per year, or about 0.7% of the City’s annual energy needs.
National forecasts for the annual growth rate of customer-sited PV range between 15% and
25%. Because of Palo Alto’s higher costs for PV systems, lower electric rates, and lower solar
availability, CPAU assumes a more modest 10% annual growth rate, after 2016 when all the
solar installations through the PV Partners program are expected to be completed. Based on
this assumption, over the next ten years an additional 12.7 MW of local net metered solar
energy is included in the most current electric load forecast, shown in Figure 1. Solar PV
associated with participation in Palo Alto CLEAN4 program is not included in the load forecast
since it is not net metered and, therefore, does not reduce the City’s load. The Palo Alto CLEAN
program is accounted for in CPAU’s renewable electric supply forecast . Staff anticipates 3 MW
of local solar capacity will be installed under the Palo Alto CLEAN program by 2015.
4 The Palo Alto CLEAN (Clean Local Energy Accessible Now) program is a feed-in tariff program offering a standard
long-term contract for local solar energy.
City of Palo Alto Page 6
Figure 1: Electric Load Forecast and PV Penetration (MWh/year)
While the total installed cost of solar PV systems has decreased significantly in t he last five
years on a national, state and local level, there are still obstacles and/or conditions which keep
installation costs in Palo Alto high, thus preventing Palo Alto from reaching its maximum solar
installation potential. In the last three years, the average installed cost of residential solar PV
(before rebates and tax credits) was 10% higher for CPAU customers compared to PG&E
customers ($7.38/watt versus $6.73 respectively). One reason may be the higher rebate
available for CPAU customers, which may be a reason that installers charge more in Palo Alto.
Soft costs associated with design, permitting and interconnection are higher in Palo Alto, which
imposes more requirements than other jurisdictions. However, the City has streamlined its
permitting process to help bring the costs down. Finally, Palo Alto is considered an affluent
community and therefore developers may be finding that they can charge more because of the
socioeconomic conditions.
Setting a Goal for the Local Solar Plan
As shown in Table 1 above, as of the end of September 2013, the City had a total of 3.9 MW of
local PV. The remaining funds for the PV Partners will add an additional 4.1 MW by the end of
2016, for a total of about 8.0 MW. The NEM cap of 9.5 MW is expected to be reached by mid-
2017 and additional PV beyond that limit will potentially be harder to get , since the incentives
in the form of rebates and NEM may be concluded.
City of Palo Alto Page 7
Table 2 below shows the estimated amount of solar that is expected to be developed and
installed if the Local Solar Plan is implemented. The goal selected for the plan is aggressive; it
requires an increase in the capacity of solar in the City to grow from the current 3.9 MW —that
CPAU has achieved after 15 years of implementing the PV Partners program—to 23 MW in the
next 10 years.
Table 2: Local Solar Forecast, Goal, and Technical Potential
Capacity
(MW)
Energy
(MWh/year)
% of City’s
Energy Use
PV Partners Program: Current Installed Capacity 3.9 6,630 0.7%
PV Partners Program: Remaining Capacity 4.1 6,970 0.7%
Total PV Partners Program Installations 8.0 13,600 1.4%
CLEAN Program Capacity 3.0 5,100 0.5%
Additional PV Forecasted Absent New Programs * 8.5 14,450 1.5%
Additional PV Needed to meet 4% Plan Goal 3.5 5,950 0.6%
Solar Penetration Goal in 2023 23.0 39,100 4.0%
Maximum Technical Potential 100.0 170,000 17.4%
Assumes a 10% annual growth rate starting after 2016 when all the solar installations through the PV Partners
program are expected to be completed (as shown in Figure 1), which could occur with no new CPAU programs.
Cost to Achieve the Local Solar Plan
A vigorous debate on the advisability of NEM is currently underway statewide. On one hand,
NEM has clearly provided an incentive to build the solar market, which has led t o falling prices
for solar PV systems. Advocates for distributed local renewable generation also tout benefits
that are shared by all ratepayers, such as less strain on the grid and reduced need for new
power plants and transmission lines. On the other hand, some feel that NEM customers do not
pay their fair share of the costs of the electric distribution and transmission systems, yet they
rely on them every night and when their usage is greater than the production from their system
(unless their system includes sufficient battery storage to let them completely disconnect from
the distribution system). Staff will evaluate the costs and benefits of NEM and develop a
recommendation on whether to continue NEM after the cap has been reached . This evaluation
will be completed as part of the electric cost of service study, which is planned for FY 2015.
The cost of remote solar installations was recently quantified when the City executed three 30-
year power purchase agreements (PPAs) in June 2013 (Staff Report # 3845) at a price of less
than $0.07/kWh for a total of 80 MW. However, this energy requires CPAU to incur costs to
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transmit the power from the remote location to the City. These costs add about $0.03/kWh to
the cost of the power, so that the remote solar projects cost the City about $0.10/kWh. There
are other advantages to local solar installations, including those that the Council recognized
when it adopted a price for the Palo Alto CLEAN program of $0.165/kWh (Staff Report #4378).
Staff assumes that the Local Solar Plan’s goal of 23 MW can be achieved with no new subsidies
or costs paid by non-participating customers. When the current mandated rebates that are
provided through the PV Partners program are exhausted, the Local Solar Plan does not i nclude
new funding for rebates. The Local Solar Plan ’s goal is expected to be achievable with the
implementation of new City programs to make solar accessible to more customers, the
development of proper policies and price signals to encourage solar, the removal of barriers to
lower costs, and the implementation of a comprehensive educational and outreach campaign.
Local Solar Plan
The proposed Local Solar Plan (Attachment B) is a tailored roadmap to encourage cost-effective
adoption of solar technologies in Palo Alto in keeping with the City’s objectives for
environmental sustainability. Although Palo Alto’s electric supply is now carbon neutral, it still
makes sense for homeowners and businesses to consider a solar system at their sites or as an
investment. Local solar systems offer the following benefits for CPAU customers and the Palo
Alto community:
Reduces participating customers’ utilities bills;
Reduces the amount of renewable energy the City must buy for the community, which
helps keep everyone’s rates down;
Avoids the cost of line losses from transmitting and distributing the electricity from
distant power facilities; and
Helps reduce the need to build expensive transmission lines throughout the state, thus
reducing the cost of transmission.
The proposed Local Solar Plan contains the following goal, objectives and supporting strategies:
Goal
To increase the installation of local solar photovoltaic facilities in order 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
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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
2. Develop proper policies, incentives, price signals and rates to encourage solar
installation
3. Assess technical and market potential of solar in Palo Alto
4. Implement policies and programs to increase solar system installations on CPAU
customer sites with good solar access
5. Facilitate and/or develop new programs to encourage new participants to participate in
developing local solar installations
6. Maximize solar installations on City-owned facilities
7. Educate the community on the benefits of solar through information and demonstration
projects
The proposed Local Solar Plan includes several tasks and initiatives. The intent is to implement
the Local Solar Plan over the next two years with a focus on developing several solar programs
intended to reflect the different interests in the Palo Alto community.
The proposed Local Solar Plan requires staff to further evaluate the merits of community solar
programs and/or other initiatives, identify several strategies to reduce hurdles to install PV in
Palo Alto, and reduce the cost of installing PV and provide information/demonstrations to help
residents and business decide if one of the City’s solar programs makes sense for them. Staff
intends to return to the UAC and Council with specific program details, including resource and
funding needs for each program developed.
Specifically, the proposed Local Solar Plan includes the development of at least two community
solar programs to facilitate solar for those customers who either don’t have good solar access,
cannot support solar at their own premise due to size o r home/business ownership status, or
want to contribute towards solar for the benefit of a community -based organization, such as
local schools.
City of Palo Alto Page 10
The main tasks in the Local Solar Plan are to develop new programs to encourage local PV
system installations, and are described below:
1. Develop a community solar donation program to be implemented by Fall 2014
In a community solar donation program, participants contribute funds towards building PV
systems on community buildings such as schools or other communit y and/or nonprofit
facilities. The projects could be funded in many ways, including via donations from participants
through monthly contributions of (e.g., $5 to $10) through their utility bill s. In addition,
members of the community or businesses could donate additional funds on a one-time basis for
the installation of the systems. Alternately, funds could be gathered for specific projects
though a crowd funded, or “kick-starter” type, campaign.
When sufficient funds are collected, the City would engage with the building owner, who would
contract with a developer to build and operate the PV systems. Participants could vote to
select sites from a set of locations identified as good candidates . The City’s role would be to
facilitate these installations and it would not own, operate or maintain the systems.
This program takes the least amount of staff time to develop, and is, therefore, the first
program under the Local Solar Plan that staff is able to implement. Staff expects to return to
Council with a community solar donation program proposal by August 2014 that could be
implemented by October 2014.
2. Develop a community share program to be implemented by July 2015
In a community solar share program, participants pay for a share of the cost of a large r system
that would be installed on a local building. This program would be valuable for customers who
may not be good candidates for solar PV on their own homes or businesses (due to shading, or
other roof or access issues) and could be cheaper per kilowatt (kW) installed due to economies
of scale. For example, 100 participants could each pay 1% of the cost of a system and virtually
receive 1% of the energy output from the PV system. The City’s Utility billing system may
require modifications to implement “virtual net-metering” to make the participant’s experience
similar to customers with PV on their own roof.
A community solar investment program is a variation of the solar share program described
above. In this program, participants would pay for a share of the cost of a PV system that
would be installed on a local building. For example, 100 participants could each pay 1% of the
cost of a system and receive 1% of the income derived from the sale of the energy produced
City of Palo Alto Page 11
from the system. In this case, CPAU would buy the energy using a long-term power purchase
agreement.
Staff expects to outsource the administration of a community share program and would need
to identify changes that may be required to the City’s Utility billing system. As in the solar
donation program above, the City would not own, operate, or maintain the systems, but would
facilitate the installations by working with the building owners who would engage developers
to build the systems. Staff expects to return to Council with a community solar program
proposal by October 2014 that could be implemented by March 2015.
3. Develop a solar group-discount program to be implemented by January 2016
The goal of a group-discount solar PV program is to lower the cost of installing PV systems i n
Palo Alto. In this program, CPAU would likely engage a third-party administrator to offer a
group-discount program for solar PV and solar water heating systems to interested customers
at a lower purchase or lease cost. CPAU could participate in existin g group-discount programs
offered by local governments (through ICLEI USA, for example). The program administrator
would provide turnkey services including: offering consumer education, preparing a Request for
Proposal for local contractors to provide solar PV and solar water heating systems to the
interested CPAU customers, and managing the installation contracts. Contractor selection
would be based on experience, installation services, cost, financing, and system quality. The
program participants would pay the full cost of administering the program.
Staff expects to return to Council with a solar group-discount program proposal by July 2015
that could be implemented by January 2016. This program would be available after staff
expects that the rebates from the PV Partners program will run out.
4. Develop a plan to install PV at City-owned facilities
CPAU staff has worked with Community Services, Planning, Public Works and Real Estate staff
to review City-owned sites for their suitability for solar PV installation based on solar access,
property leases, future redevelopment plans and whether the buildings are historical. Staff has
concluded that the parking garages have good potential for a first solar project on City -owned
facilities. Public Works staff has engaged the non-profit CLEAN Coalition to draft a Request for
Proposals to solicit bids for installing PV systems on the City-owned garages using a variety of
ownership and leasing options. If the proposals have merit, staff would request Council
approval, as appropriate, of any lease agreements.
In addition, staff will continue to investigate mechanisms to install PV systems on other City -
owned facilities and develop a plan to complete those installations. Staff expects to complete
the plan for City-owned facilities by July 2014.
City of Palo Alto Page 12
Committee Review and Recommendation
The UAC reviewed the proposed Local Solar Plan at its February 12, 2014 meeting. The UAC
was generally very supportive of the proposed plan and its programs and strategies. The
commissioners asked for more clarity on how the goal was selected asked why, if the City’s
electric supplies are carbon neutral, the City should seek more local solar. In response, staff
added more explanation to this report in the Discussion section
One commissioner stated that net energy metering (NEM) customers are not paying their fair
share of the distribution costs and that he expects NEM to be discontinued in the future. Staff
replied that NEM is a state mandate and that the NEM cap is expected to be reached at about
the same time as the PV Partners rebates funds are exhausted.
Commissioners also suggested that when staff returns with the specific programs in the
proposed plan, a complete economic analysis should be provided that shows the impact on
non-participants. Commissioners also advised that the City’s role in any of the programs needs
to be well defined.
The UAC voted unanimously (5-0, with Commissioners Chang and Waldfogel absent) to
recommend that Council approve the proposed Local Solar Plan. Excerpted draft minutes from
the February 12, 2014 UAC meeting are included in Attachment D.
Next Steps
Depending upon the recommendations from the Finance Committee, s taff plans to seek Council
approval of the proposed Local Solar Plan in April 2014. Provided Council approves the
proposed Local Solar Plan, staff intends to develop the programs and will return to the UAC,
Finance Committee and Council for recommendations and specific approval of programs. At
that time, staff will include a description of the program and potential participation, benefits
and costs and include funding and resource needs. Table 3 is a tentative timeline for seeking
Council approval for and launching the three key new programs in the Local Solar Plan.
City of Palo Alto Page 13
Table 3: Tentative Review and Approval Timeline for Major Programs
Program
Development
UAC
Review
Finance
Comm.
Review
Council
Review
Program
Launch
1. Community Solar
Donation Program
Through May
2014
June 2014 July 2014 Aug. 2014 Oct. 2014
2. Community Solar
Share Program
July-October
2014
Nov. 2014 Dec. 2014 Jan. 2015 July 2015
3. Solar Group-discount
Program
Jan-April 2015 May 2015 June 2015 July 2015 Jan. 2016
Resource Impacts
Approval of the Local Solar Plan will not impact budget resources for fiscal year 2014. Sta ff
resources will be impacted for the programs contained in the plan and as such staff may seek
consulting and program administration services to assist with the implementation of the Local
Solar Plan. Staff will identify resource impacts and will seek Co uncil approval for funds to
implement specific programs as needed.
Policy Impacts
Approval of the Local Solar Plan is consistent with existing solar legislative mandates and is in
support of the 1) City’s Climate Protection Plan; 2) CPAU’s Long -term Electric Acquisition Plan;
and 3) CPAU’s Strategic Plan.
Environmental Impacts
Approval of the Local Solar Plan does not meet the California Environmental Quality Act’s
(CEQA) definition of “project” under California Public Resources Code Sec. 21065, thus no
environmental review is required. Construction and installation of individual solar systems on
buildings in the community may be subject to CEQA review and will be addressed as needed, as
each of the Local Solar Plan’s individual sub-programs are brought forward.
Attachments:
Attachment A: Resolution Approving the Local Solar Plan (PDF)
Attachment B: Local Solar Plan (PDF)
Attachment C: Current Solar Programs (PDF)
Attachment D: Excerpted Draft UAC Minutes of February 12, 2014 meeting (PDF)
Attachment A
* NOT YET APPROVED *
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Resolution No. _________
Resolution of the Council of the City of Palo Alto Establishing a Local Solar
Plan to Provide Four Percent of the City’s Total Energy
Needs by 2023
R E C I T A L S
A. In an effort to combat climate change, in December 2007 the City of Palo Alto
(“City”) adopted the Climate Protection Plan, which set aggressive greenhouse gas (GHG)
emission reduction goals to be achieved by the year 2020.
B. The City currently offers rebates as required by state law through its “PV
Partners” program. The City’s goal under the PV Partners program is to install 6.5 megawatts
(“MW”) of solar photovoltaic (“PV”) by 2017 through issuance of $13 million in rebates. As of
September 30, 2013, 3.9 MW of solar PV have been installed representing 0.7% of the City’s
annual energy needs. An additional 2.5 MW of new electricity from solar installations funded
via PV Partners are pending completion. The funds set aside for PV Partners rebates are
expected to be exhausted by the end of 2014.
C. The City also offers net energy metering incentives as required by state law, to
customers who install solar PV systems on their premises, up to a cap of five percent of the
City’s peak annual load. The City expects to meet the cap by 2017.
D. The City provides incentives to encourage installation of solar hot water heating
systems as required by state law. Adoption of solar hot water heating systems in Palo Alto is
low due to high adoption cost.
E. Through Palo Alto Clean Local Energy Accessible Now (“Palo Alto CLEAN”)
Program, the City offers payment for electricity generated from solar PV systems where the
electricity is not used on site but is sold to the City to meet the City’s Renewable Portfolio
Standard. To date, Palo Alto CLEAN has had no participation, however 3 MW are expected to
be installed by end of 2015.
F. Local solar systems achieve many benefits for Palo Alto, including: reducing the
amount of renewable energy the City must buy for the community, which helps keep all CPAU
customers’ rates down; avoiding the cost of losses from transmitting and distributing electricity
from distant power facilities; and reducing the need to build expensive tra nsmission lines
throughout the state, thus improving grid reliability.
G. The City has been recognized as a leader in promoting solar PV energy in Palo
Alto, and desires to continue to promote and facilitate the acceleration of solar in Palo Alto in a
cost effective and safe manner in order to capture the financial, environmental and systemic
benefits of local solar development.
Attachment A
* NOT YET APPROVED *
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H. Staff presented the Local Solar Plan to the Utilities Advisory Commission (UAC) on
February 12, 2014 and the UAC voted unanimously (five in favor and two absent) to
recommend that the City adopt the Local Solar Plan.
I. On March 18, the Finance Committee voted _________________________.
The Council of the City of Palo Alto RESOLVES as follows:
SECTION 1. The Council hereby adopts the resolution establishing the Local Solar Plan
as described in Exhibit A.
SECTION 2. The Council finds that adoption of the Local Solar Plan to increase the
penetration of local solar installations from about 0.7% of the City’s total energy needs in 2013
to 4% by 2023 achieves the following benefits to the Palo Alto community:
1. Reduces participating customers’ utilities bills;
2. Reduces the amount of renewable energy the City must buy for the community, which
helps keep all CPAU customers’ rates down;
3. Avoids the cost of line losses from transmitting and distributing electricity from distant
power facilities; and
4. Helps reduce the need to build expensive transmission lines throughout the state, thus
reducing transmission costs.
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Attachment A
* NOT YET APPROVED *
140303 dm 6052079 3
SECTION 3. The Council finds that the adoption of this resolution does not constitute
a project under Section 21065 of the California Environmental Quality Act (CEQA) and the CEQA
Guidelines, and therefore, no environmental assessment is required. Construction and
installation of individual solar systems on buildings in the community may be subject to CEQA
review and will be addressed as needed, as each of the Local Solar Plan’s individual sub -
programs are brought forward.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
___________________________ ___________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
___________________________ ___________________________
Senior Deputy City Attorney City Manager
___________________________
Director of Utilities
___________________________
Director of Administrative Services
Attachment B
B‐1
Exhibit A to Resolution No XXXX
Adopted by City Council on ________________________________
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 B
B‐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 B
B‐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 B
B‐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 C
C‐1
City of Palo Alto Utilities
Current Solar Program Offerings
California has adopted several key pieces of legislation to promote renewable energy and the
installation of local rooftop solar. The City of Palo Alto Utilities (CPAU) has developed programs
to comply with these laws, including the following:
1. PV Partners Rebate Program: This program provides incentives for Palo Alto solar electric
photovoltaic (PV) customers who generate electricity that is used on site and lowers the
facility’s electric bill. Mandated by California law, the funds are reserved on a first‐come,
first‐served basis and are expected to be depleted by 2015.
2. Net Energy Metering (NEM) and Net Surplus Energy Compensation: This program credits
solar PV system owners for the energy they feed back into the grid. For example, a
customer’s PV system may generate more electricity than their home uses during daylight
hours. Under NEM, the electricity meter will run backwards to provide a credit against
electricity consumed in the home at night or other periods when electricity use exceeds the
PV system's output. Therefore, customers are only billed for their "net" energy use. “Net
surplus energy” is the electricity generated by an eligible customer over a 12‐month period
that exceeds the amount of electricity consumed by the customer. CPAU compensates
customers for net surplus energy at the cost of renewable energy.
3. Solar Water Heating Rebate Program: This program provides incentives for Palo Alto solar
water heating systems that generate hot water for domestic water heating uses. The
funding for the Solar Water Heating program was mandated by California law and is
expected to last for at least five years due to slow customer adoption of solar water heating
systems.
4. Palo Alto Clean Local Energy Accessible Now (Palo Alto CLEAN) Program: This program
offers payment for the electricity generated from Palo Alto solar electric PV installations
where the electricity is not used on site but is sold to CPAU for the renewable electricity
portfolio. A Power Purchase Agreement establishes a fixed price per unit of electricity
delivered to the Palo Alto electric grid over a twenty‐year term.
5. Local Distributed Generation (DG) Programs: While the City does not have a specific DG
goal, CPAU offers incentives to promote DG through the Power from Local Ultra‐clean
Generation Incentive (PLUG‐In) program. However, the PLUG‐In program is under review
for possible elimination as it offers incentives for local fossil‐fueled DG projects.
More detailed descriptions of these programs are provided below.
Attachment C
C‐2
Current Program Detailed Descriptions
1. PV Partners
The PV Partners program started in 1999 with a limited annual budget of $200,000 paid from
the funds collected by the electric Public Benefits charge. From 1999 through 2006, 166 PV
systems were installed for a total of 598 kilowatts (kW) with an average rebate of $3.22 per
Watt1.
Adopted in 2007, California’s Million Solar Roofs bill (Senate Bill 1, or SB1) requires that all load
serving entities such as CPAU, provide incentives in the form of rebates to encourage the
installation of 3,000 megawatts (MW) of solar PV systems in California by 2017. The City’s
proportionate share of the statewide goal is 6.5 MW2. To meet the SB1 requirements, CPAU
increased the PV Partners Program budget to $13 million over ten years. The total budget is
divided into ten steps, each funded at $1.3 million. Each step is allocated across four customer
classes: residential, small and medium commercial, large commercial and non‐profit/public
sector. SB1 also required that solar rebates be reduced by a minimum of 7% per year to
encourage lower installation costs. The average PV Partners rebate for the SB1 goal is $2 per
Watt ($13 million divided by 6.5 MW).
For PV systems with capacities less than 30 kW, the rebate is paid in a single check to the
system owner. For systems 30 kW and larger, the rebate is paid monthly for five years based
on the metered PV system generation (using a revenue‐grade generation meter which is
separate from the City’s net energy meter). Customers may reserve a PV Partners rebate after
they have a purchase contract and have participated in an energy audit. The reservation period
is 12 months for retrofits and 24 months for new construction projects. As of September 30,
2013 $5 million of the SB1 PV Partners funds has been expended, $6 million has been reserved
and staff expects the balance ($2 million) to be reserved by end of 2014. Table 1 provides a
summary of local solar installations through the PV Partners Program.
1 All power units (Watts, kilowatts (kW), and megawatts (MW)) are rated using the California Energy Commission
(CEC) rating standard. The CEC‐AC rating standards are based upon 1,000 Watt/m² solar irradiance, 20 degree
Celsius ambient temperature, and 1 meter/second wind speed. The CEC‐AC Watt rating is lower than the
nameplate rating at Standard Test Conditions (STC).
2 While 6.5 MW was the original AB1 goal for CPAU, over time based on changes to how the capacity can be
counted, CPAU expects to get more from its expenditure of the $13 million, or a total of about 7.4 MW plus the 0.6
MW installed prior to SB1 for a total of 8 MW for the PV Partners Program.
Attachment C
C‐3
Table 1: Solar PV Installations in Palo Alto through the PV Partners Program*
Year
System Count
per Year
Capacity (kW‐AC)
per Year
1999 4 16
2000 6 16
2001 27 100
2002 22 73
2003 16 40
2004 17 45
2005 20 74
2006 54 233
2007 77 213
2008 85 1,347
2009 57 340
2010 48 503
2011 51 444
2012 40 204
2013 * 42 254
Total 566 3,904
Data through September 30, 2013.
2. Net Energy Metering and Net Surplus Energy Compensation
In 1996 California state law required all electric load serving utilities to offer net energy
metering to eligible customers with a solar PV system, up to a defined maximum cap based on
the load serving entity’s total customer peak demand. Under current law, the net energy
metering cap is 5% of the City’s peak electric demand, or 9.5 MW.
Net energy metering is a special billing arrangement that provides a bill credit to customers
with solar PV systems for the full retail value of the electricity their system generates. Under
net energy metering, the solar customer's electric meter keeps track of how much electricity is
consumed by the customer and how much excess electricity is generated by the system and
sent back into the electric utility grid. If the customer earns a net metering bill credit, it cannot
be cashed out and can only be used to offset future electric consumption charges on the same
account. Most solar customers are net consumers and do not generate more electricity than
they need in a year.
Attachment C
C‐4
As shown in Table 1 above, as of September 30, 2013, the City has 566 customers on net energy
metering, for a total of 3.9 MW of PV capacity representing 2.1% of the City’s peak electric
demand. Table 2 is a summary of PV installations through September 30, 2013 along with
forecasted new PV installations. The table shows that the 5% net metering cap will be reached
in mid‐2017.
Table 2: PV Partners and Net Energy Metering Participation
Year Pending PV
Partners
Reserved
Capacity
(kW)
Unreserved
PV Partners
Capacity
(kW)
Estimated
Forecasted PV
Capacity After SB1
Funds Depleted3
(kW)
Cumulative
Installed
Capacity
(kW)
Percent of
Net
Metering
9.5 MW
Cap
Rebates
paid
1999‐2013* 3,904 41% $7.7M
2014 1,689 5,593 59%
2015 765 1,000 7,358 77%
2016 691 509 8,558 90%
2017 1,320 9,878 104%
2018 1,452 11,330 119%
2019 1,597 12,927 136%
2020 1,757 14,684 155%
2021 1,933 16,617 175%
TOTAL 2,454 1,691 8,568
* Through September 30, 2013
California Assembly Bill 920 (2009) requires electric utilities to offer the option for solar
customers with net energy metering to receive compensation for “net surplus electricity”. Net
surplus electricity is the electricity generated by an eligible customer measured in kilowatt‐
hours over a 12‐month period that exceeds the amount of electricity consumed by the
customer. AB 920 states that the utility can count the purchased net surplus electricity toward
its Renewable Portfolio Standard (RPS)4 requirements. The net surplus electricity
compensation rate is priced based on the cost of renewable electricity (currently at
$0.05481/kWh) so that no extra cost is borne by other rate payers (beyond the program
administration cost).
3. Solar Water Heating Program
In 2007, California State law (Assembly Bill 1470) established a requirement for all natural gas
utilities to offer rebates for solar water heating systems. In 2008, CPAU launched the Solar
3 Forecasted new PV capacity is estimated using 10% annual growth in net metered installations. Does not include
systems installed under the CLEAN program since CLEAN participants are not eligible to receive net metering.
4 The annual amount of net surplus electricity generated in Palo Alto is minimal and therefore is not currently
counted towards the City’s RPS.
Attachment C
C‐5
Water Heating (SWH) Program which provides incentives in the form of 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. Space heating, pools and spas are not eligible
for CPAU SWH program incentives. CPAU currently provides approximately 32 million therms of
natural gas per year to its natural gas customers, which represents approximately 0.25% of
statewide non‐electric‐generation natural gas sales. The State’s goal is to install 200,000 solar
water heating systems by 2017, and City’s proportionate share is approximately 530 systems.
The City’s Climate Protection Plan has a goal of achieving 1,000 systems by 2020.
The SHW Program is available to residential, commercial and industrial natural gas and
electricity customers within Palo Alto. CPAU offers incentives on a first‐come, first‐served basis
within each incentive category (Single‐Family Residential, Multifamily Low‐Income, or
Multifamily/Commercial). As of September 30, 2013, $86,737 in rebates have been issued
under the program. The program is expected to continue through 2017 with incentive levels
decreasing over the program lifetime.
Table 3 is an accounting of the number of SWH systems installed in Palo Alto since the SWH
Program was launched in 2008.
Table 3: Palo Alto Solar Water Heating Installation Count
Year SWH System
Count per Year
2008 9
2009 10
2010 15
2011 7
2012 1
2013 1
Total 43
4. Palo Alto CLEAN
In addition to meeting the mandated solar initiatives, in 2012, the City launched the Palo Alto
Clean Local Energy Access Now (CLEAN) program. Through the Palo Alto CLEAN program,
building owners may lease their roof tops to solar developers, or develop solar themselves, and
sell the energy and renewable attributes to the City at a fixed rate over a 20‐year term.
Through Palo Alto CLEAN, CPAU would purchase electricity generated by solar electric systems
located in the City through a standard Power Purchase Agreement (PPA). The power is
separately metered and delivered to CPAU’s electric distribution system (as opposed to being
used at the facility where the system is located), and is counted towards CPAU’s renewable
energy goals. Programs like this are also known as "feed‐in tariff" programs in reference to the
fact that the power is "fed into" the electric grid. None of the power is used to offset the host
Attachment C
C‐6
customer’s load and therefore participants in the Palo Alto CLEAN program do not qualify for
net energy metering.
A key feature of a CLEAN program is the standardized PPA so that participants know what the
requirements and payments will be without having to negotiate a contract with CPAU. As of
November 30, 2013, CPAU had received no applications to the Palo Alto CLEAN program.
The program was first adopted in March 2012 at a price of $0.14/kWh fixed for a 20‐year PPA
with a maximum capacity for the program of 4 MW. Effective January 1, 2013, Council
increased the program price to $0.165/kWh for a 20‐year PPA and the maximum capacity for
the program was reduced to 2 MW. On February 3, 2014, the City Council voted to continue
the program price at $0.165/kWh for a 20‐year PPA, but increasing the program cap to 3 MW.
There have been no applications for the Palo Alto CLEAN program to date, but staff believes
that some CLEAN applications will be completed in 2014.
5. Distributed Generation Programs
California’s Governor Jerry Brown has established a distributed generation5 (DG) goal of 12,000
MW. Solar is expected to play an important part in meeting the governor’s DG goals and staff
expects legislation or incentives will be developed in support of a DG goal. On a national level,
solar makes up more than 90% of all DG6. While the City does not have a specific DG goal,
CPAU currently offers incentives through the “Power from Local Ultra‐clean Generation
Incentive” (PLUG‐In) program to promote DG, including from fossil‐fueled resources. The
PLUG‐In program is planned to be revamped or terminated as the program no longer meets the
City’s carbon neutrality objectives. Local solar is expected to continue to be the City’s primary
DG resource in the future.
5 Distributed generation (DG) refers to power produced at the point of consumption which is connected to the
host utility’s distribution system. DG is typically a small‐scale energy resource ranging in size from 3 KW to 10 MW,
but can be larger. DG may be sourced through fossil‐fuel energy (e.g. natural gas) or renewable resources
including bio‐fuel, wind or solar or be in the form of combined‐heat‐and‐power (sometimes called co‐generation)
or fuel cells.
6 American Public Power Association, Distributed Generation, An Overview of Recent Policy and Market
Developments – November 2013.
EXCERPTED DRAFT MINUTES OF THE FEBRUARY 12, 2014
UTILITIES ADVISORY COMMISSION SPECIAL MEETING
ITEM 1: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend
that the City Council Approve the City’s Local Solar Plan
Senior Resource Planner Monica Padilla summarized the written report. Padilla described the
proposed Local Solar Plan as a road map, which includes the development and implementation
of three new solar programs: a solar donation program, a community solar program and a bulk
discount program. She stated that the needs for the plan include high community interest as
well as the expected end of the current program to encourage the installation of solar
photovoltaic (PV) systems, the PV Partners program. Padilla noted that even though the City
ranks 7th in the nation on the number of solar systems installed per customer, there is still the
potential to increase the penetration of solar in Palo Alto. As of September 30, 2013, the City
had a total of 3.9 MW of solar installed and the goal of the proposed Local Solar Pl an is to have
23 MW installed by 2023.
Padilla stated that the proposed Local Solar Plan includes seven strategies including reducing
any barriers to installing solar, developing proper incentives, assessment of technical and
market potential, the development of the three new solar programs, promotion of solar
installations on City facilities, and community education.
Public Comment:
Bruce Hodge, from Carbon Free Palo Alto, supported the proposed plan, but would like to see
more analysis of the big picture and accelerated development of solar program. He stated that
the plan should include the impact of changes to the electricity landscape such as additional
Electric Vehicles (EVs), fuel switching from gas to electricity as well as replacement of most
lighting with LED lights on the electric system. Hodge said that the solar plan should be
developed in the larger context of the Climate Protection Plan. He recommended accelerating
the timeline for the community solar program. Hodge said that a good model alre ady exists for
this program and there is no need to reinvent the wheel. He said that this program should be
sped up and would have the largest impact.
Bret Anderson, a resident of Midtown, who has installed solar on his roof, said that the best
option is the community solar program since it's a breakthrough for those who can't have solar
on their own roofs. The other options can be done already with existing rules and systems. A
community solar program opens up a whole new market and will allow Palo Alto to take the
lead in the solar.
Commissioner Eglash stated that he is delighted with the plan and recommendations. He said
that this plan is the most exciting thing CPAU is doing and noted that the plan has all the right
aspects and components. He asked why, if we are already carbon neutral, should the City seek
more solar. He noted that the stated goal in the plan is to increase solar, but there is no
explanation of why this is a goal. He advised adding a reason for the goal to the plan, noting
that these reasons may include good contributions to the Renewable Portfolio Standard given
that some of the renewable Power Purchase Agreements (PPAs) will be expiring, and that there
may be certain benefits of having local renewable systems. Padilla replied that one of the
reasons is that local solar decreases the need to buy renewable energy outside the City and
that local generation may have some strategic value to the City.
Commissioner Eglash noted that the PV Partners will run out of money at the end of 2014 and
asked if the City can add new money to the PV Partners program when the current rebates
expire. Assistant Director Jane Ratchye replied that state law requires the City to provide the
rebates for the PV Partners program, but that once the rebate s are all paid out, the subsidy
would no longer be mandated. She added that the proposed Local Solar Plan assumes that no
new subsidies would be provided since the goal of the state mandate to build a market for local
PV systems has largely worked as evidenced by the declining cost of solar. After the program’s
funds expire, the hope is that the economics for solar systems will be attractive without the
need for further subsidies.
Commissioner Eglash noted that the plan mentions solar water heating, but it is not clear if that
will be part of the proposed new programs outlined in the plan. Padilla explained that the state
established a target for solar water heating systems, but they are not cost -effective, and that
there are better technologies. However, the cost could decrease in a group discount program
enough that these systems may become cost-effective.
Commissioner Eglash said that net energy metering (NEM) customers are not paying their fair
share of the distribution costs and that those costs are borne by non-participating customers.
He said that he expects NEM to be discontinued in the future and that customer charges will be
designed to recover more of the costs of the distribution system and backup service.
Commissioner Eglash asked what staff is thinking about NEM. Ratchye said that the NEM limit
by state law is 5% of the City’s peak load. She noted that the table in Attachment B shows that
the 5% target is expected to be reached at about the same time as the PV Partners program
ends. At that point, a policy decision will need to be made as to whether to continue the NEM
subsidy beyond the 5% limit. Ratchye also said that electric rates have not been adjusted since
2009 and currently include no fixed customer charge. She said that st aff expects to embark on
a new electric cost of service study this year that will look at rate design and that this topic will
likely be a key issue in that study.
Commissioner Hall said that he is supportive of the plan, but would like to see a long -term
trajectory of the impacts of the costs of local distributed generation (DG) versus remote, higher
intensity, renewable energy sources. He asked where the bright line of the economics is and
when is it better to site PV remotely than locally. Noting that the goal is to achieve 4% of the
City’s energy needs from local solar, he asked if that cost-effectiveness line is less, or more,
than that number. Commissioner Hall suggested that we need to justify the goal established
and to explain to everyone, especially to those not participating in the programs, that this is a
sensible plan to implement. Padilla said that the 4% goal was selected as it is expected to be
achievable without any additional subsidies. Commissioner Hall asked that staff show if the
cost of power can be lowered with this plan and its programs.
Commissioner Eglash added that the latest remote solar PV PPAs were executed at a very low
cost. He suggested that when the individual programs contemplated in the plan return to the
UAC for consideration, staff include a complete economic analysis showing the impact on non -
participants.
Commissioner Hall said that for the three programs in the plan, the role of the City needs to be
clearly identified. For example, if a system installed through a community solar program did
not work as expected, what would the City do? He said that citizens will understand and may
invest in the programs, but staff needs to identify who owns and maintains the systems as part
of the plan. Padilla noted that although staff is still evaluating alternative program designs, she
does not feel that an alternative where the City owns and maintains the solar system will be a
viable option and therefore would not be proposed.
Vice Chair Foster said that he was very supportive of the program. He read a statement the
UAC received from Walt Hays, the Chairman of the Community Environmental Action
Partnership (CEAP): "I am writing to urge you to approve the proposed plan as presented. Staff
has worked long and hard in coming up with this plan, including seeking and receiving feedback
from the Community Environmental Action Partnership, which I chair, on two occasions.
Increasing evidence of climate change impacts makes setting high goals urgent, and the Plan
offers an aggressive program to achieve them, including a variety of approaches that allow
different groups to participate. Please recommend that the Finance Committee and Council
approve it expeditiously so implementation can begin as soon as possible. Thank you for your
consideration - and for your continuing service to the community."
Vice Chair Foster said that he agreed with the comments from Bruce Hodge and is most
supportive of the community solar program. He asked how a donation program would work.
Padilla said that the City won’t own any of the facilities. She said that the City might collect
money through the Utility bill that is given to a non-profit entity that would build and own the
PV system itself. Ratchye added that another way to raise money is a crowd-funded, or “kick-
starter” type, campaign for a particular project or location. Lindsay Joye, Solar Marketing
Engineer, added that the non-profits are currently an unserved market since they cannot take
advantage of federal tax credits that reduce the cost for others.
Vice Chair Foster said that he noted that solar water heating systems are not cost -effective, but
that a group buy program could help to improve the cost-effectiveness of those systems.
Chair Cook said that heat pump water heaters could be a better alternative than solar water
heating systems and we may want to encourage those instead. Ratchye referred to the analysis
presented to the UAC in December 2013 on fuel switching. That analysis confirmed that air-
source electric heat pumps are much more cost-effective than solar water heating systems.
Vice Chair Foster supported an accelerated timeline for implementing the community solar
program.
ACTION:
Vice Chair Foster made a motion to recommend that the City Council approve the proposed
Local Solar Plan. Commissioner Eglash seconded the motion. The motion passed unanimously
(5-0) with Commissioners Chang and Waldfogel absent.