Preparing Your Prop 39 Application: The TerraVerde Energy Report Card

Transcription

1 CASBO Members Rick Brown, PhD, President, TerraVerde Prop 39 Application/Energy Best Practices 1/27/14 Preparing Your Prop 39 Application: The TerraVerde Energy Report Card Background Passage of Proposition 39 was a unique event in several ways. It was only the fourth successful effort since Proposition 13 in 1978 where a majority of voters agreed to enhance public revenues. And they did so with very few strings attached. It will generate approximately $2.5 Billion in funding for energy conservation and clean energy (e.g., solar) projects at California schools over the next five years. The risk is that if these funds are not spent wisely, it will be a long, long time before the voters again agree to make such a significant investment in our schools. And like any investment, the voters will be watching and measuring the returns very closely. If invested wisely, the reward is threefold: 1) Investments in projects that reduce the use of energy translate directly into cost savings; a reduction of the fastest growing non personnel related line item in most Districts budgets, directly producing increased revenues for core educational activities. 2) Many energy improvement projects also result in cleaner air quality, better control over temperature settings, and better lighting, all critical factors contributing to a healthier and more productive, teaching, working and learning environment. 3) While $2.5 Billion is a lot of money, it comes nowhere close to the enormity of the need to modernize the energy consuming infrastructure and classroom environment in California s schools. By spending this money wisely, and reporting the highly measureable results, Districts will demonstrate that they are responsible stewards of the public s funds, reinforcing the voters confidence and trust in making additional, future investments in our educational infrastructure. TerraVerde, in partnership with CASBO, prepared a 15 minute video on Best Practices in Energy and Solar Project Development, Contracting and Measurement and Verification to help CASBO members better understand how to approach the use of Proposition 39 and other funding sources to obtain the best value out of their energy projects. What follows is an update on Prop 39, steps that Districts can take to get started on their Prop 39 Application and Expenditure Plan (including Technical Assistance from TerraVerde) and a detailed list of the best practices discussed in the video. Current Status (1/27/14) Included in the State Budget was language outlining the funding allocation formulas and major steps District s will need to take to receive the funding for their energy projects. In September, 2013 the Dept. of Education released information on individual District (i.e., LEA ) allocations for the fiscal year. The California Energy Commission ( CEC ) was tasked with developing specific procedures and guidelines for administering the funding. After an extensive public outreach process, on December 19, 2013, the CEC approved the Guidelines. On the CEC released Application materials and a Workbook to provide directions to Districts on steps required to obtain funding. For questions, or to schedule a free consultation on preparing your Prop 39 Application, contact Doug Stoecker: , Doug.Stoecker@TVRPLLC.com

2 Technical Assistance: TerraVerde Energy Report Card To help CASBO members prepare for the allocation of Proposition 39 funds, TerraVerde is offering CASBO members a comprehensive TerraVerde Energy Report Card at no charge. The Energy Report Card is designed to answer four key questions that you will want to have the answers to in order to prepare your Prop 39 application: 1) What is the sum of all energy savings opportunities in our portfolio of buildings and systems? 2) How much capital do we have to invest in those opportunities? 3) What specific projects should we pursue to maximize the return on our investment? 4) What is our expected return on that investment? One of the requirements of the Application is submission of the Energy Use Benchmarking Analysis that compares each of the District s specific sites electricity and natural gas usage and costs across all systems (lighting, HVAC, office equipment, kitchen equipment, etc.). The TerraVerde Energy Report Card produces this benchmarking analysis using the California Energy Commissions Energy IQ tool which compares the energy usage of a given building type to a population of peers of the same size, age and climate zone. ENERGY USE INTENSITY CHARTS You vs. Your Peer Group kbtu/sf yr 120 Energy Use Intensity per Site kbtu/sf yr Your Peer Group 100 You Line indicates average Energy Use Intensity for the selection 20 Notes: 1. kbtu thounsands of British Thermal Units is a combined measure for electricity and gas/propane usage. 2. Peer Group school Districts in the same geographic and climate zone. In addition, an assessment of which energy conservation measures provide the best opportunity for savings is provided. Districts can use this assessment to target the scope of the Prop 39 Application required investment grade audit for certain measure is included. 2

3 The TerraVerde Energy Report Card also includes a Solar Feasibility Analysis. This report includes a determination of which District sites have electricity usage profiles where implementing solar will produce meaningful net cost savings. The report also analyzes potential cost savings under multiple project funding/financing scenarios, including: cash purchase (e.g., GO Bond or Prop 39), public finance, power purchase agreement ( PPA ) and combinations of each. TerraVerde uses all of this data, in combination with an operational analysis, to produce the TerraVerde Energy Report Card that includes a set of recommendations on the best opportunities for energy conservation and/or clean energy generation and cost savings. This report can serve as the analysis required for developing the Proposition 39 Funding Application and Expenditure Plan. It can also be used to support other Facility Master Planning efforts. TerraVerde has developed proprietary software, and one of the most comprehensive databases of California school energy usage, enabling it to conduct a TerraVerde Energy Report Card quickly and accurately, and the ability to present the information in an understandable and actionable form. Recent California utility company announcements of 4 5% increases for most electricity rates impacting schools are likely to foreshadow a return to California s 40 year historical average annual electricity inflation rate of 5.4%. Given the current availability of renewable energy and energy efficiency rebates and incentives, historically very low financing costs, and Prop 39 funding on the way, now is the time to for Districts to obtain objective assessments of their energy usage and how to get the best return on their energy investments. For questions, or to schedule a free consultation on preparing your Prop 39 Application, contact Doug Stoecker: , Doug.Stoecker@TVRPLLC.com 3

4 Energy Project Best Practices: 7/1/13 Best Practices in Contracting for Energy Efficiency Projects 1. Start with a Plan Identify the objectives of conducting an energy efficiency upgrade project and develop a specific plan to meet the objectives including return of investment, energy usage reduction, operational improvements, etc. 2. Conduct Energy Benchmarking Conduct an energy benchmarking activity to rank each site against sites in each peer group including: facility type, climate zone, utility, etc. 3. Conduct a Targeted Energy Audit Conduct an energy audit on energy intensive sites and/or sites that require known upgrades. Ensure the energy audit covers the following topics: a. Comfort and operational requirements b. Utility rate analysis c. No cost Energy Efficiency Measures ( EEMs ) d. Low cost EEMs e. Investment Grade EEMs f. EEMs that are not recommended g. Demand response strategies 4. Use Cost Breakdown Tables Obtain project costs to be provided for each EEM. Energy savings produced from energy conservation measures depend on the value of avoided cost of energy as well as the cost of installation and financing. While awarding a contract on multiple EEMs may yield savings due to economies of scale, the owner needs to evaluate each EEM individually in order to make a decision to proceed with implementing each EEM. 5. Specify Equipment Specify the quality of equipment for each EEM and request equipment from bankable manufacturers with readily available spare parts (if needed) and maintenance support. 6. Perform Targeted M&V Use the IPMVP 1 framework to create a Monitoring and Verification ( M&V ) plan and checklist. Request all installations to undergo thorough measurement and verification activities at commissioning to prove that installations pass the defined performance criteria. An M&V checklist should be developed by the owner (or owner s independent advisor) and completed either by the installer, or the owner could use the services of an independent advisor or service provider to perform the M&V activities. Best Practices in Measurement and Verification ( M&V ) 1. Incorporate latest IPMVP guidelines in M&V planning and practice a. Additional guidelines to consider including: ASHRAE Guidelines concerning Measurement of Energy and Demand Savings 2. All parties (Client/Owner s Representative and Contractor) should agree on the method for establishing an energy usage baseline as well as the M&V protocol before finalizing the Investment Grade Audit ( IGA ) scope of work. a. Electricity usage baseline must address assumptions for usage creep due to future plug load increase. 3. The M&V Protocol should not be approved by the Client/Owner s Representative unless it includes the following elements: a. A description of the Energy Conservation Measures and their intended results b. An description of the specific IPMVP option to be used for each ECM c. Identification of the measurement methods and equipment to be used for each ECM d. A plan for how commissioning of the newly installed ECMs will occur e. Method (including, specific activities, their frequency and duration) of documenting post ECM energy and operating data (aka Reconciliation Report) f. Method for reporting savings (net of cost of M&V operations and equipment) g. A clear specification as to how the owner will be reimbursed for the difference between verified savings and the guaranteed level of savings, including, specification of the timing of the reimbursement (i.e., if for an ECM with a performance guarantee ) 1 The International Performance Measurement and Verification Protocol (IPMVP ) defines standard terms and suggests best practices for quantifying the results of energy efficiency investments and increase investment in energy and water efficiency, demand management and renewable energy projects. 4

5 h. A post installation report delivered to Client/Owner s Representative within 30 days of the end of Commissioning phase for final review and acceptance. Note: The Client/ Owner s Representative should thoroughly review the report and comment as appropriate, the ESCP responds to comments, and the report is finalized. 4. During the performance period, periodic M&V reporting should be conducted to verify persistence of savings for at least two years. a. At least annually, M&V reports should be reviewed by an independent, expert 3 rd party to ensure compliance with the contract. 5. M&V reports should include: a. An executive summary b. Brief description of any physical or operational changes to facilities identified, and potential impact on energy usage c. All physical measurements that were performed d. Calculations of energy savings verified for each ECM e. The guaranteed minimum energy savings and verified actual energy savings f. Clear distinction between units of energy usage variance (ex. increase or decrease of kwh) and units of energy costs (ex. the price increase or decrease per kwh per each tier of time of use). g. If the report indicates guaranteed savings (aggregate) are not being met, proposed remedies to correct deficiencies, including: whether and by when the specific physical aspects of the project that led to the loss of savings will be corrected. Best Practices in Contracting For a Solar Installation 1. Define Scope of Work Frame the scope of work such that the pricing proposals from contractors can be evaluated on a levelized basis, including: a. Production Target: the production target in unit of kwh must be identified by the owner (or owner s independent energy advisor) and included in the contract as the primary sizing factor of the solar photovoltaic ( PV ) systems b. Equipment Specification: the quality of solar PV panels and inverters must be specified in the contract so the contractors provide equipment from bankable manufacturers with proven technologies, comprehensive warranties, and local service capabilities c. PV System Performance Derate: the performance derate criteria and limits (example AC and DC voltage drop) must be defined in the contract so the contractors derate the performance of the PV systems realistically d. PV System Performance Simulation: the PV system performance simulation software must be identified in the contract to be used as the common basis for modeling the PV systems production output 2. Use Cost Breakdown Tables The contract must require the project costs to be provided on a meter by meter basis. Energy savings produced from PV systems depend on the value of the avoided cost of electricity as well as the cost of installation of the PV systems. While awarding a contract on multiple sites results in construction savings due to economies of scale, the owner needs to evaluate each meter individually in order to make a decision to install PV systems. 3. Perform Commissioning & Testing The contract must require the PV systems to undergo a comprehensive commissioning and testing protocol to prove the systems pass the defined performance criteria (eg weather adjusted power output). The commissioning and testing checklist must be developed by the owner (or owner s independent energy advisor). Alternatively, the owner could require the contractor to use the services of an independent energy advisor or service provider to perform the testing and commissioning activities. 4. Purchase Spare Equipment It is recommended to purchase spare PV panels and fuses as part of the contract. Purchasing spare equipment as part of the contract allows the owner to receive a discount on the cost of equipment due to economies of scale and help maintain a high PV system uptime over the systems useful life. 5. Use of Site Permit Solar PV projects require the use of multiple construction trades. Since most contractors subcontract some portion of the work, it is imperative to establish in the contract when, where, and what construction activities can take place at the project sites. 6. Don t Overreach If the organization does not have the internal resources to execute the Best Practices outlined above for this specialized work, seek the advice of an experienced consultant. 5

6 Best Practices in Contracting for a Solar Power Purchase Agreement 1. Equipment Removal: At the end of the PPA contract term, the school PPA Provider must bear full responsibility for the cost of removing equipment and returning the site to a a condition substantially similar to the pre installation condition of the Sites. 2. Environmental Attributes: Solar projects come with a number of different financial incentives associated with the environmental benefits they create. The contract needs to specify whether the school or PPA provider owns title to these benefits. In that regard, the bid documents should request pricing alternatives based on the owner of financial and environmental incentives (e.g. Renewable Energy Certificates). 3. Conditions Precedent to Construction: Many PPA providers sign contracts with schools before they have fully lined up their own project finance sources and/or defined the final contract terms. Therefore, the PPA contract should include a set of conditions precedent that the PPA provider must adhere to, or the school can opt out of the contract prior to authorizing the start of construction. 4. Conditions Precedent to Commercial Operation: The same issue holds true for commercial operation. In other words, the school is suffering tangible damages in lost energy savings for every day operation of the solar facility is delayed beyond the contracted deadline. The agreement needs to describe how the school is going to be compensated for these losses and/or allow for a termination option if the provider fails to reach commercial operation. 5. Purchase of Solar Facility: Since the great bulk of a PPA provider s investment return occurs within the first 5 7 years of operation (i.e. when tax benefits and incentives are exhausted), the PPA provider may be motivated to sell the solar facilities to the District, often at an attractive price. Construct a favorable buy out clause and memorialize these values in the contract. 6. Customer s Early Termination Rights: Given the length of a PPA agreement term, years, there is a risk that a school will cease to operate during the term of the PPA agreement. To protect the District from being required to continue to pay for electricity generated at such a site that is taken out of operation, the PPA Agreement should specify the District s rights under those conditions (on a per site basis). 7. Access to Easement Premises: In order for the District to have control over its sites, the Site Easement Agreement (generally separate from the PPA Agreement) needs to specify the conditions under which the PPA provider can access the solar facilities while not disrupting daily operations or posing safety risks. 8. Maintenance and Operations: While the District is not the owner of the system, they should ensure that regular maintenance is prescribed within the contract. Failure to perform this maintenance could void major component warranties, lead to diminished production, and result in a system that may not be worth buying out in the future. 6