Council Meeting: March 14, 2006
TO: Mayor
and City Council
FROM: City
Staff
SUBJECT: Conceptual
Approval of a
Introduction
This report
recommends Council conceptually approve a Santa Monica Community Energy Independence
Initiative and authorize implementation of a two-year demonstration project to
verify potential program benefits and develop proposed financing and full-scale
implementation plans for the Initiative.
Background
In October 1999, Council adopted a Strategic Energy
Plan aimed at maximizing the environmental, community economic development, and
public health benefits of greater energy efficiency and using energy generated
from cleaner sources. The five
strategies identified in the plan as critical were:
- Energy efficiency and
source reduction;
- Renewable energy
procurement;
- Distributed power
generation;
- Community energy
system; and
- A role beyond the City
boundaries.
Since adoption of the Strategic Energy Plan, the City
has implemented energy efficiency programs and renewable energy projects that
have increased City staff’s familiarity with energy management practices and
expertise with energy technologies, and moved the community closer to achieving
its Sustainable City Program and Strategic Energy Management Plan goals as
detailed below:
Significant Energy Plan Milestones, 2000-2004
- Subsidized SMMUSD
with $513,000 to retrofit 8
- Retrofitted 1657
households and 60 small businesses with energy efficiency measures through
the Community Energy Partnership currently consisting of ten
- Renegotiated a contract
with Commerce Energy for the provision of 100% renewable energy for City
facilities through the purchase of renewable energy certificates that
results in no net increase in electricity costs to the City.
- Established a utility
management system for City utility accounts that has identified billing
errors on Southern California Edison accounts that will result in savings
of over $500,000 to the City.
- Facilitated in the
design and construction of Colorado Court, an award-winning 44-unit
affordable housing project, through a unique partnership between the City,
Community Corporation of
- Entered into an
agreement with the Southern California Air Quality Management District to
become part of the “hydrogen highway” through participation in a five-
cities hydrogen vehicle demonstration program including installation of a
hydrogen fueling facility at the City Yard.
- Implemented energy
performance standards for new construction and substantial remodels that
result in the construction of higher quality and higher performance
buildings in
- Prepared a Solar
Potential Study to analyze the technical, financial, and regulatory
aspects of the potential for installation of solar electric systems in
Discussion
Summary of Solar Study Findings
The key
components of the Solar Potential Study, which was partially funded by a
$35,000 Million Solar Roofs grant from the U.S. Department of Energy, were:
- An analysis of the potential for deploying solar
energy (electric and thermal) into the community as part of an integrated
approach that includes energy efficiency and clean cogeneration;
- An evaluation of the costs associated with
deployment of an integrated energy management approach (energy efficiency,
solar, and clean distributed generation) into the residential, commercial, industrial, and
municipal sectors; and
- Evaluation of
potential business models for implementation of a Santa Monica Community
Energy Independence Initiative (CEII) over the next 15 to 20 years and an
estimation of potential costs and funding opportunities.
The study identified 17,500 structures in
Implementing the integrated energy strategy detailed in the
study would require significant capital investment by residents, businesses and
public institutions, but the analysis of investment in integrated energy
systems presents a strongly positive business case when analyzed over the life
of the specific features and when compared to the return on typical financial
investment alternatives. The
solar study calculates that commercial buildings would account for about 30% of
the total CEII investment. Industrial
and municipal buildings would represent 6% and 3% of the total CEII investment,
respectively, with residential buildings accounting for the remaining 61% of
investment. It is also expected that the
CEII would substantially benefit
The study proposes that the City’s role in the
implementation of an integrated energy strategy would be to form a Community
Energy Authority or other appropriate administrative entity, as well as funding
the investment in municipal buildings. The
City could also bring down costs for energy hardware and equipment by entering
into long-term agreements with suppliers, and qualified contractors, facilitating
permitting and inspections by the City, providing project financing loans, and
generating interest and support in the community through public outreach and
demonstration projects.
Potential Benefits of Community Energy
Implementation
of an integrated approach to energy management as detailed in the study would
provide
·
Cost-effective source of new peak demand
power
·
Improved power quality and reliability
·
Reduction in utility charges
·
Potential source of emergency standby power
- Potential source of high-reliability power for critical
government facilities, hospitals, banks, internet providers, digital
entertainment firms, etc.
It is
important to note that the franchise electricity provider for the City’s
residents and businesses, Southern California Edison, has recently received
approval from the Public Utilities Commission for significant rate increases
over the next two years. These
inevitable increases in electricity expenses make the proposed CEII
demonstration project all the more urgent and compelling as a cost-effective means
to lessen the financial impact on residential and commercial customers in Santa
Monica.
1. The City could renovate municipal buildings and schools to benefit the
public by improving the working environment, productivity, comfort and health.
2. The municipal code could be amended to address emerging energy technologies; encourage solar energy, energy efficiency and cogeneration citywide; and streamline permitting for new and innovative buildings.
3. The City could identify ways to pass on energy savings from owners to
lessees or tenants and for property owners to recover their investment in solar photovoltaics.
4. The City could evaluate potential mandatory requirements for energy performance and onsite generation for new construction, as well as energy efficiency upgrades at time of sale or transfer of existing buildings.
5. The City could serve as a clearinghouse of information on energy efficiency, solar energy and cogeneration, design and construction of LEED and/or Energy Star buildings, etc.
6. The City could promote installation of integrated energy systems by accessing funding and controlling costs through the use of loan guarantees; municipal tax exempt bonds; bulk purchasing of equipment; and training of qualified contractors.
Proposed
Community Energy
Staff has evaluated the Solar Potential Study
conclusions and the survey responses and recommends Council approval of a two-year
Community Energy Independence Initiative (CEII) demonstration project that will
show residents and businesses how energy efficiency, solar energy, and
distributed generation can work together effectively and how greater energy
independence provides economic benefit to the community. It is proposed that up to 50 residential, commercial,
and municipal buildings be solicited to voluntarily participate in the
demonstration project.
The City will use a customized approach to encourage
participation from each building sector.
For commercial property owners, the City could enter into a public/private
business relationship with one or more third party investment firms to provide owners
with a lease/purchase option to finance and install photovoltaic systems on their
buildings. Under this approach, the
building owner would enter into a long-term power purchase agreement with the
third party investment firm and receive a savings on Southern California Edison’s
utility rate based on the kilowatt-hours produced by the installed systems. The investment firm would invest a
significant portion of the capital needed for each PV installation and, in
exchange, retain ownership of the system and accrue any rebates and tax
incentives. Under this scenario, the
City could use its own bond financing to cover the remaining portion of the
cost of the systems, be guaranteed reimbursement by the third party firm, and
retain the solar renewable energy credits (SRECS) that could be later sold to
pay for additional investment in renewable energy for the community.
For residential property owners, the City could
solicit prospective hardware suppliers, installers, and local financial
institutions to participate in the CEII.
These residential demonstration project participants could be offered a pre-qualified
package of services and hardware at a reduced cost. After installation, each of the commercial
and residential demonstration sites would be commissioned to ensure that the
upgrades perform as designed and, on an ongoing basis, each site would be
monitored to calculate energy savings.
Four municipal sites are proposed to be included in
the pilot: the Village multi-family residential project to be located in the
The
following table shows that the economic benefit to the first 50 buildings to participate
in the two year demonstration project is conservatively estimated at $375,863
in net present value dollars, with an annual carbon dioxide emissions reduction
of 430 tons.
If approved by Council, staff will return to Council
within a six to nine month period to report back on financing, administrative, risk
management, and legal issues involved in the establishment of the Community Energy
Independence Initiative, including recommendations to form a Community Energy Authority
or alternative administration vehicle that could best deliver services to the
community.
One of the initial demonstration project tasks will
be to create a Santa Monica Community Energy Independence Initiative website
and to sponsor public outreach and workshops that serve as a primary source for
information about integrated energy management and build community support for
the Initiative. The website will feature
descriptions of energy products and their benefits, case studies showing the
cost effectiveness of integrated energy management systems, calculators for
citizens to perform quick analysis of their property’s potential for
installation of energy efficiency and solar systems, permitting guidelines,
rebate information, tax credit forms, and other financial information. As the demonstration site projects are
implemented, the website will provide detailed information on the specific
products used, installation costs, rebates, and energy savings. The website will also allow property owners
to survey their roofs through the City’s GIS system for solar electric and solar
thermal applicability. The tasks and associated
timetable for the two year demonstration project are described in
Attachment B.
Budget/Financial Impact
It is currently estimated that implementation of the
CEII demonstration project will require one-time expenditures of approximately $200,000
in FY 2005-2006, $440,000 in FY 2006-2007, and approximately $322,000 in FY
2007-2008. These funds would be required
to pay for one temporary Staff Assistant III position in the Energy and Green
Building Programs office for administrative and clerical support, contracts
with outside vendors for technical and financial analysis and public
information and outreach activities, and the cost of printed materials,
supplies, website development and other necessary components of the
demonstration project.
Currently, budgeted funds in the amount of $637,780 are
available in account C010763.589000710662 “Energy Efficiency/Conservation Fund”
to cover the costs of the project during the remaining portion of the current
fiscal year and for FY 2006-2007. The
additional funding required for FY
2007-2008 will be determined over the next year as future budget considerations
are more fully understood, and will be presented for Council consideration and
approval as a part of the FY 2007-2008 Proposed Budget.
Recommendation
Staff recommends
that the City Council conceptually approve a Santa Monica Community Energy Independence
Initiative and direct staff to proceed with implementation of a two-year demonstration
project as described above.
Prepared
by:
Attachment: A – Solar
Potential Study
B – Demonstration Project Tasks and Proposed
Schedule