HomeMy WebLinkAboutRes 04-35 MOU - Energy CoalitionCITY OF PALM DESERT
COMMUNITY SERVICES
STAFF REPORT
REQUEST: Adopt Resolution No. 04-35 authorizing and approving the "Request
for Assistance" from the California Energy Commission for Development
of an Energy Efficiency, Cogeneration Project at City Hall.
SUBMITTED BY: Robert Kohn, Director of Special Programs
DATE: May 13, 2004
CONTENTS: 1. Resolution No. 4.04-35
2. Technical Assistance Application
3. Comments from Don Kasama, California Energy
Commission
Recommendation:
Adopt Resolution No. _04-35 authorizing and approving the "Request for Assistance"
from the California Energy Commission for Development of an Energy, Efficiency, and
Cogeneration Project at City Hall.
Executive Summary:
During the past 9 months, staff has been evaluating a proposal from Noresco,
Incorporated, involving a proposed energy efficiency and cogeneration project for the
Civic Center complex and Desert Willow Golf Course. Staff's goal in researching
energy efficiency and cogeneration projects is to see if the City of Palm Desert can
invest in existing or new technology and have the energy savings equal or exceed the
cost of the project over time. In addition to evaluating the proposal from Noresco, staff
is also reviewing proposals from World Water Corporation, Unisolar Corporation, and
Sun Edison. Staff is also developing a proposed project for solar electric and energy
efficiency to determine if the overhead and markup can be reduced, thereby improving
the return on investment. To improve the City's chance for success with the project,
staff enlisted the help of Don Kasama of the California Energy Commission (CEC). Mr.
Kasama is reviewing the Investment Grade Audit and other proposals the City has
received or developed. He has advised the City to apply for assistance from the CEC.
Through the "Energy Partnership Program", the CEC provides engineering consultants
to assist members with energy audits, design specifications, etc., for new or retrofit
energy efficiency projects.
Staff Report
May 13, 2004
Technical Assistance Application
Discussion:
Page 2
After completing the Investment Grade Audit, Noresco submitted a draft energy services
agreement along with various financial scenarios for the proposed projects. Staff
discussed concerns over how the costs and savings were derived. Leonard Wolk of
Reasco was brought in to assist with the financial analysis of the project proposal from
Noresco. Based on the analysis, the economics of the project do not appear to be as
beneficial as projected by Noresco. Even with a very low lease interest rate (4.11 %),
removing the cost of carports ($859,000) and manipulating the lease term, the project
was still upside down during the first three to seven years. The energy savings were
based on a very high, historical electric rate escalation of 7% per year. Electric rates
have been nearly flat for three years and who knows what the future will bring.
According to Fred Ghahramani, General Manager of Noresco, an escalation rate of
5.8% in electric rates would be needed to make or break a lease purchase package.
In addition, the energy savings guarantee contained in the Energy Services Agreement
is not as good as staff expected. Noresco would basically guarantee the energy
savings or energy production of the system, not the cost of electricity. Electric rates are
beyond their control. Almost all solar equipment manufacturers will guarantee their
products electrical production for 20 to 25 years.
After review of this proposal and others, staff believes that City staff can implement
energy saving projects without the overhead and markup of energy efficiency
consultants. In some cases, the City can buy direct from a manufacturer and have the
systems installed by a local contractor or buy a turnkey system from a manufacturer
without the significant overhead and markup on products. Staff believes the City will
find this to be true with most energy projects. Through assistance from the California
Energy Commission a "revenue neutral" and eventually cost saving energy efficiency,
conservation and cogeneration project can be put together.
Submitted by:
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ROBERT KOHN, Director Special Programs
Approval:
CARLOS 0'TE, City Manager
CITY MANAGER
PAUL GifiSON, Finance Director '"''
RESOLUTION NO. 04-35
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
PALM DESERT APPROVING THE "REQUEST FOR
ASSISTANCE" FROM THE CALIFORNIA ENERGY
COMMISSION FOR DEVELOPMENT OF AN ENERGY
EFFICIENCY, COGENERATION PROJECT AT CITY HALL
WHEREAS, the California Energy Commission has developed the
Energy Partnership Program to provide technical assistance in identifying
energy efficiency improvements;
WHEREAS, the City Council of the City of Palm Desert authorizes
the City Manager, to apply for technical assistance from the California
Energy Commission;
WHEREAS, the City Council of the City of Palm Desert recognizes
that the California Energy Commission has limited funds for technical
assistance and that primary consideration will be given to those that are
committed to implementing the recommended projects identified through
the Energy Partnership Program;
WHEREAS, the City of Palm Desert intends to apply for assistance
from the California Energy Commission for development of an Energy
Efficiency and Cogeneration Project at City Hall;
WHEREAS, the City of Palm Desert will enter into agreements with
the California Energy Commission;
NOW, THEREFORE, BE 1T RESOLVED, that the City Council of the City of
Palm Desert, California, authorizes the following:
1. The submittal of an application to the California Energy Commission's
Energy Partnership Program.
2. The City Manager, or a designee, is hereby authorized and empowered to
execute in the name of the City of Palm Desert all necessary applications,
forms, contracts, payment requests, agreements, and amendments hereto
for the purpose of obtaining technical assistance and funding for energy
efficiency improvements to City Hall.
RESOLUTION NO. 04-35
PASSED, APPROVED, and ADOPTED at a regular meeting of the City Council
of the City of Palm Desert held this 13th day of May 2004, by the following vote, to
wit:
AYES: BENSON, CRITES, KELLY, SPIEGEL
NOES: NONE
ABSENT: FERGUSON
ABSTAIN: NONE
ROBERT A. SPIEGEL, MAYOR
ATTEST:
RACHELLE D. KLASSEN, CITY CLERK
CITY OF PALM DESERT
California Energy Commission
Energy Partnership Program
Technical Assistance Application
1. Applicant Information
Applicant: City of Palm Desert
Mailing Address: 73-510 Fred Waring Drive, Palm Desert, CA 92260
Street Address: 73-510 Fred Waring Drive, Palm Desert, CA 92260
County: Riverside
Contact Person: Robert Kohn Title: Director of Special Programs
Phone Number: (760) 346-0611 Fax Number: (760) 340-0574
Website: www.palm-desert.orq
E-Mail: bkohn@ci.palm-desert.ca.us
2. Project Description
A. We are applying for the following assistance (check all that apply):
❑ New construction design assistance
❑ Energy assessment of existing facilities
Other - specify: solar array, lighting retrofit, and a/c controls
B. For each item checked in 2A, discuss why you need assistance.
The City has implemented several energy conservation programs over the past few years including cool
roof w/reflective coating & foam undercoat, HVAC programmable thermostats, more efficient NC units, &
some lighting changes including LED exit signs. City has initiated plans to expand these efforts to include
expansion of existing solar and other facility improvements. City has completed an investment grade audit.
Various proposals for solar arrays are confusing and contradictory. Assistance is needed to determine
most economical and effective measures to implement. City was moved to "time of use" metering,
increasing cost almost 20%.
C. Discuss any plans to remodel or change the use of any facilities for which you are requesting assistance.
Facility use will remain the same (employees, storage, and public service). Remodel work is due to space
needs. City has some solar equipment, but no overall solar power plan.
D. Describe any maximum payback or cost-effective criteria for your projects:
City desires a project that starts out "revenue" neutral and can be amortized over a 10-15 year period.
Some reduction in utility bills would be helpful especially when using the facilities as models for other cities
and private projects. Reducing the City's long-term dependence on the electric grid is also a goal.
3. Project Schedule
Discuss your implementation schedule for projects recommended through the Energy Partnership Program.
Tentative project start date: September 2004
Tentative project completion date: January 1, 2005
4. Project Commitment
A. Discuss how you will implement the projects recommended through the Energy Partnership Program.
Indicate current contracts or relationships with architects, consultants, energy services companies, utilities, or
others that may help with project implementation:
The City has been in consultation with Noresco who completed the investment grade audit, Unisolar, World
Water, and a local engineering firm, "Doby Engineering" that are willing to assist with any project the City
pursues. The City is a member of the California Energy Coalition and will utilize their expertise as well.
B. Discuss how you plan to fund any recommended energy options identified through the Energy Partnership
Program. NON -PROFITS - please provide recent annual financial statements.
The City is hoping to fund the project through a loan from the CEC. However, private financing is available at a
higher interest rate.
5. Project Team
In Table 1, identify the key responsible people who will comprise your Energy Partnership Program Team.
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6. Certification
To the best of my knowledge and belief, the data in this application are correct and complete.
Name of Authorized Representative Carlos Ortega
Title City Manager
Signature of Authorized Representative
Date Telephone (76Q) 346-0611 Fax (760) 340-0574
7. Building Information
For each facility in Table 2, provide annual electric, natural gas, and other energy bills (e.g., propane and oil). You
should prioritize your facilities from highest to lowest. Use additional pages if needed.
Mail to: California Energy Commission
Energy Partnership Program
Public Programs Office
1516 Ninth Street, MS 42
Sacramento, CA 95814-5512
If you have questions call: (916) 654-4147
email: pubprog@energy.state.ca.us
Page 1 of 2
Kohn, Bob
From: Donald Kazama [Dkazama@energy.state.ca.us]
Sent: Monday, May 03, 2004 3:35 PM
To: Kohn, Bob
Subject: Palm Desert PV and Energy Efficiency Project
Bob,
I have completed my preliminary analysis of the PV and energy efficiency project proposed by Noresco for the
City of Palm Desert. As we discussed at our April 21 meeting at your office, I concur that the Noresco proposal
appears to be a bit too far-reaching for the city to implement. Consequently, I took on the task of rescoping the
project to try and get the city the best mix of PV and energy efficiency to provide a neutral or better cash flow
for possible financing through the Energy Commission. You were not available by phone today, so I'm e-mailing
a summary of my preliminary findings so that we can have a more detailed discussion at your earliest
convenience.
PV System
The way the system was originally sized by Noresco at 293 kW is a little unrealistic for your application. The
system's economics were predicated upon a 50% incentive rebate from the California Energy Commission's
Renewables Program. Unfortunately, the maximum system size currently eligible for a rebate from us is 30
kW. The CPUC through SCE does, however, offer a similar 50% rebate for system sizes of 50 kW or less.
Therefore, I selected 50 kW as my starting point. I used Noresco's system cost (I am assuming that it includes
the cost of the carport infrastructure) and kW/kWh output estimates and scaled those to represent the new
downsized PV system. I estimate that this system would cost about $186,500 to build; save the city $10,715
annually in electricity costs (including demand charge savings --something not included in Noresco's proposal) at
the new, reduced SCE rates (Noresco's proposal used the old, higher pre -rollback rates); with a simple project
payback of about 13 years. 50 kW may not be the optimal size for economics, however. We would have to
conduct an analysis more detailed than I could with the limited information that is available to me. We are also
willing to provide a credit for the existing, installed 15 kW PV system, but only at the current measured output
level of 4.5 kW until repairs are effected and it is verified that the output is higher. The energy savings from the
existing PV is assumed to be about 9,700 kWh per year.
Lighting Replacement Project
Instead of delamping and reflectorizing the interior fixtures as proposed by Noresco, I stuck strictly with a one -
for -one lamp replacement with energy -efficient F032T8 fluorescent lamps and electronic ballasts. This strategy
was pursued because you informed me that all of the recessed three -lamp fixtures in the office areas already
have inboard/outboard switching. Conducting a good employee education program to only use the two outboard
lamps most of the time is a no -cost item that can result in substantial savings. Doing this results in an annual
electricity cost savings (at the new, rolled -back SCE rate) of $3,235, including demand charge savings, and
reduces the project cost to about $10,200. The simple payback for the lighting replacement project would
be about 3.2 years. Since no room -by -room lighting fixture inventories are available, it is possible that more
savings than that stated here may be achievable, depending upon the type of equipment. This will have to be
determined by a more detailed technical audit and analysis.
HVAC Energy Management System
I agree with Noresco's proposal that air conditioners could be duty cycled when your facility peak electric demand
reaches a predetermined level. Duty cycling 20% of the air conditioners from 12:00 noon to 5:00 p.m. each day
of the summer billing period would save about 30 kW in demand, about 19,000 kWh, and $4,280 annually in
electricity. The cost estimated by Noresco for the EMS system appeared to be a little higher than what might
be expected because I believe that they were also going to use the EMS for net metering of the large PV
5/4/2004
Page 2 of 2
system. Since the PV system is now relatively small, and will be used only to offset a part of the facility's peak
demand, net metering is no longer a firm requirement. If we stick with only control of HVAC, the EMS cost could
come down to about $42,000. However, it may not be a bad idea to specify a unit which can be expanded later
to pick up net metering if needed. We may also find additional savings for HVAC control because I assumed that
the installed air conditioning capacity is 150 tons, per David Flint. However, he stated that Noresco miscounted
the number of units. Instead of 39 package units as indicated in the report, there are actually 42. He is crawling
around up on the roof to try and verify the tonnage number for me. If more tonnage can be controlled, there
will be greater savings.
Overall Project Savings and Economics
The savings for the overall project are: 100,380 kWh in annual energy use; 77.5 kW in peak electric demand;
and $18,226 in avoided electricity costs each year. The total rescoped project cost is estimated to be $238,755.
The simple payback is 13.1 years.
The 13.1 year payback would preclude the Energy Commission from financing 100% of the project cost as our
regulations require projects to have a simple payback of 10 years or Tess. What I have provided is only a rough
estimate of costs and savings and a more in-depth analysis, including a detailed site survey should be conducted
to determine if we can fund the project. Perhaps if we can come up with a more optimal size for the PV
and fine-tune the lighting and EMS projects, there could be more savings and the payback could go down. Give
me a call at your earliest convenience and let me know what you would like us to do next.
Regards;
Donald B. Kazama, P.E., C.E.M.
Senior Project Manager
Energy Efficiency Division
(916) 654-5072
5/4/2004