In an earlier post I wrote about the City Council’s consideration of the Environmental Commission’s CCA report and its recommendations. A local CCA makes a lot of sense for many reasons, among them providing residents and businesses with cleaner and greener electricity. A CCA is the single quickest and easiest way a city can achieve a step reduction in its greenhouse-gas (GHG) emissions.
Also on the Council’s December 16 Agenda is Item 10D, Solar Assessment Report. In this item, the City considers installing solar panels on city facilities to generate electricity for local use. The City hired contractor 3fficient to evaluate the City’s solar potential and to submit a Solar Assessment Report.
3fficient evaluated two options. Option 1 considers solar installations on four buildings, with annual projected electricity generation approximately equal to the City’s annual usage (a “100% offset”). Option 2 considers additional installations to produce up to 5 times the City’s annual usage.
Option 1 uses a 1.3 MW system that would cost about $5.8M and return over $15M in revenue over 20 years (see table on page 7 of the report). The payback period would be under 10 years, especially if 30% tax credits are utilized (page 9). This system includes solar arrays at four City facilities.
Option 2 considers a 6.2 MW system costing $26M and returning $64M over 20 years. This system comprises installations at 17 sites (details on page 7). However, the financial calculations in the page 7 table is misleading and are possible only if a local CCA is created.
The financial calculations strongly depend on the amount the City will receive for the power it generates. That amount is set by AB920, the Net Energy Metering (NEM) Tariff. AB920 is described on the second page of Appendix A.
NEM rules require that the rate paid to a customer for generated electricity is paid at retail rate, up to 100% of that customer’s usage. Production and usage are tallied annually on the “True-Up” date. For example, if a customer uses 1000 KWHr of electricity and generates 1200 KWHr in one year, then for the first 1000 KWHr of electricity, the cost of the electricity used by the customer and the amount paid to the customer are equal.
For the remaining 200 KWHr, the “excess” generation, the NEM rules allow utilities to pay a Net Surplus Compensation (NSC) rate that is generally based on wholesale rates. For SDG&E, that rate is 4.3 cents per KWHr (CPUC NEM Billing).
Option 1, the 100% offset option, the City generates little excess electricity and so it receives retail rate for its electricity. Its revenue from its generated electricity balances the cost of the electricity used. Option 2, the 5x option, generates excess electricity about 4 times greater than is used by the City. For this excess electricity, SDG&E pays the wholesale rate of 4.3 cents/KWHr.
In contrast, if the City had a local CCA, the CCA sets its payback rate. There are many factors that a CC considers when it determines a fair rate to pay for power, but it is generally based on market rates rather than wholesale rates (as noted on page 37 or the report, wholesale rates are only 20-25% of retail rates). For example, California’s two established CCAs (Marin Clean Energy and Sonoma Clean Power) pay one cent above retail rates for locally-generated electricity.
3fficient used a flat rate of 19 cents/KWHr in its calculations for the table on page 7. The City may receive this rate from SDG&E for Option 1, but it will not receive this rate for the excess electricity generated by the 5x array in Option 2. The City may receive this rate from a local CCA. The revenue reflected in the page 7 table is feasible only if a local CCA is created.
Therefore, when a CCA (Item 10A) is coordinated with a City solar installation (Item 10D), the combination is synergistic.
Encourage the Council to approve both of these items !