DATE: April 14, 2014 REPORT NO. PW Chair and Members Committee of the Whole Operations and Administration

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1 PUBLIC WORKS COMMISSION DATE: April 14, 2014 REPORT NO. PW TO: FROM: Chair and Members Committee of the Whole Operations and Administration Geoff Rae, MBA, P.Eng. General Manager, Public Works Commission 1.0 TYPE OF REPORT CONSENT ITEM [ ] ITEM FOR CONSIDERATION [ X ] 2.0 TOPIC License Agreement for the Design, Build and Maintenance of Third Party Owned Roof Top Solar Photo-Voltaic Systems on Three City Owned Facilities. 3.0 RECOMMENDATION A. THAT Report No. PW , License Agreement for the Design, Build and Maintenance of Third Party Owned Roof Top Solar Photo-Voltaic Systems on Three City Owned Facilities, BE RECEIVED; and B. THAT the City Clerk BE DIRECTED to put the 20 year term lease agreement or agreements with Essex Energy Corporation for the rental of roof space at the Civic Centre, Brantford Municipal Airport and Transit Garage on the next available Signing By-law once the terms have been finalized; and C. THAT the revenues generated from these leases BE APPLIED to the Facilities Management Reserve (RF0189), Airport Facilities Reserve Fund (RF0188) and the Parks & Recreation Facilities Reserve (RF00362). 4.0 PURPOSE The purpose of this report is to seek Council authorization to proceed with formalizing and entering into a long term lease agreement, or agreements, with the Essex Energy Corporation for the lease of City owned roof space to accommodate the installation of Solar Photo-Voltaic (PV) Systems at three City owned buildings. The leases are conditional upon completion of satisfactory detailed feasibility studies and approval of the solar projects to proceed by the Ontario Power Authority (OPA).

2 Date: April 14, 2014 Page BACKGROUND In 2011, staff from Brantford Generation Inc. presented Report No. BGI (Evaluation of Renewable Energy Generation on City of Brantford Properties), on behalf of the Renewable Energy Generation Joint Management Steering Committee, which provided an update on Council direction on the feasibility of installing renewable energy generation (solar) on City properties. The analysis and report included 5 Sites (Airport, Police Headquarters, Transit Garage, Civic Centre and Lion s Park). The BGI report provided an overview of the possible opportunities to install solar on these facilities and described the significant capital costs associated with the installation of solar. It also presented two operating model scenarios including a City-owned build and operate, and the leasing of rooftop space to a third party who would install, own and maintain the system. Under the second scenario, the City would receive monthly rental income for the square footage utilized by way of a roof top lease agreement and it also proved to be the lowest risk to the City. It was identified that the installation of solar, whether through generation and sale of electricity or through roof top leases, would provide new revenue streams that could be used for re-investment in facilities or to offset operational costs. In 2013, staff began researching the opportunities in the market place for solar, and in discussion with other municipalities staff investigated the feasibility and possible revenues that could be generated through the leasing of suitable rooftop space to solar energy developers. This staff report describes the status to date and provides recommendations on proceeding with the leasing of roof space as a viable alternative to the direct development and maintenance of a City-owned solar system. 6.0 CORPORATE POLICY CONTEXT The installation of solar on City facilities supports implementation of a corporate-wide Energy Management Plan that is still under development and will be presented to Council in May It also supports the City s Strategic Plan s vision element of Managed Growth and Environmental Leadership and Excellence in Governance and Municipal Management. The following Strategic Actions are directly linked to the Energy Management Plan: - Maintain the Infrastructure Management Strategy - Develop a Green Infrastructure Strategy. - Brantford will be recognized as a fiscally responsible and well-managed City that provides efficient and effective government services.

3 Date: April 14, 2014 Page 3 In addition to the Strategic Plan, in December 2012 and February 2013, City Council endorsed Resolutions that support the review and inclusion of Renewable Energies such as solar and the advancement of energy management within the City. 7.0 INPUT FROM OTHER SOURCES Staff from Community Services, Purchasing, Legal and Realty Services have been engaged in developing the Request for Proposal, the lease agreements, terms of a roof top licence agreement and assisted with the solicitation and selection of vendors for this initiative. The Brantford Airport Advisory Board has also been consulted in the development of this report. 8.0 ANALYSIS Within Report No. BGI (Evaluation of Renewable Energy Generation on City of Brantford Properties) various alternatives along with the estimated capital costs associated with the installation and management of solar PV systems were presented. It was identified that the capital cost to develop renewable energy was very expensive, costs for the installation on 4 rooftops identified as possible candidates would be over $4.5M, and the estimated costs did not include the annual operating costs to maintain the systems. Since the 2011 report, Facilities and Asset Management staff have researched alternatives including the leasing of rooftop space to third parties that specialize in the generation of electricity through solar. Through researching the approaches used within various municipalities, rooftop leases appear to be a viable approach. Many municipalities and private agencies use rooftop leases as a way of generating revenue from solar, including the Wentworth District County School Board, Grand Erie District School Board, Town of Tecumseh, Amherstburg, Owen Sound and Caledon to name a few. In order to better understand the feasibility of this approach, staff developed and advertised a terms of reference seeking proposals from qualified, experienced firms that would be responsible for the design, build, operation and maintenance of a solar systems. Within the Request For Proposals staff identified four locations for consideration. The buildings identified have new or relatively new roofs and have significant rooftop area that would make solar feasible and cost-effective (greater than 20,000 square feet). They included the Grand River Avenue Transit Garage, Civic Centre, two hangars at the Brantford Airport and Lion s Park. During the

4 Date: April 14, 2014 Page 4 RFP process, it was revealed that there was no capacity in the Lion s Park area to receive the electricity generated and this site was removed from consideration. The RFP also contained a rooftop lease agreement that was developed by Legal and Realty Services. Proponents would be required to enter into such an agreement should the solar project proceed to construction. At the end of the 20 year lease, the agreement stipulates that the City has the following options: 1) renew the lease and renegotiate rates; 2) ask the company to remove all equipment from the site 3) take over maintenance and operations. The agreement also contains the terms of operation of the system, processes for payments and other legal and contractual requirements. The Request for Proposals required that the successful proponent would be responsible to fully finance the development and ownership of the system. In the evaluation of proposals, the firm with the highest combined technical score and proposed per square footage rental rate would be selected to proceed into the next phase of the project. As there are still many unknowns, the proponent is required to complete a series of feasibility studies, assess roof structural condition and assess any repair needs, complete a design, drawings, secure permits and make the necessary applications to the Ontario Power Authority (OPA) Feed in Tariff (FIT) program. City Facilities Management staff would be involved in this process to ensure the protection of City assets. The OPA FIT program provides windows for applications and is described further below. While the next window to receive applications has not yet been established by OPA, it historically opens late in the year. The work completed by the proponent between now and that time will be critical in ensuring the installation of solar is feasible, practical and the proponent can submit an application. Should the proponent be successful in securing an agreement from the OPA, it is expected that the installation of solar would commence in The development of the solar installation and the application process will proceed in three phases. The phases include: Phase 1 - Proponent to complete a detailed feasibility and initial design Phase 2 - Application for Contract under the OPA Fit Program Phase 3 - If successful, complete Final Engineering and Installation OPA Fit Program The Ontario Power Authority (OPA) has developed the Feed-In Tariff (FIT) Program for the Province of Ontario to encourage and promote greater use of renewable energy sources including on-shore wind, waterpower, renewable biomass, biogas, landfill gas and solar photovoltaic (PV) for electricity generating projects in Ontario. The fundamental objective of the FIT Program, in conjunction with the Green Energy and Green Economy Act, 2009 (Ontario) and Ontario s

5 Date: April 14, 2014 Page 5 Long Term Energy Plan, 2010, is to facilitate the increased development of renewable generating facilities of varying sizes, technologies and configurations via a standardized, open and fair process. The FIT Program is open to projects with a rated electricity generating capacity greater than 10 kilowatts kw and generally up to 500 kw. There is no guarantee that an application submitted will be accepted by the OPA. During the most recent FIT 3 application window from November 4 to December 13, 2013, the OPA received 1,982 applications representing a total of megawatts (MW) of generation capacity. These applications were for renewable energy projects (solar, wind, waterpower and bioenergy) with a proposed capacity of more than 10 kilowatts (kw) and up to 500 kw. The OPA received applications with Aboriginal community participation (30.8 percent of net applications), municipal and public sector participation (26.9 percent), and community participation (11.7 percent). More than 75 percent of applications are for rooftop solar projects. Successful applicants are expected to be announced in the second quarter of The OPA will award up to MW worth of contracts as a result of applications received during this application period. This equates to approximately 25% of the applications submitted being approved. Should a project be approved and proceed to construction, the OPA pays the provider a rate for each kwh of electricity generated. These rates (based on the last FIT program range from 32.9 c/kwh to 39.6 c/kwh for the length of the contract (20 years). Request for Proposal Evaluation Process Four firms specializing in the installation of solar PV systems submitted proposals. A detailed technical evaluation was prepared that included the qualifications of firms, project team, experience with similar projects for municipalities, ability to finance 100% of the costs, work plan and methodology and details of the proposed solar systems. From the review, two firms did not meet the technical benchmark as they did not present an approach that was consistent with the requirements of the RFP. Two firms (Essex Energy Corporation and Ameresco Incorporated) demonstrated a comprehensive understanding of the project and ability to meet the City s requirements and proceeded to the next step in the evaluation.

6 Date: April 14, 2014 Page 6 Table 1 below provides an overview of the proposed annual lease rate. Table 1 Lease Rate Site Estimated Rooftop (sq/ft) Ameresco Essex Energy Corporation (EEC) Total Annual based on estimated square footage 145,000 $44,000 / year $56,000 / year Annual estimated revenues using EEC above - Civic Centre $10,000, Airport $28,000, Transit $18,000 per annum The Essex Energy Corporation (EEC) is a wholly-owned subsidiary of the Essex Power Corporation. Essex Power is jointly and equally owned by four municipal shareholders within Essex County. EEC has worked with over 60 Ontario Municipalities to date. They have confirmed a financial commitment to cover 100% of the costs associated with proceeding in the development and installation solar PV systems on the facilities (should the technical review determine they are feasible). Based on the review, staff is recommending that an agreement with Essex Energy Corporation be established and that they proceed through the first phase of this initiative (detailed feasibility and initial design). Council will be kept informed of the progress of their studies and their applications to OPA. 9.0 FINANCIAL IMPLICATIONS Should it be determined that all sites are feasible and the systems proceed to construction the annual revenue that could be received from this opportunity is estimated to be $56,000 per year once the solar panel installation is operational. While the lease rate per square foot is not expected to change, the estimated revenue and useful square footage will be updated as work commences through the technical evaluation. It is recommended that the revenue generated by each site be placed into a site specific capital reserve accounts that can be used toward future capital needs at the facilities. Should all sites proceed, over the term of the contract overall additional revenue is expected to be $1.12M CONCLUSION Upon completion of the technical studies should sites indeed be feasible, EEC would prepare the necessary applications to the OPA Fit program. While there is no guarantee that the OPA FIT application will be successful, staff are of the opinion that Essex Energy provides a proven track record and has previously been successful in securing OPA approval. Should the project proceed beyond feasibility to the next level, City Realty services would enforce the long term (20 year) lease agreement with Essex Energy. In the event that either the feasibility

7 Date: April 14, 2014 Page 7 study reveals that roofs are not viable or cost effective, or OPA approval is not granted, the lease agreement would be null and void. The City issued a Request For Proposals for roof top leases for the installation of solar panels on specified City buildings. Essex Energy Corporation is the successful proponent and has a due diligence period in which to complete feasibility studies and obtain OPA approval for the solar panel project. If Essex Energy Corporation does obtain OPA approval for projects on all three buildings it will provide the City with a revenue stream of approximately 1.12 million dollars over a twenty year period and staff recommends the leases be approved. Geoff Linschoten, CET Director, Facilities & Asset Management Geoff Rae, MBA, P.Eng., General Manager, Public Works Commission In adopting this report, is a by-law or agreement required? If so, it should be referenced in the recommendation section. By-law required [ ] yes [ x ] no Agreement(s) or other documents to be signed by Mayor and/or City Clerk [ x ] yes [ ] no Is the necessary by-law or agreement being sent concurrently to Council? [ ] yes [ x ] no