SR-510-013
CP:SM\EPWM\EPD\STAFFRPT\CEIISTAFFREPORT.DOC
Council Meeting: March 14, 2006 Santa Monica, California
TO: Mayor and City Council
FROM: City Staff
SUBJECT: Conceptual Approval of a Santa Monica Community Energy
Independence Initiative and Authorization to Implement a Two-Year
Demonstration Project
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:
1. Energy efficiency and source reduction;
2. Renewable energy procurement;
3. Distributed power generation;
4. Community energy system; and
5. A role beyond the City boundaries.
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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
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Subsidized SMMUSD with $513,000 to retrofit 8 Santa Monica schools
and District headquarters with energy efficient lighting and control
systems. Electricity savings are anticipated to exceed $94,000 annually.
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Retrofitted 1657 households and 60 small businesses with energy
efficiency measures through the Community Energy Partnership currently
consisting of ten Southern California cities. Estimated savings over the
life of the measures are estimated to exceed $1.5 million.
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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.
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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.
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Facilitated in the design and construction of Colorado Court, an award-
winning 44-unit affordable housing project, through a unique partnership
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between the City, Community Corporation of Santa Monica, Southern
California Edison, and the Energy Coalition. Colorado Court features
several state of the art technologies that distinguish it as a model
demonstration building of sustainable energy supply and utilization. The
building achieved LEED-Gold certification from the U.S. Green Building
Council.
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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.
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Implemented energy performance standards for new construction and
substantial remodels that result in the construction of higher quality and
higher performance buildings in Santa Monica.
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Prepared a Solar Potential Study to analyze the technical, financial, and
regulatory aspects of the potential for installation of solar electric systems
in Santa Monica and the potential for increased energy efficiency and on-
site distributed generation (microturbines and small fuel cells) in public
and private buildings.
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:
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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;
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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
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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 Santa Monica physically suitable for
installation of rooftop solar photovoltaic (electric) or solar thermal systems. The
study found that solar energy generation could potentially replace about 23% of
the electricity and 5% of the thermal energy consumed annually in Santa Monica
and that implementation of comprehensive energy efficiency measures in all
sectors of the community could substantially reduce Santa Monica?s baseline
energy consumption by as much as 38%. Finally, the study showed that
installation of clean distributed generation (primarily microturbines that capture
waste heat and small fuel cells) in building types possessing the appropriate ratio
of electricity and thermal energy use results in further efficiency improvements.
The study concludes that full implementation of integrated energy efficiency,
solar, and clean distributed generation efforts over the next 15-20 years can
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result in the onsite generation of enough power to meet the net annual electricity
requirements of the city and may even allow the community to become a net
exporter of electricity (see Executive Summary at Attachment A).
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 Santa Monica?s economy by creating energy cost
savings that may be re-invested locally. Aggressive solar deployment may also
provide employment opportunities for local contractors and may attract new
businesses to the City.
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
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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 Independence Initiative
Implementation of an integrated approach to energy management as detailed in
the study would provide Santa Monica with both financial and environmental
benefits. The community would be able to create its own self-contained "micro"
power grids that would be much more efficient, cleaner, and less prone to power
outages. Since solar energy systems do not depend on fuel commodity markets,
they are not subject to energy price increases once installed. Also, when
combined heat and power (CHP) systems are used to produce both electricity
and heating or cooling on-site, efficiencies of 70-80% can be achieved compared
to efficiencies of 40-50% with utility grid-supplied power. This means more end-
use energy can be generated by the same amount of fuel, thereby significantly
reducing toxic air emissions and greenhouse gases. Other potential benefits of
the Initiative include:
Cost-effective source of new peak demand power
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Improved power quality and reliability
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Reduction in utility charges
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Potential source of emergency standby power
?
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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.
Survey Responses from Potential Participants
As part of the Solar Potential Study, over 250 randomly selected Santa Monica property
owners were interviewed to corroborate findings of the study?s building analysis and to
obtain information on the range of City actions that could facilitate installation of
integrated energy systems. Forty percent of survey respondents were supportive of
investing in integrated energy systems for their properties if an uncomplicated and
reliable approach can be identified. Property owners also suggested the following:
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.
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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 Independence Initiative Demonstration
Project
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.
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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
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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 Civic Center, 415 Pacific Coast
Highway, the Civic Center Parking Structure, and the Big Blue Bus Campus. It is
likely that additional public buildings will be identified to become a part of the
demonstration project as it moves forward.
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
$375,863 in net present value dollars, with an annual carbon dioxide emissions
reduction of 430 tons.
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2/6/06
Demonstration Solar Projects in Santa Monica
Inputs in blue:
Benefit to Community$ 375,863
Cost / kWh assumption$ 0.15 Solar Hours 6
*
Economic Multiplier
2.05 Discount Rate3.0%
Cumulative Tons CO2 Reduced 429.9
0Include Existing Solar?NoTons CO2/MWh 0.3522
Cost per Watt of Solar$ 6.00
Demonstration Project TypeNo.SizeCumul.Cumul. kWhAnnual Value ofBenefit to Cumulative BenefitTons CO2 Mitigated
kWkWSaved/yearEnergy SavedCommunity *to Community *AnnualCumul.
Year 1 - 2007 Total
146 1,194 293,095$ 43,964$ 90,257$ 90,257 103.2
Residential Single Family1120 418 40,150$ 6,023$ 12,364 14.1
Residential Multi-family416 376 32,120$ 4,818$ 9,891 11.3
Municipal110 98 20,075$ 3,011$ 6,182 7.1
Commercial (Large)140 66 80,300$ 12,045$ 24,728 28.3
Commercial (Small)360 236 120,450$ 18,068$ 37,092 42.4
Total All Building Types20146 1,194 293,095$ 43,964$ 90,257$ 90,257 103.2
Year 2 - 2008 Total
462 10,226 927,465$ 139,120$ 285,606$ 375,863 326.7
Residential Single Family1530 5,490 60,225$ 9,034$ 18,546 21.2
Residential Multi-family572 1,646 144,540$ 21,681$ 44,510 50.9
Municipal1150 558 301,125$ 45,169$ 92,729 106.1
Commercial (Large)250 494 100,375$ 15,056$ 30,910 35.4
Commercial (Small)7160 2,038 321,200$ 48,180$ 98,911 113.1
Total All Building Types30462 10,226 927,465$ 139,120$ 285,606$ 375,863 326.7
Existing0 - - - $ -$ - $ - - -
Year 120146 1,194 293,095$ 43,964$ 90,257$ 90,257 103.2 103.2
Year 230462 10,226 927,465$ 139,120$ 285,606$ 375,863 326.7 429.9
*Multipliers are often quoted as between 3.0 and 10.0. Since we are examining just local (not national) impacts, we chose
a multiplier more typical of a California coastal community based on research conducted at UC Santa Cruz. See:
http://www.ucsc.edu/about/economic_impact.asp
**Carbon Dioxide (CO2) reduction estimates based on Western Systems Coordinating Council (WSSC) / CNV Regional
Electricity Emission Coefficients from 2000, found in ICLEI Emission Inventory for City of Santa Monica June 1, 2004.
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
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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
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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: Craig Perkins, Director, Environmental and Public Works
Management
Susan Munves, Energy and Green Building Program Administrator
Attachment: A ? Solar Potential Study
B ? Demonstration Project Tasks and Proposed Schedule
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Attachment A ? Solar Potential Study
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CITY OF SANTA MONICA
SOLAR ENERGY RESOURCE,
CO-GENERATION
AND
ENERGY EFFICIENCY
PROGRAM DEVELOPMENT
FINAL REPORT
Submitted to:
The City of Santa Monica Sustainable City Program
HELIOS INTERNATIONAL INC
with the participation of
PUGH + SCARPA
RENEWABLE ENERGY DEVELOPMENT INSTITUTE
THE DAHLGREN GROUP
DECEMBER 2003
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TABLE OF CONTENTS
Page
Acknowledgements and Disclaimer????????????????? 3
List of Tables and Figures?? ???????????????????. 4
1.0 Executive Summary ???????????????????.?. 5
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ACKNOWLEDGEMENTS
The authors of this report express their gratitude to the many individuals and entities in
the City of Santa Monica for the support and information they have provided during the
execution of this report. In particular, the authors would like to thank Mr. Craig Perkins,
Ms. Susan Munves and Mr. Stuart Cooley of the Environmental and Public Works
Department of the City of Santa Monica. The study director Dr. John G. Ingersoll of
Helios International would like to acknowledge the following individuals for their
contributions to this report: Mr. Gwynne Pugh, PE and AIA, Mr. Lawrence Scarpa, AIA,
Ms. Angie Brooks, AIA and Mr. Tom Petersen of Pugh+Scarpa; Mr. Keith Rutledge of
the Renewable Energy Development Institute; Mr. Anthony Sprow, Sr. of the Dalhgern
Group; Mr. Michael Norris, Ms. Loraine Loh, Mr. Steve Edler and Ms. Brigitte Edler of
Helios International; and Mr. Marc Luesebrink, Esq. of Manatt, Phelps & Philips, LLP
representing himself for this work. The extensive participation of Mr. Stuart Cooley for
the necessary data collection and manipulation from restricted information sources
available only to City personnel was an integral part of this effort. Information on energy
efficiency equipment, solar energy systems, and co-generation systems has been supplied
by a number of major US suppliers, including United Technologies Corporation and its
subsidiaries, BP Solar, Kyocera, Xantrex, Heliodyne, ProgressivTube as well as several
other specialty energy product organizations.
DISCLAIMER
This report was prepared by Helios International Inc, Pugh+Scarpa, Renewable Energy
Institute, Dahlgern Group and other team personnel as an account of work sponsored by
the City of Santa Monica. Neither the Helios International Inc team, nor any person
acting on their behalf:
a. Makes any warranty or representation, expressed or implicit, with respect to the
accuracy, completeness, or usefulness of the information contained in this report, or that
the use of any apparatus, method, or process disclosed in this report may not infringe
privately owned rights, or
b. Assumes any liability with respect to the use of, or for damages resulting from the
use of, any information, apparatus, method, or process disclosed in this report.
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LIST OF TABLES AND FIGURES
Table 1.1 Building Stock Breakdown by Type and Function Employed in the
Assessment of the Physical Potential of the City of Santa Monica for Solar Energy, Co-
Generation and Energy Efficiency.
Table 1.2 Calculated Solar Electric and Solar Thermal Potential in All Buildings in
the City of Santa Monica.
Table 1.3 City of Santa Monica Energy Program (Energy Efficiency, Solar Energy
and Co-Generation) Physical Size and Benefits.
Table 1.4 Calculated Cost of Implementing Selected Elements of the Energy
Program for Residential and non-Residential Buildings in the City of Santa Monica.
Table 1.5 Required Investment for the City of Santa Monica Energy Program,
Annual Revenues and Life-Cycle Cost (LCC) Effectiveness.
Table 1.6 Estimated Cost of Operating the Santa Monica Energy Corporation during
a 20-Year Implementation Period of the Energy Program.
FIGURE 1.1 Location of Residential Buildings in the City of Santa Monica (Based on
County Assessor Building Design and Classification Codes 0xxx).
FIGURE 1.2 Location of Commercial Buildings in the City of Santa Monica (Based on
County Assessor Building Design and Classification Codes 1xxx and 2xxx).
FIGURE 1.3 Location of Industrial Buildings in the City of Santa Monica (Based on
County Assessor Building Design and Classification Codes 3xxx).
FIGURE 1.4 Location of Institutional (Churches, Private Schools, Hospitals, Private
Utilities) and Government Owned Buildings (Public Order and Service, Public Schools,
Transportation, Utilities, Right of Way) in the City of Santa Monica (Based on County
Assessor Building Design and Classification Codes 7xxx and 8xxx).
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1.0EXECUTIVE SUMMARY
The City of Santa Monica Sustainable City Program (City) has been examining short-
term and long-term mechanisms to deploy more renewable energy resources along with
increased energy efficiency and site-power generation into the Santa Monica building
infrastructure and energy planning processes. As a part of that effort, the City needs: to
(1) understand the existing physical potential and the required financial investment of
these energy technologies for city-wide application; (2) identify barriers restricting the
widespread use of such technologies left on their own or with a business as usual
intervention by the City and others; (3) become cognizant of opportunities facilitating
implementation; and (4) develop strategies that could lead to a successful Energy
Program combining solar energy, other distributed generation options and energy
efficiency over a period of time spanning as many as fifteen years. The Energy Program
and associated efforts cover commercial, residential and institutional energy customer
classes and include municipal uses as well. The goal of the study presented herein is to
help the City develop an action plan, based on the results and recommendations of this
analysis, to expand the use of solar energy resources, other distributed generation options
and energy efficiency within the City of Santa Monica boundaries for peak power
purposes, for reliability purpose, for environmental and public health reasons and in order
to make the community a zero net importer of electricity.
The study has addressed and analyzed the technical, financial and regulatory aspects of
the potential for installation of solar energy systems in the City Santa Monica. However,
the study has gone beyond that by pursuing a holistic or systemic approach in its effort,
as it attempts to devise a model to integrate solar energy into the energy mix of the City
of Santa Monica. Thus, solar energy forms one of the three pillars constituting our
holistic Energy Program approach. The other two pillars are comprised of (1) energy
efficiency and energy demand management and (2) distributed clean natural gas based
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power/co-generation technologies (micro-turbines, fuels cells, etc.) . By aggregating
resources such as solar energy with clean distributed power in an on-site co-generation
mode and with curtailable loads through efficiency and possibly demand side
management, one can overcome the inherent high cost and intermittent availability
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limitations of solar energy. This study thus focuses on three main themes, as follows:
(1) the examination of solar resource options, including solar thermal and solar electric
technologies, as part of an integrated Energy Program that includes efficiency and
distributed clean power with co-generation technologies; (2) regulatory, market and
technical impediments along with concepts used practiced by other local and state
governments, the private sector and other countries and suggest opportunities to
overcome existing barriers; and (3) the cost of implementing the Energy Program and
1
Clean power in a co-generation mode here refers to site NOx and CO emissions under 10 ppm and
greenhouse gas emissions under 0.25 g per kWh of output usable energy (electric and thermal).
2
Biogas from city wastes may be used as a renewable resource to replace part or all of the natural gas.
3
A web-based power management platform may be used to monitor individual on-site generators for
availability and to activate them, if the utility has an emergency or if less expensive power is required.
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cost-effectiveness criteria that must be met and options for financing it as well as
structuring and financing its implementation.
The results of the study presented herein have been divided naturally into four main
segments as follows:
1. Analysis of the potential for deploying solar energy (electric and thermal) into the
City of Santa Monica energy infrastructure as part of an integrated approach that
also includes energy efficiency as well as clean co-generation for appropriate
classes of customers as part of a city-wide Energy Program.
2. Evaluation of the cost of the Energy Program for all classes of customers, i.e.,
residential, commercial, industrial and municipal, and guidelines of cost-
effectiveness criteria that need to be met or adhered to by each class of customers.
3. Selection of a plausible business model applicable to the implementation of a city-
wide Energy Program including an estimation of its cost to the City and
suggestions for its funding along with opportunities to finance the Energy
Program itself.
4.Discussion of opportunities for the City to develop a city-wide Energy Program
that is practical, minimizes market inertia, lessens the impact of status-quo
regulatory regimes, takes a pro-active stance within the existing legal framework
while trying to advance the discourse and engages the community as an integral
part of the implementation.
Each one of these four key areas has been covered to one degree or another in various
sections in the main body of this study. The findings and recommendations in each of
these key areas are summarized in the remainder of this section.
Analysis of the Physical Potential for the Energy Program
The data necessary to carry out the analysis have been obtained from a number of
available resources supplied by the City. These sources included previous reports and
studies, the Los Angeles County Assessor?s list for the all the buildings in the City of
Santa Monica (residential, commercial and industrial), aerial photographs of rooftops out
of the City of Santa Monica data base and utility bills supplied both by the local electric
and gas companies as well as the City for its own use. Moreover, a list of all the
municipal buildings with the requisite building information was developed in conjunction
with the aforementioned aerial photograph data base, because the Assessor?s list did not
contain any useful information on municipal buildings for the purposes of this study.
Finally, a survey of some 200 randomly selected residential, commercial and industrial
buildings along with about 50 building sites for municipal buildings was carried out to
augment or corroborate statistically the analytical findings and also elicit to the extent
possible inputs for the public that could help in the design of a better Energy Program.
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The methodology followed in this analysis was quite simple, although the data necessary
for the study required a significant amount of effort so that the available data could be
brought to a usable format. The buildings were divided into over 30 categories based on
type and function. These categories were developed by employing the classification of
the assessor?s list as well as by utilizing the division of the US Department of Energy
statistical data on energy consumption in buildings. The building categories and sub-
categories shown in Table 1.1 were considered in this analysis. A schematic view of the
location of the residential, commercial, industrial and government and institutional
(includes municipal) buildings in Santa Monica is shown in Figures 1.1 through 1.4 and
has been based on the assessor?s classification.
Table 1.1 Building Stock Breakdown by Type and Function Employed in the
Assessment of the Physical Potential of the City of Santa Monica for Solar Energy,
Co-Generation and Energy Efficiency.
Major Category Subdivisions within Category
Residential Buildings Single Family - and subset buildings with swimming pool
Two to Four Units - and subset bldgs with swimming pool
Five or more Units - and subset bldgs with swimming pool
Mercantile and Service Retail Stores
Food Stores/Supermarkets
Service
Retail and Office
Retail and Residential
Office Large Office/Banks/Professional Buildings
Lodging Hotels and Motels with 50 or more units
Hotels and Motels with less than 50 Units
Homes for the Aged
Food Service Restaurants
Recreational Athletic Facilities/Clubs
Public Assembly/Theaters
Industrial Light Manufacturing
Warehouses
Educational Buildings Private Schools
Religious Worship Churches and Associated Schools
Health Care Hospitals/Clinics
Parking Lots Commercial
Industrial
Municipal Public Order and Service/Administration
Warehouses
Parking Lots and Structures
Public Schools
Vacant Vacant Land
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The information obtained from the assessor list for residential, commercial and industrial
buildings, included among others the building floor area as well as the building lot area.
The objective was to determine the usable roof area of all the buildings. Since the
database does not contain directly this type of information, it needed to be derived via a
statistical means. To this end, a statistically random sample of buildings within each of
the categories was derived at the 95% confidence level. The buildings in the statistical
sample were then analyzed one-by-one in order to obtain a number of correction
coefficients as follows: gross roof area as a fraction of parcel area or floor area, non-
shaded portion of roof area from trees and adjacent structures, portion of roof with proper
orientation for solar energy (from SE to SW), portion of roof unobstructed or otherwise
free of encumbrances and allowance for build-able portion of roof area. These
coefficients derived statistically for each building sub-category were also checked to the
extend possible for accuracy against information obtained in the aforementioned survey
data and if necessary an additional adjustment was made. A final correction was
instituted for residential and some commercial buildings to account for certain roof types,
i.e., ceramic tile, which are not conducive for mounting solar arrays. The correction
coefficients thus derived for each building type were applied to calculate the available
roof area for solar energy at the 95% confidence level. For the municipal buildings, an
analysis of all buildings via the aerial photography database and subsequent survey was
performed in order to remedy the lack of an appropriate database. This was feasible
given the relatively small number of public order and service buildings and the
availability of a good database on all public schools. The determination of the actual
numbers of structures and accounting for the correct floor area in certain high-rise
buildings was also carried out. The painstaking analysis of the available building data
with the support of City personnel ensured that a good number for the potential roof area
available for solar energy city-wide could be established.
For the solar electric system we have assumed a typical polycrystalline technology with a
DC output of about 10.5 W per square foot and an overall DC to AC conversion
efficiency of 72% to 75%, including an 83 to 85% solar module de-rating, 91 to 95 %
peak inverter efficiency and about 95% to 97% DC transmission efficiency. This results
in an AC output of about 5 W per square foot for sloped roofs and 6 W per square foot
for flat roofs, the difference attributed to the different spacing necessary for proper
maintenance of the solar array modules. For the solar thermal system, applicable to the
cases of swimming pools to either replace natural gas or increase utility by providing heat
for a longer period, we assumed a typical collector performance of no less than 900
Btu/day/square foot for the Santa Monica climate. The resulting annual generation of
usable energy was obtained through a standard hourly analysis for a typical year
approximating the climate of Santa Monica. The available roof mounted solar electric
and solar thermal potential for the entire City building stock is summarized in Table 1.2
and amounts to almost 103 MW of solar electric power capacity and about 350 thousand
square feet of low temperature solar thermal collectors. This solar energy generation
replaces about 23% of the electricity and 5% of the thermal energy consumed annually in
the entire City of Santa Monica, including residential, commercial, industrial and
municipal buildings. It should be noted that in this analysis we have opted to maximize
the potential of solar electric generation and have limited thermal energy utilization only
22
Table 1.2 Calculated Solar Electric and Solar Thermal Potential in All
Buildings in the City of Santa Monica.
Sub-Category No Solar Collector Size Energy Generation
(#) Electric Thermal Electric Thermal
A. Residential
64
Single Family-Detached 11,684 17,580 269,000 35.3x10 88x10
6
Two to Four Units 1,642 13,047 NA 26.2x10 --------
64
Five-Units or more 2,485 32,459 54,000 65.2x10 18x10
64
Total 15,811 63,086 323,000 126.7x10 106x10
B. Commercial and Industrial
6
Commercial 1,132 22,430 NA 45.0x10 --------
6
Industrial 270 6,525 NA 13.1x10 --------
C. Municipal
64
Public Order/Service/Other 112 8,064 9,400 16.2x10 3x10
64
Public Schools 88 2,654 12,700 5.3x10 4x10
64
Total 200 10,718 22,100 21.5x10 7x10
64
City-Wide Total 17,413 102,759 345,100 206.3x10 113x10
NOTES. The No column refers to the number of buildings or facilities in Santa Monica. Solar collector
size is in kW for electric and square feet for thermal Energy generation is in site kWh for electric energy
and therms equivalent of natural gas for thermal energy.
to specific applications as already noted. Obviously there is a trade off between the
magnitude of solar electric and solar thermal energy given that the roof area is fixed.
Energy efficiency can reduce the baseline energy consumption of the entire City of Santa
Monica by a sizeable amount, making the contribution of solar energy even more
dramatic as a percentage of the final mix. A number of energy efficiency measures have
been considered for residential and non-residential buildings. Energy efficiency
measures for residential buildings include the upgrade of windows to double pane for
more than 90% of the residential buildings in the City, increased wall and attic insulation
from the minimal used currently, the replacement of more than 10 year old refrigerators,
forced air furnaces and any HVAC equipment with preferably Energy Star rated ones,
even if the existing machinery is still functional, the widespread use of compact
fluorescent light (CFL) bulbs along with on/off sensors and the replacement of old water
heaters with point of use (POU) ones. The resulting annual savings have been estimated
to be on the order of 46% for natural gas and 51% for electricity. Likewise, in non-
residential buildings energy efficiency measures include the increase of wall-ceiling
insulation to the extent practical, employment of light sensors and controls based on
availability of daylight and presence of occupants and replacement of older motors with
efficient ones having appropriate speed controls for the intended applications for a total
reduction in natural gas use by 18% and of electricity by 29% annually. We have
intentionally left our glazing improvement from single to double pane for most non-
23
residential buildings as being too expensive of a retrofit until such time that the old
building is remodeled or torn down to be replaced by a new one. However, the City of
Santa Monica building stock is quite old and it will take a very long time to wait for the
natural replacement of the buildings estimated at a rate of 2% per year. Hence, energy
efficiency needs to be one of the Energy Program components. The attainable energy
savings through the implementation of energy efficiency measures are substantial and as
it turns out quite cost-effective, although not as glamorous as solar electricity. Table 1.3
summarizes the benefits of energy efficiency with respect to the City of Santa Monica
energy use and compares them against the use of solar and co-generation as the other two
components of the Energy Program. The energy efficiency numbers in Table 1.3 ought
to be counted as savings or negative energy as opposed to generation toward meeting the
goal of the entire Community to become self-sufficient by generating its own power
within the City limits. We may also note that the implementation of energy efficiency
city-wide and the simultaneous or subsequent implementation of solar energy in the
already calculated magnitude results in solar electricity replacing 35% and solar thermal
replacing 10% of the respective energy uses city-wide.
The implementation of co-generation in a small number of high-rise or large residential
buildings with over one hundred housing units in Santa Monica and mostly in non-
residential buildings with the appropriate ratio of electricity and thermal energy use can
essentially result in further efficiency improvements and generate all the power required
by the City of Santa Monica on-site. The current technology of choice includes the use
of natural gas powered micro-turbines with heat recovery. The major efficiencies from
co-generation result from the generation of hot water for domestic applications, space
heating and space cooling through the use of absorption chillers. The latter technology is
just coming of age, is ideally suited for commercial buildings with significant cooling
load, reduces electricity consumption by 15% by shifting it to the use of waste heat and
eliminates altogether the use of environmentally harmful refrigerants. Co-generation can
also reduce by at least half the peak load demand and supply the remainder of electricity
generation after energy efficiency and solar energy provide their contribution. The
potential of co-generation may further increase in the future as a potential trade-off
between it and solar energy could take place in residential applications, when small
capacity fuel cells under 10 kW become commercially available at a reasonable price.
The results of the implementation of the Energy Program with the general physical
attributes shown in Table 1.3 suggest among others a primary energy reduction in the
51% to 85% range compared to the baseline design for the various building types. For
the municipal buildings we have considered two options for solar electric. One option is
at the maximum potential of 10.7 MW and one at the significantly reduced capacity of
1.8 MW combined with an increased co-generation contribution as a means of cost
reduction and better cost-effectiveness to be addressed shortly. The overall reduction in
primary energy use city-wide from the current 11.7 trillion Btu/yr will range between a
high of 4.3 trillion Btu/yr (36% of current use) and a low of 3.6 trillion Btu/yr (33% of
current use) depending on the extent of solar electric installations in municipal buildings
and ability to export net electricity generation. This is almost a factor of 3 reduction in
primary energy use even without considering any possible synergisms for direct energy
24
exchange between buildings of various types. Such an energy exchange would require,
for example, the creation of a mini or local network for power transmission and
distribution among major buildings or existing clusters of buildings in various parts of the
City (see Figures 1.2, 1.3 and 1.4). The potential of a mini-grid is an option that deserves
closer attention as part of the Energy Program.
Table 1.3 City of Santa Monica Energy Program (Energy Efficiency, Solar
Energy and Co-Generation) Physical Size and Benefits.
Energy Program Parameter Parameter Value
Residential Commercial Industrial Municipal
Baseline Energy Use
6
SE (10 kWh) 230.9 498.2 49.7 39.1
Capacity (MW) 45-50 85-90 10.0 5.0
6
NG (10 Therm) 17.1 11.5 0.7 0.7
9
PE Total (10 Btu) 4,203.7 6,496.2 582.9 477.2
Energy Efficiency
6
SE Saved (10 kWh) 117.7 145.2 14.4 7.0
Capacity Saved (MW) 20.0 30.0 4.0 1.5
6
NG Saved (10 Therm) 7.8 2.1 0.1 0.2
Co-Generation
Capacity (MW) 5.0 31.8 5.2 3.9 1.9
6
SE Generated (10 kWh) 30.7 243.7 16.0 25.2 9.7
6
SE Shifted to HE (10 kWh) NA 74.7 7.4 2.7 0.9
6
HE Utilized (10 Therm) 2.2 15.2 1.0 0.9 0.7
6
NG for Co-Gen (10 Therm) 3.9 31.6 2.1 3.2 1.2
Solar Electricity
Capacity (MW AC) 63.1 17.7 6.0 1.8 10.7
6
SE Generation (10 kWh) 126.7 35.5 12.0 4.2 21.5
Solar Thermal Energy
3
Collector Area (10 sf) 323 NA NA 22
6
HE Utilized (10 Therm) 1.1 NA NA 0.1
Post Implementation Energy Use
6
Site Electricity (10 kWh) (44.2) (0.9) (0.1) 0.0 0.0
6
Natural Gas (10 Therm) 6.0 31.6 2.0 3.2 1.2
9
PE Total (10 Btu) 599.8 3,160.8 204.5 322.6 124.2
9
PE Total (10 Btu) w/exporting 122.4 3,151.1 203.4 322.6 124.2
Primary Energy Reduction 85.7% 51.3% 64.9% 32.4% 74.0%
NOTES. SE = Site Electricity. NG = Natural Gas. HE = Heat Energy. PE=Primary Energy. Numbers in
parenthesis mean net surplus of energy to be exported. Second column in Municipal buildings describes
the maximum co-generation and solar PV case, which is also very expensive and very likely not financially
feasible.
25
Financial Analysis of the Energy Program
The investment associated with the city-wide implementation of the Energy Program
comprised of integrated energy efficiency, solar energy and co-generation elements has
been calculated based on reasonable assumptions on the cost of the key components. In
addition, a cost-benefit analysis has been carried out to determine the financial terms
under which the Energy Program can become viable. It is important to set out certain
financial parameters with respect to this analysis.
First, the implementation of the Energy Program city-wide requires the investment of
capital in the inception of each project for the installation of certain features such as
efficiency measures, solar energy and co-generation with benefits to be accrued
throughout the life of these features. Thus, a life-cycle cost analysis would be the
appropriate tool to ascertain the fiscal viability of the Energy Program. The cost-benefit
analysis determines the net present value (NPV) of the investment over the life of the
specific features, which ought to be positive for a typically desirable investment. The
cost-benefit analysis also determines an internal rate of return (IRR), which ought to be
comparable with the return on investments of the same or similar type.
Second, given that several of the features comprising the Energy Program include items
such as energy efficient appliances, HVAC equipment, micro-turbines, and even solar
modules which have a life of fifteen to twenty years, while other features such as energy
efficient glazing or insulation have a longer life, we consider that any cost-benefit
analysis needs to be justifiable over a period of about least fifteen years. This is actually
a conservative estimate, because in any new construction, for example, the typical
repayment of the incremental costs for energy efficiency or co-generation or solar energy
as part of the new building will be over the life of the loan on the property, which is
typically on the order of 25 to 30 years.
Third, the typical internal rate of return on energy investments such as utilities has been
historically under 10% per year because such investments are highly capital intensive and
are characterized by a long period for cost recovery. On the other hand, such investments
carry a low risk as they are guaranteed to perform over a long period of time in excess of
30 years, if they are designed and implemented correctly. The City of Santa Monica
Energy Program is very similar in nature and scope. It carries a significant capital
investment, but the benefits in the form of reduced utility bills are to be obtained year
after year throughout the physical life of the buildings involved.
Fourth, the low inherent risk and anticipated lower internal rate on return for investments
associated with the Santa Monica Energy Program suggest that the interest rate to be
charged for loans pertaining to the energy program should be as close as possible to a
standard measure of interest rate. Such a measure could be the prime rate set by the US
Federal Reserve on a periodic basis or, depending on the source of the funds, an
internationally recognized benchmark such as LIBOR (London Inter Bank Offered Rate),
which is adjusted on quite frequent basis. In order to keep the interest rates of the
investment for the Santa Monica Energy Program as low as possible, it makes sense for
26
the City to seek and make available a portfolio loan against which each program
participant can borrow, if qualified, rather than having program participants obtain their
own loan, which will invariably be at a higher rate than that of a City negotiated portfolio
loan. Another financing arrangement very appropriate for an investment with a long
term relatively low yield and lower risk would be through the issuance of tax-exempt
municipal bonds. Municipal bonds allow the investment of private capital without
privatizing the enterprise of the Energy Program. A combination of private loans and
municipal bonds may ultimately provide the necessary funding for the Energy Program.
It would appear, however, that an acceptable interest rate for the Santa Monica Energy
Program should not be any higher than 4% to 5% per year.
Careful analyses of the costs associated with the implementation of the Energy Program
have been carried out for residential and non-residential buildings. The results of this
cost analyses are given in Table 1.4 and are presented on either per square foot of
occupied floor area basis or another appropriate unit.
The calculated total investment for the Energy Program implementation based on the
preceding cost assumptions is given in Table 1.5. It amounts to almost $1.45 billion in
current dollars. Obviously, this investment takes place over a period of time of about 15
years. Over 60% of the investment is devoted to residential buildings. Commercial
buildings account for about 30% of the total. Industrial and municipal buildings
represent 6% and 3% of the total investment, respectively. For municipal buildings we
have chosen the option with reduced solar electric power to 1.8 MW and increased co-
generation to 3.9 MW as opposed to the maximum 10.7 MW of solar and a co-generation
of only 1.9 MW, because the later case will generate a positive cash flow in less than 20
years after implementation. Moreover, the natural replacement of privately owned
buildings at a rate of 2% per year will reduce substantially this calculated total investment
amount of $1.45 billion as the new buildings have to be built with a number of minimum
energy efficiency features. The average investment per residential building stands at
about $57,000 ($26,700 for single family detached, $83,400 for 2-4 units and $182,200
for 5+ units). It approaches almost $400,000 for commercial buildings, hovers around
$250,000 for industrial buildings and is in the low $200,000 for municipal buildings.
The annual net revenues for each type of building from the implementation of the Energy
Program have been calculated on the basis of the physical benefits of reduced energy use
due to renewable solar energy as well as the more efficient energy use due to improved
energy efficiency and co-generation. The savings are based on current utility prices for
electricity, peak demand charges and natural gas use under various applicable tariffs.
The assumptions for the financial analysis include a horizon of 15 years, a 5% interest
rate charged to Energy Program participants, if they seek Energy Program guaranteed
finance, a 2% average annual inflation rate, an energy price escalation of 1% net per year,
and a residual value of the investment varying as percent of the initial investment from
50% for residential, to 33% for municipal and 0% for commercial and industrial
buildings. The net present value and the internal rate of return have been calculated for
all the four types of building use/ownership and are also shown in Table 1.5. In all
instances, a positive net present value (NPV) value is obtained and the resulting internal
27
Table 1.4 Calculated Cost of Implementing Selected Elements of the Energy
Program for Residential and non-Residential Buildings in the City of Santa Monica.
Measure Description Cost
A. Residential Buildings
A.1 Energy Efficiency Measures $9.05 per sf
Windows at 10% of Floor Area and $36 per sf of glazing installed
Insulation (R-13 walls and R-19 ceiling) installed
HVAC Equipment (Forced Air Furnace and non HCFC A/C) installed
Refrigerator (w/Frost Free Freezer, Energy Star)
Compact Fluorescent Lights and Selected Motion Sensors
Point Of Use Natural Gas Water Heater installed
A.2 Solar Thermal Collector 17.5 sf area (15,000 Btu/day) installed $57.12 per sf
A.3 Solar Electric System 1.7 kW DC / 1.3 kW AC Installed $7.62 per W AC
Solar Panels 1,700 W at $2.3 per W
Inverter 1.5 kVA / 240V AC /1 phase
Remote Meter for indoor system monitoring
Wires and Support/Mounting Materials
Installation Cost 40 hrs at $70/hr and 40 hrs at $35/hr
Maintenance Cost $0.015 per kWh
B. Commercial/Industrial/Municipal Buildings
B.1 Energy Efficiency Measures $4.40 per sf
Insulation (R-13 walls and R-19 ceiling) installed
Lighting Sensors/Controls and Motor Drive Controls installed
B.2 Co-Generation w/ Absorption Cooling $5.87 per sf
Co-Generation ? 60 kW Micro-turbine w/Hot Water Generator
Gas Booster, Transformer, Exhaust Ducting installed
Hot Water Storage Tank and Absorption A/C System ? Indirect Firing,
Maintenance Cost $0.010 per kWh
A.3 Solar Electric System 17 kW DC / 13.7 kW AC Installed $5.90 per W AC
Solar Panels 17,000 W at $2.3 per W
Inverter 15 kVA / 208V AC /3 phase
Remote Meter for indoor system monitoring
Wires and Support/Mounting Materials
Installation Cost 200 hrs at $70/hr and 200 hrs at $35/hr
Maintenance Cost $0.015 per kWh
NOTE. The system AC output is calculated by multiplying the DC nominal system size by an inverter
efficiency of 0.90 to 0.94, a module de-rating factor of 0.88 and a DC transmission efficiency of 0.97 (3%
losses). Also, none of the above cost estimates include the use of outside funding in the form of rebates,
buydown funds, or other financial incentives that may be available from serving utilities or from State and
Federal programs.
rate of return (IRR) in the right range for this type of investment. Moreover, a positive
cash flow is obtained in the 6 to 7 years period following program implementation for
commercial and industrial buildings. This is a highly desirable result for a profit-oriented
28
operation. On the other hand, the positive cash flow occurs beyond 10 years for
municipal buildings and even longer for residential buildings, approaching 15 years.
However, the investment criteria for residential and municipal buildings are not
necessarily the same as for commercial and industrial ones. The former represent an
investment in private and public goods, respectively, while the latter represent an
investment to maximize medium and long-term profitability. It should be pointed out
that the more favorable cost-benefit figures for the commercial buildings have resulted in
part because both these types of buildings employ relatively smaller solar electric systems
compared to the building electricity demand. It should also be pointed out that the
considered cost for the hardware and installation of solar PV system is lower than current
prevailing costs. This favorable cost of the solar electric system has been based on two
factors as follows: (1) the City negotiating purchases of a fixed hardware quantity not to
fall below a pre-agreed minimum capacity in MW annually over a long period of time for
public and private buildings; and (2) the City succeeding in training several installers and
appropriately managing their labor costs. Both of these factors are critical for the success
of the Energy Program.
Table 1.5 Required Investment for the City of Santa Monica Energy Program,
Annual Revenues and Life-Cycle Cost (LCC) Effectiveness.
Investment Category & Building Sector
LCC Effectiveness Residential Commercial Industrial Municipal
Number of Buildings (#) 15,820 1,139 258 200
Investment
6
Energy Efficiency (x 10) $402.530 $145.734 $12.705 $15.823
6
Solar Energy (x $10) $504.165 $104.430 $35.400 $11.882
6
Co-Generation (x $10) $0 $194.422 $16.947 $15,262
6
Total (x $10) $906.695 $444.586 $65.052 $42.968
Average Investment (per#) $57,313 $390,330 $252,140 $214,840
Single Family Detached $26,682 N/A N/A N/A
Two-Four Units $83,374 N/A N/A N/A
Five or More Units $182,152 N/A N/A N/A
6
Annual Net Revenue (x $10) $43.1 $70.3 $9.0 $3.7
LCC Effectiveness
Period to Positive Cash Flow (yr) 15 6 7 11
IRR on Investment (%) 4 14 11 6
NOTES. IRR=Internal Rate of Return. The alternative investment of maximum solar electric power for
municipal buildings totals $85.498 million and has a payback approaching 20 years with an IRR of 4% per
year. The avoided price of electricity (peak or over baseline rate) is $0.16 per kWh for residential,
commercial and industrial customers and $14.5 per kWh for municipal buildings. Demand charges average
$7 per kW in the winter (Nov-Apr) and $14 per kW in the summer (May-Oct) for an average of about $10
per kW per month. The current commercial natural gas rate (GN10 tariff) averages about $0.75 per therm
and the co-generation gas rate per GN 10 for Tier III consumption averages about $0.60 per therm. N/A =
Non- Applicable.
29
The financing of the Energy Program represents a major challenge. First of all, we have
presented an all-encompassing Energy Program that can be easily reduced in scope with a
proportional reduction in the required investment. Thus, the high investment calculated
is not a showstopper. Beyond that, the City has a number of options at its disposal. The
exact financing mechanism or mechanisms will need to be investigated in detail as part of
a Pilot Energy Program to be instituted prior to the inception of the Energy Program
proper. This is necessary for a number of reasons, including building and gaining public
support, which is essential for the ultimate success of the effort as it will be discussed
shortly. The major advantage of the Energy Program in a city like Santa Monica is that
the cost represents a relatively small investment compared to the property values,
residential and non-residential alike. This fact does not make the implementation task
easier. It simply makes the Energy Program plausible from an investment point of view:
?The private money is there, but how to access it is the real issue.? This is where the
City?s participation as a catalyst for the implementation process becomes not only crucial
but imperative. Suffice to say that the goal for the City would be not necessarily to fund
the entire Energy Program, but rather utilize private sources for a portion of the total
investment covering the municipal buildings. Implementation of the Energy Program in a
large scale starting with the municipal buildings will generate the requisite installation
expertise and control installation costs, help bring down the hardware costs through long
term purchase agreements of a predetermined volume and generate the necessary
confidence in the private sector to follow suit. Thus, the actual investment that the City
needs to have access to is on the order of $43 to $85.5 million, which is still a large
amount, although easier to raise than the entire Energy Program investment. The City
can rely, for example, in issuing tax-exempt bonds to finance the municipal buildings
portion of the Energy Program. This is one of the options that need to be examined and
refined during the two to three year period of a Pilot Program preceding the Energy
Program. The investigation of the participation of major loan institutions to complement
the funding of the Energy Program needs to be addressed in the Pilot phase. Obviously,
the Energy Program funding will be secured in increments given the long duration of the
implementation effort.
Business Model for Implementing the Energy Program and its Cost to the City
A number of options have been considered regarding the structure of the implementation
of the Energy Program. It would appear that an organization must be set up tasked with
the several phases of the implementation process over the long life of the effort estimated
to be on the order of 15 to 20 years. Of these options, the one appearing to be the better
candidate is through a semi-autonomous entity, which is not tied to the daily operations
of the City, but which also remains under the oversight of the City. A proper balance
must be struck between these two requirements. The charter of this non-for-profit entity,
which we have named for identification purposes the ?Santa Monica Energy
Corporation? would be organized to perform a number of functions as follows:
30
-Audits or other evaluation techniques of Buildings for Suitability of
Energy Efficiency, Solar Energy and Co-Generation;
-Procurement of Requisite Equipment directly from the manufacturers in
order to reduce mark-up costs by middlemen;
-Training of qualified installers, mechanical, electrical and plumbing to
perform installation of equipment and maintenance after installation;
-Retention of one or two qualified engineering firms to provide drawings
for solar and co-generation equipment that meet the City?s requirements
-Disbursing of funding for different projects after they are approved by
another City agency such as Environmental and Public Works
Department;
-Collection of any fees from permitting and other negotiated benefits by
project owners to defray the administrative costs of the Energy Program.
Additional functions may be identified for the proposed agency or corporation. This
entity will start at a small but viable scale and expand as the Energy Program develops.
Given that the expansion of the Energy Program will follow a logistic or ?S? shaped
curve to cover all or most of the 17,500 structures city-wide, one can ascertain the size of
the Santa Monica Energy Corporation in terms of personnel and expenditures for labor as
well as for office space, publications and other promotional activities. Thus, the Energy
Corporation will have to deal with as many as 1,500 buildings per year at the peak of the
Energy Program some 13 years after its inception. At that point some 50% of the entire
building population of the City would have become part of the Energy Program by
implementing some aspect of it. According to the same model, the 10% and 90%
participation of the buildings in the Energy Program will occur 8 years and 18 years after
the inception. The model also assumes a two- to three-year period for the design of the
Energy Corporation as part of the aforementioned Pilot Program. It should be noted that
this rather ambitious implementation rate could be easily scaled down by design or out of
necessity to accommodate a smaller number of buildings, longer implementation times,
or both. In other words, there is no a-priory ability to determine the actual rate of
implementation.
The Energy Corporation may be staffed by no more than 5 senior personnel, including
persons with financial, legal anal technical expertise, and a number of junior to middle
level personnel involved with the mechanics of the implementation of the Energy
Program such as audits, selection of measures for specific sites, training, support and
supervision/checking of installations Using typical City of Santa Monica employee
salary rates for similar job descriptions, we have deduced the annual costs shown in
Table 1.6. The annual costs include besides salaries, rental costs for a modest office and
a relatively significant budget for publications, website maintenance and upgrading and
advertising to the community. Obviously, the operation of the Energy Corporation will
.
have to be managed well in order to reduce waste and inefficiencies
31
Table 1.6 Estimated Cost of Operating the Santa Monica Energy Corporation
during a 20-Year Implementation Period of the Energy Program.
Year Energy Program Phase Cost ($/yr)
1-3 Pilot Program/ 3 to 5 part-time personnel/25-50 bldgs/yr covered $275,000
8 Energy Corp/15 full staff/600 bldgs/yr covered/10% participation $2,100,000
13 Energy Corp/35 full staff/1,550 bldgs covered/yr/ 50% participation $3,725,000
18 Energy Corp?16 full staff/1,150 bldgs/yr covered/90% participation $1,710,000
NOTE. All costs are in 2003 dollars.
The City through one of its Departments most relevant to the nature of the Energy
Program such as the Environmental and Public Works could fund and provide some
personnel on a part time basis along with a few consultants in the early stages,
particularly during the two to thee years of the Pilot Program. After the Energy
Corporation has been established, the funding of the operation will have to come from a
dedicated source. One of several possibilities is the use of a small usury fee associated
with the signing up and participation to the Energy program by new customers. For an
Energy Program as large as $150 million annually at its peak, a 2.5% fee will suffice to
cover the operations of the Energy Corporation.
The oversight of the Energy Corporation will probably have to come from the City
Council, possibly in combination with members of the community. However, the Energy
Corporation must retain a degree of autonomy from City Hall politics in order to exercise
its charter in a more effective way. The nature, exact structure, authority and oversight
clauses of the Energy Corporation need to be worked out during the forming period of the
Energy Program, which will occur in the two to three year period of the Pilot Program.
Findings, Opportunities and Recommendations
Surveys of over 200 randomly selected buildings (residential, commercial and industrial)
along with as many as 50 municipal buildings and structures have been performed in
order to corroborate some of the findings of the analysis of the assessor database and the
aerial photograph database as already discussed. The surveys also included a number of
questions directed at the building owners and operators in order to obtain information that
could be used effectively in the implementation of the Energy Program. As it turned out
the survey provided a wealth of information. While several of the findings were
anticipated, others were totally unexpected and constitute therefore significant
information. In addition, the lessons learned from a recent involvement of certain of the
team members in the design and construction of a new multi-family residential building
were also compiled and useful information was derived that could be used to reduce the
cost of just about all elements of the Energy Program. Lastly, a review of earlier or
current regulatory measures and programs by other municipalities as well as states,
including the State of California, the federal government and even other countries were
32
evaluated to determine opportunities for action regarding the implementation of the City
of Santa Monica Energy Program. Based on the actions of other communities, states and
countries that have the most relevance to the City of Santa Monica Energy Program, we
propose a number of options and opportunities that ought to receive high priority for
inclusion in the Energy Program. We also summarize the most prominent findings from
the survey and lessons learned. In all cases we offer a recommendation or course of
action in response to the finding or opportunity that could be folded eventually into the
Energy Program.
The selected opportunities, major findings and possible actions and recommendations are
summarized below.
Of the large number of opportunities that the City may consider for inclusion in the
Energy Program the following five ought to receive a high degree of attention along with
the recommended actions.
(1) Production incentives for Solar Electricity on per kWh generated basis. This
incentive may be coordinated with pending similar programs by the federal government.
The local electric utility should be included as a partner in a way to be determined and in
order to reduce or neutralize the expected opposition of the local electric utility to the
idea of the Energy Program. This incentive encourages the participants to maintain their
systems properly, which has been up to now a major performance issue.
(2) Peak Demand Reduction through the use of concerted application of load demand
management, co-generation and solar power as appropriate. There is a significant
reduction in utility bill costs and there exist various types of incentives by the State for
residential and commercial buildings, including all the buy-down programs. The City can
invest its limited resources to take advantage of these opportunities for its own buildings
and also make the private sector aware of the same opportunities. Moreover, the existing
laws need to be modified by lobbying the State PUC and the State Legislature to extend
net metering to include also clean power site generation and increase the current cap.
(3) Federal and State Tax Credits. There exist a large number of available tax credits
for businesses and residents, which can reduce substantially the cost for energy efficiency
measures, solar energy and co-generation. The City can generate a comprehensive
summary of all these options with appropriate application forms and make the
information readily available to the public on a website.
(4) Mini Grid Creation. The possibility of employing a mini-grid to connect major
users and potential site-producers of power can increase efficiency in utilization and
reduce the investment cost by sharing power and in selected cases waste heat. The cost
savings will come from the reduction in installed peak load and fuel consumption for co-
generation and increased reliability (reduction in lost productivity) among potential users,
although such cost savings have to be balanced against the cost of the mini-grid. The
high concentration of commercial, industrial and municipal buildings in certain parts of
the city makes the mini-grid option a realistic prospect.
33
(5) LEED and Energy Star Programs The City can build into the permitting
process minimum energy efficiency requirements beyond Title 24 in exchange for
reduced fees, faster approval and/or cost and time saving mechanisms for the private
sector. The City may require certain documentation as proof of compliance by
employing the LEED template, but not requiring formal certification, which can be
costly. Likewise, the City can also require the purchase of Energy Star rated products by
citizens and business in exchange for reduced fees and expedited approvals. The same
must be true for all municipal buildings. The City needs to make the public aware of the
nature of LEED and Energy Star and must provide in a comprehensive fashion
information on the selection process centered around the all too frequently forgotten life-
cycle cost analysis as the economic justification for the likely higher initial investment.
The surveys of the buildings and the opinions of their owners and operators suggest the
following seven opportunities and recommendations for action as part of the Energy
Program.
(1) Improving Aging Buildings as a Social Goal. The entire Santa Monica building
stock is older and is therefore less efficient than it could be. This presents a liability and
an opportunity for change, in particular for municipal buildings, including schools. The
Energy Program can be justified as part of a bigger renovation effort that would benefit
the public beyond reducing energy bills by improving the working environment,
productivity, comfort and health.
(2) Streamlining City Permitting Process for Energy Innovation. The City personnel
involved in permitting new and innovative buildings throughout the City are not well
versed in new technologies yet. This complicates matters, raises the cost of innovation
and delays unnecessarily the progress. Moreover, the municipal code as a reference
document does not cover or is vague about solar electric energy and co-generation. The
relevant City personnel would need some type of training besides ?learning on-the-job?
and the municipal code must be augmented to address emerging energy technologies.
(3) Addressing Disconnect between Users of Energy and Owners of Buildings. In
most municipal buildings as well as residential, commercial and industrial ones the users
of energy are either not aware of the cost or have no control over it. The City can begin
improving the efficiency of several of its buildings rather rapidly through a walk through
audit of buildings and analysis of utility bills. Moreover, certain City ordinances
designed for other purposes (rent control) have unintended consequences on energy by
discouraging the use of solar energy or energy efficiency or co-generation city-wide. The
City can set the example of improving the efficient utilization of energy in its own
buildings as a first step in the Energy Program and advertise the results at the Energy
Program website, before contemplating the installation of solar energy or co-generation.
(4) Reducing Transactional Costs. The public at large and businesses are too busy
with everyday activities and have little time or inclination to do something about
reducing energy costs. Moreover, people and businesses alike tend to be risk averse so
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that any large-scale change such as the implementation of the Energy Program cannot
and will not happen by itself on a purely voluntary fashion. The City and only the City
through a properly constituted agency or organization such as the already mentioned
Santa Monica Corporation is ideally suited to spearhead this effort.
(5) Reliable Information Clearing House. The public has limited knowledge as to
how to go about reducing their utility bills. Moreover, incomplete or wrong or
conflicting information on solar power and other technologies from a variety of sources
compounds the problem. The community is looking for information, but has no
comprehensive place to look for it. The City agency can create a clearing-house of
information on energy efficiency, including information on LEED and Energy Star
programs, solar energy and co-generation. To this end, the creation of a website would
be the ideal introduction of the Energy Program to the community. The website will be a
great public service asset.
(6) Accessing Funding and Reducing Costs. The City agency has several instruments
at its disposal to access funding as well as reduce and control associated costs in order to
promote the city-wide implementation of an Energy Program. These instruments include:
portfolio loan guarantees; municipal tax exempt bonds; non-compliance fees for those not
participating in the effort; aggregation of purchases of energy efficiency; solar and co-
generation equipment to reduce hardware cost; and installation cost control by training
and approving qualified companies to support the needs of the community.
(7) Cultivating Community Energy Program Approval and Support. Citizens are
concerned about the cost of any new program, may be distrustful of the local government
trying to create or impose something new and do not want to be the first to join in the
effort unless their neighbors or colleagues do. The City agency needs to create gradually
an atmosphere of cooperation among the citizens based on (a) responsibility (take charge
toward the common goal rather than comply with rules), (b) broad interests with short
term incentives (community goals instead of narrow self-interest), (c) identity (possibility
for involvement for the common good) and (d) principle (uphold ideals in the course of
4
complex decision making while respecting opposing views).
The function of the Energy Program is to provide over time the necessary assurance,
information and support to catalyze the community into action in accordance to the set
vision and goals. In other words, the Energy Program needs to fill the leadership vacuum
that is necessary to bring about a change and a paradigm shift. The approach of a city-
wide Energy Program, however it is going to be constituted in the end, represents a major
departure from the traditional business as usual approaches in implementing energy
programs. This departure entails:
I. An integrated approach in dealing not only with solar energy or only with energy
efficiency or only with co-generation, by rather by combining all three elements
together in a holistic fashion to maximize efficiency and minimize costs, i.e.,
4
Philip Selznick, ?The Communitarian Persuasion?, Woodrow Wilson International Center, Washington,
DC and UC Berkeley, CA, 2002.
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realize a pragmatic approach to sustainability, rather than stove piping the
implementation process.
II Bring about a major change and shift in thinking by addressing, engaging and
meeting the energy needs of the entire community rather than carrying out limited
scope demonstrations within the community that provide no long-term ability for
replication and propagation.
Undoubtedly the community or city-wide Energy Program spearheaded by an appropriate
City controlled entity, e.g., the Santa Monica Energy Corporation, represents a far more
challenging venture that has the capacity to advance the discourse as opposed to the more
traditional approaches by local governments in the energy arena of relatively low
resistance - low yield projects. The aforementioned 12 opportunities/recommendations
for action need to be considered for inclusion in designing the Energy Program for the
City of Santa Monica.
As we have mentioned already on numerous occasions, the Energy Program requires
careful thinking and strategic planning before it can get off the ground as a viable
operation. To this end, a Pilot Energy Program would be necessary as the precursor to
the main Energy Program. This Pilot Program will last for an anticipated period of two
to three years during which time a number of important issues such as the 12
opportunities and recommendations already outlined must be addressed and be given
satisfactory answers. The Pilot Program needs to accomplish a minimum number of tasks
and objectives and has to be structured accordingly. These objectives may include the
following:
- Carefully select demonstrations in a number of building sites across the City,
where Energy Programs can be implemented with a high degree of success, including
high yield low cost installations, to create a benchmark for other citizens. As many as 25
sites may be selected initially and more may be added in the second or third year.
Municipal sites should be among them. In all cases, the building owner has to be a
willing participant by either co-sharing some of the expenses or contributing in some
fashion.
- Develop a website serving as an information source for the community to learn
about energy efficiency, solar energy and co-generation, obtain useful facts about buy-
down programs, incentives and tax credits, ensure that the website is well publicized and
ask citizen opinions with respect to fashioning an Energy Program. The website would
expand gradually over time to include performance and cost data from City and other
installations.
- Study options regarding the optimal structure and finance of the operation of an
Energy Corporation within the constrains of the existing legal framework and by talking
into account potential legal challenges from those who may perceive such an entity as a
threat. As part of this process, address options and make recommendations regarding the
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raising of the funds required to include municipal buildings to the Energy Program from a
variety of possible sources including municipal bonds.
- Cultivate community participation and support for the Energy Program through
regular town hall meetings where citizens can exchange opinions and argue for or against
the Energy Program. These meetings can be moderated by the City and could help build
community involvement and community buying into the concept. These meetings along
with the website could also provide a lot of common sense wisdom to those designing the
Energy Corporation.
The City of Santa Monica and many of the businesses and residents are strong advocates
of renewable energy resources and green building techniques. While past contributions
of the City to environmental stewardship have served as a bellwether for the nation and
although Santa Monica boasts several notable solar and other installations, market,
regulatory and other barriers have kept solar energy and several environmentally benign
energy technologies from establishing a stronger presence not only within the City?s
boundaries, but also throughout the nation. The creation of a city-wide Energy Program,
comprised of an integrated approach in combining solar energy, co-generation and energy
efficiency to be administered by a suitably constituted entity, i.e., the ?Santa Monica
Energy Corporation? offers the best solution for a paradigm shift at the present time. The
Santa Monica Energy Corporation should be an autonomous, but City regulated entity,
which would provide all the necessary services to the community to reduce inertia,
mitigate risk by providing reliable information and evaluating the viability of projects,
facilitate financing and build community participation. A Pilot Energy Program should
be created to pave the way toward the establishment of the ?Santa Monica Energy
Corporation? and the formulation of the Energy Program, which could begin being
implemented within three years following the inception of the Pilot Program.
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FIGURE 1.1 Location of Residential Buildings in the City of Santa Monica
(Based on County Assessor Building Design and Classification Codes 0xxx).
38
FIGURE 1.2 Location of Commercial Buildings in the City of Santa Monica (Based
on County Assessor Building Design and Classification Codes 1xxx and 2xxx).
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FIGURE 1.3 Location of Industrial Buildings in the City of Santa Monica (Based
on County Assessor Building Design and Classification Codes 3xxx).
40
FIGURE 1.4 Location of Institutional (Churches, Private Schools, Hospitals,
Private Utilities) and Government Owned Buildings (Public Order and Service,
Public Schools, Transportation, Utilities, Right of Way) in the City of Santa Monica
(Based on County Assessor Building Design and Classification Codes 7xxx and
8xxx).
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Attachment B
Demonstration Project Tasks and Proposed Schedule
Outcome TasksTask
Schedule
(Month)
Install Integrated Solicit volunteers from residential, 1-6
1.
Energy Systems commercial, and industrial sectors to
in Up to 50 participate in integrated energy
Demonstration demonstration project.
Project Sites Enter into MOUs with prospective suppliers 1-6
2.
of solar photovoltaic equipment, solar
thermal equipment, distributed generation
products, energy efficiency products to
guarantee purchase prices in exchange for
product placement opportunities.
Pre-qualify contractors and maintenance 1-6
3.
service providers.
Develop evaluation criteria for engineers 1-6
4.
surveying potential demonstration project
sites.
Sales/Implementation Process: Develop and 1-24
5.
implement the pilot project sites with energy (ongoing)
efficiency measures, solar and co-generation
systems.
Develop monitoring program for all 1-24
6.
demonstration sites that is linked (ongoing)
electronically and can be accessed on the
website.
Prepare Draft Explore feasibility of establishing an energy 1-18
1.
Implementation cooperative or other legal entity to deliver
Plan for CEII CEII services to the community; i.e.,
community-wide governance, administrative, legal, financial
issues.
Discuss the economic viability of establishing 1-18
2.
a CEII with local banks and potential third
party financial partners.
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Explore partnerships with other local 1-18
3.
cooperatives and credit unions.
Collaborate with representatives from 1-18
4.
SMMUSD, SMC, and private schools on
identifying a potential role in the CEII.
Collaborate with local environmental 1-18
5.
organizations on potential role in CEII.
Hold community meetings to solicit public 1-18
6.
input and feedback on establishment of a
CEII.
Draft a consensus-based implementation 1-18
7.
plan to take to City Council for review and
approval.
Develop Website/ Establish CEII website that serves as 1-3
1.
Marketing Plan for information source to community on
Community-wide demonstration project sites, CEII, and
CEII integrated energy systems.
Collaborate with potential partners on 1-18
2.
development of a marketing plan for the
CEII.
Draft an RFP for marketing and 24
3.
communication services for a community-
wide CEII upon Council?s approval.
Prepare Revised Update City?s energy performance 1-4
1.
Standards and requirements for new construction and
Guidelines for substantial remodels of multi-family and
Review and nonresidential buildings.
Permitting of CEII Analyze potential energy savings and cost-1-6
2.
Projects benefits of developing a retrofit upon sale
ordinance for all existing buildings and
present to City Council.
Establish revised standards for installation of 1-12
3.
solar photovoltaic, solar thermal, and
distributed generation systems.
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