6d memo
COMMISSION AGENDA MEMORANDUM Item No. 6d ACTION ITEM Date of Meeting December 12, 2017 DATE: December 4, 2017 TO: Dave Soike, Interim Executive Director FROM: David McFadden, Managing Director, Economic Development Nick Milos, Manager, Corporate Facilities Terrance Darby, Energy and Sustainability Program Manager Catherine Chu, Capital Project Manager SUBJECT: Pier 69 Solar Energy Implementation (CIP #C80888) Amount of this request: $515,000 Total estimated cost to the Port: $332,500 ACTION REQUESTED Request Commission authorization for the Executive Director to accept a Washington State Department of Commerce grant for a maximum of $317,000, and develop, advertise, and execute a Public Works Building Engineering Systems Contract for the Pier 69 Solar Energy Project, with an estimated total project cost of $515,000. EXECUTIVE SUMMARY This project will involve the installation of a roof-mounted photovoltaic (PV) system at Pier 69, the Port of Seattle Headquarters. The PV system is designed to generate approximately 100,000 kWh annually. The total estimated project cost is $515,000. Washington State Department of Commerce awarded a grant to the Port for up to $317,000 to be equally matched by Port funds for eligible costs. A Public Works Building Engineering Systems contract will be procured under state public works law to implement the project, which has potential to further improve project efficiency, reduce risks, and minimize costs. The Pier 69 Solar project directly supports the Century Agenda Goals to meet future energy needs through conservation and to reduce greenhouse gas emissions. JUSTIFICATION Economic Development Supports jobs in the solar energy industry by using in-state sourced solar panels and local installation contractors. Demonstrates the Port's leadership in producing clean energy Template revised September 22, 2016. COMMISSION AGENDA Action Item No. 6d Page 2 of 6 Meeting Date: December 12, 2017 Environmental Responsibility The array replaces nearly 100,000kWh grid-produced electricity use annually and generates 3,300 MWh of renewable energy over the life of the panels Reduces greenhouse gas emissions by 1.5 MtCO2 annually and by 49 MtCO2 for life of project Complements other sustainability projects at the facility Community Benefits Demonstrates the Port's commitment to be the greenest and most energy efficient port in North America DETAILS The proposed project would install a roof-mounted PV system, which would generate nearly 100,000 kWh annually. The estimated life span of the project is 33 years. The system provides approximately 4% of the annual power demand for the P69 facility. Using the current electricity utility base rates, the PV system will offset approximately $11,000 annually in electricity costs. The estimated payback period for the project is 24 to 30 years depending on future electricity rate increases. Over the life of the PV system, the project will save the Port between $586,000 (3%/yr. increase) to $885,000 (5%/yr. increase) in utility payments depending on the annual electricity rate increases. Scope of Work The scope of the project includes installation of approximately 328 monocrystalline solar panels produced in Washington State. The panels will mount on the sloped, metal-clad portion of the roof. The scope also includes installation of inverters, remote monitoring, metering, and other electrical infrastructure work to run solar power to the main electrical panels adjacent to the lobby on the first floor. The work will be competitively procured as a building engineering systems contract. In accordance with RCW 39.04.290, the Port may award contracts of any value for the design, fabrication, and installation of building engineering systems, by using a competitive bidding process or request for proposals process where bidders are required to provide final specifications and a bid price for the design, fabrication, and installation of building engineering systems, with final specifications being approved by the Port. This procurement strategy was chosen because a simplified and self-contained turn-key solution is available and equipment represents a large percentage of the project cost. Further, this provides opportunities for quality, efficiency, and risk reduction for the Port. Port staff will provide project administration and oversight. Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. 6d Page 3 of 6 Meeting Date: December 12, 2017 Small Business Elements within the scope of work may provide small business opportunities. The project team is coordinating with the small business team in the Office of Economic Development to help identify and outreach to those small businesses that may be interested in this project. Schedule Commission authorization December 2017 Construction start Q2 2018 In-use date Q4 2018 Cost Breakdown Port Staff (not grant eligible) $150,000 Construction (incl. sales tax) $365,000 Total Project Cost $515,000 Expected Grant Reimbursement (50% of ($182,500) construction costs) Total Cost to the Port $332,500 ALTERNATIVES AND IMPLICATIONS CONSIDERED Alternative 1 Continue using grid based power sources and decline Department of Commerce grant. Cost Implications: No additional investments. Pros: No use of Port Capital Development funds and grant funds. Cons: 1) Will not reduce annual electricity costs requiring starting at approximately $11,000 in the first year or $586,000 (3%/yr. increase) to $885,000 (5%/yr. increase) in utility payments over the life of the project; 2) Will not encourage clean energy industry in state of Washington; 3) Will not reduce greenhouse gas emissions by 1.5 MtCO2 annually and by 49 MtCO2 for life of project; and 4) Will not build a locally produced, clean, renewable electricity production facility and will not demonstrate in a concrete fashion observable to the community the Port's leadership in producing clean energy while utilizing Washington-based industries. This is not the recommended alternative. Alternative 2 Accept grant and install 100kW solar array on P69 using traditional design-bidbuild project delivery system. Cost Implications: Most likely greater than $515,000 in total capital investments. Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. 6d Page 4 of 6 Meeting Date: December 12, 2017 Pros: 1) This is a traditional project delivery method; 2) Port has existing processes defining each step; and 3) Award of construction contract is based on low bid which makes the process easier. Cons: 1) Low bid companies may not be the best qualified; 2) Increased potential for conflicts between the designer and contractor; 3) Less efficient process when separating design from construction; 4) Less opportunity for contractors' innovation and input during design; and 5) Port may specify non-optimal solutions and forego best ideas from those most familiar with these types of projects. This is not the recommended alternative. Alternative 3 Accept grant and install 100kW solar array on P69 using Building Engineering Systems project delivery process. Cost Implications: Estimated at $515,000 total with net cost of $332,500 to the Port after grant reimbursements. Pros: 1) Provides an additional opportunity for the Port to invest in solar energy; 2) Demonstrates Port's efforts towards meeting Century Agenda Goals; 3) Solar panels will be purchased from a Washington-based company; encouraging and sustaining local renewable energy industry; 4) Project offsets 100,000 kWh grid-produced electrical energy annually and defers generating 3,300 MWH over the life of the project with renewable energy source; 5) Reduces greenhouse gas emissions by 1.5 MtCO2 annually and by 49 MtCO2 for life of project; 6) Reduces electrical energy costs for the facility in the first year by approximately $11,000. Cumulatively, the project will save $586,000 (3%/yr. increase) to $885,000 (5%/yr. increase) depending on the rate of electricity cost increases. Solar would provide 4% of total energy usage for the P69 facility; 7) Produces 7.7 jobs from buying solar panels in WA State and using local installation contractors; and 8) Building Engineering Systems delivery process allows the Port to combine design and construction into one contract and select a contractor with best combination of qualifications and cost. Cons: 1) Investment cost to produce kWh ($3.23/kW) still much greater than cost to provide from existing grid with similar renewable energy credit; 2) Investment cost per ton CO2 emissions avoided for life of project varies from $3,000 MtCO2 to $4,000 MtCO2 for life of project based on range of projected electricity increases of 3% to 5% yearly; and Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. 6d Page 5 of 6 Meeting Date: December 12, 2017 3) Other energy efficiency projects may provide increased environmental benefits for less cost. This is the recommended alternative. FINANCIAL IMPLICATIONS Cost Estimate/Authorization Summary Capital Expense Total COST ESTIMATE Estimate $515,000 $0 $515,000 AUTHORIZATION Previous authorizations $ 50,000 0 $50,000 Current request for authorization $465,000 0 $465,000 Total authorizations, including this request $515,000 0 $515,000 Remaining amount to be authorized $0 $0 $0 Annual Budget Status and Source of Funds This project was included in the 2017 Plan of Finance under CIP 800888 P69 Solar Panel System at an estimated total cost of $1.2M. This project will be funded by the General Fund. Financial Analysis and Summary Project cost for analysis $332,500 Assumes reimbursement of $182,500 from WA Department of Commerce grant. Business Unit (BU) Pier 69 Facilities Management Effect on business performance On average, this project is expected to increase NOI after (NOI after depreciation) depreciation by approximately $2,000 to $11,000 annually, over the project's 33 year life, depending on the expected growth in grid-based electricity rates.* IRR/NPV (if relevant) IRR: 3.4% to 4.7% NPV: ($149,000) to ($203,000) *Range reflects assumed annual electricity rate increase of 3% and 5% CPE Impact N/A Future Revenues and Expenses (Total cost of ownership) The project assumes annual energy production of 100,000 kWh per year over the expected 33 year life of the system. Energy savings are based on an initial rate of $0.1003/kWh and growing at 3% to 5% per year. Future expenses included annual maintenance for cleaning and an inverter replacement at year 15. Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. 6d Page 6 of 6 Meeting Date: December 12, 2017 ATTACHMENTS TO THIS REQUEST PowerPoint Presentation PREVIOUS COMMISSION ACTIONS OR BRIEFINGS None Template revised September 22, 2016; format updates October 19, 2016.
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