Renewable Energy

Energy Oversight Committee Report
November 18, 2009

On January 29, 2009 former Chancellor Mark Drummond requested a new ad-hoc committee called the Energy Oversight Committee be convened. The committee’s first meeting was held on February 12, 2009. Comprising the members:

Ernest H. Moreno    Chairperson, President- East Los Angeles College
David Beaulieu    President, District Academic Senate
Roland Chapdelaine    President, Los Angeles Trade-Tech College
Larry Eisenberg    Executive Director, Facilities Planning and Development
Donald Gauthier    President, Academic Senate, Los Angeles Valley College
Jeanette Gordon    Chief Financial Officer/Treasurer
Marvin Martinez    Vice Chancellor for Economic and Workforce Development
Jamillah Moore    President, Los Angeles City College

The specific objective of the Energy Oversight Committee was to analyze and study all aspects of a district-wide renewable energy program proposed by the Executive Director of Facilities and Planning, Larry Eisenberg, including new technologies, funding, financing mechanisms, and for this committee to report their findings and recommendations to the Chancellor upon completion.

Throughout the course of the study, various individuals and entities presented both technical and financial information and data for our review. During our assessments and deliberations of all the technologies under consideration strong emphasis was placed on their viability in terms of financial and technical risk.

Please note, some technologies were initiated prior to the formation of the Energy Oversight Committee and expenditures of bond monies for such initiatives were authorized without the benefit of our review. Therefore, we are reporting retroactively.

While we are cognizant of our responsibilities to protect the environment this desire must be tempered by the current economic climate and available Bond resources.

Some technologies reviewed are not “renewable”; however, they have a significant impact on the performance of those technologies which are renewable in terms of efficiency and economy.

The committee concludes that some technologies carry minimum risk and are without question beneficial to our campuses. Recommended technologies are considered core technologies for all campuses, and as such are the building blocks for future technology as it develops.

The mandatory core technologies are: (Recommended)
1. Central Plants & Thermal Energy Storage [Ice Farms]
2. Solar Photovoltaic Arrays
3. Solar Thermal Systems
4. Micro-Turbine Generators

Non-mandatory technologies are: (Not recommended at this time)
5. Hydrogen Fuel Cell Systems
6. Electrical Energy (battery) Storage Systems
7. Wind Turbines
8. Geo-Thermal Systems

New Technologies

1. Central Plants & Ice Farms

The majority of campus buildings are currently served by individual small-scale cooling systems. Such systems are prone to high operating costs, are labor intensive with multiple maintenance points, have a short equipment life, and are noise pollutants. Sizing equipment for individual building loads represents a large capacity investment in energy consumption and electrical demand. In other words, all machines must be brought on-line simultaneously, even in low demand periods, resulting in a lower efficiency and economic operation with increased pollutant emissions to the atmosphere.

To overcome these shortcomings a Central Plant will house all the equipment necessary to provide campus cooling and heating requirements. The day-to-day running of the Central Plant is more or less a hands-free operation and is controlled by the campus building automation and energy management system.

The benefits of a Central Plant as opposed to individual systems at building level are numerous. Fewer pieces of equipment are required to achieve the same objective. For example, in the Central Plant two or three machines can satisfy the total campus cooling demand compared to ten or twenty smaller units installed in each building. In terms of operation this is much more efficient.

Fewer machines means less maintenance in terms of manpower and other resources necessary to keep the plant operating at optimum performance. A central plant has built-in redundancy since two or more machines are always available in the event of a breakdown. Therefore, there will always be chilled water available to all buildings which may not be the case with a local system where only one cooling device serves a set number of classrooms.

A centralized system is easier to control and is able to react faster to fluctuations in load. All of this translates into reduced operating and maintenance [O&M] costs.

A compelling justification for a Central Plant is that a centralized system enables us to take advantage of energy conservation measures that are not feasible on large multi-story buildings. Installing a thermal energy storage system (TES) is one high profile example. Such a system allows us to make chilled water during the night and store it in tanks for later use during the day.

The cost of electricity is much cheaper at night and instead of paying high demand charges for a unit of power during high peak periods that same unit of power is used at night when costs are minimal. Although the same amount of energy is consumed albeit in a different time frame, we do actually conserve energy, indirectly. Shifting demand for power from daytime high usage periods relieves the stress placed on utility power stations, enabling them to conserve power generation and in so doing reduce carbon emissions.

Recommendation

Central Plants and thermal energy storage [TES] systems are well established and proven technologies, providing high economic and technical benefits. An additional benefit is that shifting power demand from daytime reduces the amount of photovoltaic and other renewable systems needed, with an associated reduction in capital cost.

This committee recommends that Central Plants with associated thermal storage systems be constructed on all campuses to garner the high economic and environmental savings available. In addition, the committee recommends the expansion of existing Central Plants to accommodate all new buildings constructed under Measure J and in so doing accrue the additional savings available.

2. Solar Photovoltaic Arrays

Solar photovoltaic [PV] is a core technology of the Renewable Energy program for generating electricity from the sun. This is truly a cost-free electricity generating technology since there is no charge for capturing the sun’s energy. Three systems have been identified as beneficial to the campuses:

PV panel systems are solar cells attached to rigid panels and as such are well suited for installations as canopies on large-footprint parking lots, parking structures, and designated rooftop applications. In parking applications the main consideration is the use of much needed available space while shading for vehicles is a bonus. In rooftop applications, again making use of available space, the bonus is much cooler buildings since the sun’s heat is reflected away from the roof.

PV systems known as “thin-film” are systems where the solar cells are fixed to a flexible membrane instead of a rigid panel. Being much lighter, these systems are designated for covered walkways and rooftops that are not structurally capable of supporting heavier rigid PV panels.

Concentrated solar PV [CSPV] systems use, mirrors or other reflective materials to concentrate sunlight onto high-efficiency solar cells to generate electricity. These arrays can be mounted on poles or ground mounted as space permits. Focusing sunlight in this way makes for a smaller array and at the same time increases efficiency.

Recommendation

Solar PV is an approved core technology for all campuses and is highly recommended. Which systems to employ, will be a decision based upon the geographic constraints of each campus.

3. Solar Thermal Systems

Solar thermal technology generates high temperature water using energy from the sun. The water is stored in tanks and used for heating in the winter and cooling in the summer. The water can also be used to provide domestic hot water and for heating swimming pools. Using the sun’s energy in this way reduces our consumption of natural gas since fewer boilers need to be started up. Since the boilers are used less frequently they will last longer and require less maintenance, extending the life of the plant and equipment.

In the summer the hot water provides energy to drive special absorption chillers which provide cooling and in so doing reduces our electricity consumption.

Recommendation

Solar thermal technology is a mature technology with low risk and many benefits, offering an economic, environmental, and easy to maintain alternative.

Solar thermal systems are a core technology for taking advantage of a sustainable energy source, the sun, and highly recommended by this committee for installation at all campuses. The system was recently installed at LAVC and is performing beyond expectations.

4. Micro-Turbine Generators

Micro-turbine generators [MTG’s] are small machines that generate electricity and heat energy. Operating on natural gas a large amount of heat is produced and usually discharged up the stack. An alternative approach is to harness this heat energy and make hot water which can then be utilized for heating and cooling purposes as described in section 2 above. This has tremendous environmental and economic advantages because now a single fuel, natural gas, produces electricity, heating, and cooling. This reduces the number of machines needed for air-conditioning, i.e. chillers and boilers.

MTG’s also provide a buffer for solar PV systems; on cloudy days when PV systems generate less electricity the shortfall is made up by the MTG’s. Another advantage of these electricity generators is to provide emergency power generation for campuses designated Community Emergency Centers (neighborhood natural disaster assembly points), as is the case at ELAC.

Currently, LAPC, LAHC and LAVC have small systems installed and ELAC has a 500kW system included in the Central Plant project.

The only downside to this technology is the use of natural gas as a fuel, though the emissions, including carbon dioxide, are in compliance with the rules established by both SCAQMD and CARB regulating agencies.

Recommendation

Although these MTG’s run on natural gas it is far more cost effective to operate them than to pay for the electricity which would be needed when the PV systems are operating under cloudy conditions. Technically, these machines are tried and tested throughout the world and are certified for use under the stringent emission controls in force in California and the committee approves their use on all campuses with PV installations.

5. Hydrogen Fuel Cell Systems

Unfortunately, the only fuel cells available and capable of providing campus base load power requirements operate on natural gas or other hydrocarbon fossil fuels. There are smaller fuel cells which run on hydrogen but they are designed for use as backup power systems (for example, IT server applications). For this reason hydrogen-fuelled fuel cells cannot be considered for base load applications.

In 2008 3rd Rock proposed a 1MW fuel cell to satisfy base load at LAMC. After checking the validity of this proposal it was pointed out to 3rd Rock that this solution did not exist. They subsequently revised their proposal and substituted the fuel cell with internal combustion engines converted to run on hydrogen. However, these engines are not certified by the California Air Resource Board [CARB] or the South Coast Air Quality Management Division [SCAQMD] and, therefore, would not be issued with operating licenses.

Recommendation

At this time there are no viable hydrogen fueled fuel cells designed for base load applications.

6. Electrical Energy (battery) Storage Systems

LACCD is considering battery storage technologies for storing electrical energy generated by PV arrays. The purpose of these systems is to store excess energy generated during the day for later use as a source of energy when the sun is not available. A key issue when storing excess power in a battery system is that a fraction of the produced power is lost when charging and discharging the battery. This corresponds to a larger requirement of PV compared to using the grid as the storage option.

The system of interest is commercially available and has undergone testing by the Department of Energy in Northern California. It is UL listed, CEC approved and complies with all local, state and federal regulations. The system was recently used for energy storage at the Olympic Games in Beijing.

LACCD recently requested funding from the DOE in a “Recovery Act – Smart Grid Demonstration” application to cover the materials and installation costs for 3 x 500kWh flow batteries. The grant valued at $4,500,000 has been awarded. The energy storage system will be installed at LASC as part of an overall Smart Grid installation involving solar PV, battery storage and enterprise management system.

Recommendation

An immediate benefit of the battery storage system is the ability to shift campus energy usage from high peak to low peak tariff periods and thus reduces energy costs. These systems are load shifting devices and the committee approves their use when significant savings can be demonstrated and grants or incentives are available to defray costs.

7. Wind Turbines

The District has been investigating the feasibility of wind turbines for generating electricity. The turbines of interest are designed specifically for operation in urban areas and occupy a much smaller footprint than conventional tower mounted axial turbines. The turbines are small 1kW generators that can be mounted on the roof parapets of campus buildings and are angled such that they take advantage of any updrafts created by the buildings.

Decisions were taken to install one or more of these turbines prior to the formation of the Oversight Committee. Aero-Vironment, a local company based in Torrance, who manufactures architectural wind turbines, was chosen to provide 1kW units for each campus. It is understood that these small installations will not contribute to campus demand reduction but will provide a mechanism for recording wind data for determining which campuses are suitable for expanding the technology and which are not. Since the turbines are intended for wind speed measurement purposes they will be available for educational purposes if so desired.

Architectural Wind Turbines are eligible for financial incentives under the auspices of the California Public Utilities Commission; however, incentives are dependent on suitable wind data being available at proposed sites to confirm minimum wind speed requirements.

Recommendation

To date one wind turbine has been purchased. It is the opinion of this committee that no further capital investment be made in this technology until minimum required wind conditions have been establish on all campuses.

We recommend the purchase and installation of weather stations at each campus to monitor wind conditions 24/7 for one year to determine those campuses suitable for this technology. These weather stations costing $2,500 each are a much more cost effective and economical method for obtaining data and will have the added advantage of measuring other weather related parameters, i.e. hours and strength of sunshine, temperature, rainfall. During this period the wind turbine previously purchased can be demonstrated at each campus on a monthly rotational basis.

8. Geo-Thermal Systems

Geo-thermal is a sustainable technology for heating and cooling buildings. This technology relies on the fact that the Earth (beneath the surface) remains at a constant temperature throughout the year, relative to the air temperature which is colder in winter and hotter in summer; a cave would be a good analogy. Heat extracted from buildings is piped into the earth via a closed pipe loop. Hot water carrying the heat is pumped down the pipes where the heat is released. Cool water returns to the building where it is used for air conditioning.

Geothermal systems are considered low-maintenance heating and cooling systems, but they do require consistent monitoring to ensure their systems are balanced. If systems aren't properly managed, the ground temperature around the wells can gradually increase, which can then dramatically decrease the geothermal system's efficiency.

LACCD retained Geo-Exchange experts (Haley & Aldrich Inc) to undertake a feasibility study at all campuses to determine the viability and costs of these systems. In the study, two possibilities were discussed, using Pierce College as the basis for modeling.

Option 1 would improve the Central Plant efficiency and save 78,000kWh per annum valued at $15,000. The cost of a geo-thermal system for this application lies between $1,300,000 and $2,400,000 depending on the number of wells that need to be drilled.

Option 2 installed in a 35,000ft2 building would save 20,400 kWh per annum valued at $4,623. The cost of a geo-thermal system for this application lies between $395,000 and $715,000, again depending on the number of wells that need to be drilled.

Eliminating costs as an obstacle, there remains a certain degree of risk from an operational point of view due to climatic conditions in the Los Angeles area. The technical risks arise when too much heat is pumped into the ground saturating the well-field and making it unusable. Should this happen, the well-field would require many years to recoup or rehabilitate. As mentioned earlier, constant monitoring of the well-field is extremely important to avoid a catastrophe, and some form of heat dissipation will be required.

Recommendation

While it appears that geo-thermal systems would produce savings, they are minimal in relation to the high capital installation costs and could be considered cost prohibitive, unless substantial grants and incentives are available to pay for them. However, when the technical risks are factored in, the committee does not recommend spending bond dollars on this technology. Given appropriate external funding, the potential installation of geo-thermal technology should be studied and considered for each campus on a case by case basis.

Summary Recommendation:

The committee supports the use of bond dollars to construct solar-based technologies, such as solar photovoltaic arrays and solar thermal systems. Furthermore, the committee encourages the exploration of other alternative technologies, such as wind turbines and geo-thermal systems. However, at this time, these technologies should be used for educational and demonstration purposes only. Funding sources such as grants must be utilized for implementation.

Financing and Funding Considerations

As mentioned in the technical summary of this report, the Energy Oversight Committee also examined the financial risks of alternative energy technologies. There are at least three key variables involved:

1. The cost of energy that would be displaced by the project today

2. The changes to the cost of energy over time (inflation rate)

3. The discount rate, which should reflect the risk of the asset and the time value of money

These three variables were used to project the benefit or cost of the alternative energy investments. Based on these assumptions, it was concluded in late May that the cheapest way to finance energy projects was with a Power Purchase Agreement (PPA), which takes advantage of allowable tax credits and depreciation benefits that are passed through the private developer and the investor.

In the bond program’s original plan it was determined that it would take approximately $261 million in tax equity capital to complete all energy projects for all campuses, but we were only able to utilize $110 million. Shortly after this point, in February of this year, the committee began to meet. It determined that the focus should be on the proposed $47.2 million of Southern California Edison (SCE) service area projects that could be done in 2009, rather than projects in the DWP service area. Given that the District had no agreement in hand with DWP, and that it appeared highly unlikely that issues would be resolved to allow installation and switches to be turned on by 12/31/09, as would be required in a PPA, the committee felt that the District should not subject itself to the risk of paying "commitment fees." These were stated as possibly being 2-3% of the $62.8 million in projects in DWP territory. Quality projects such as LACCD's would be able to attract tax equity investors for 2010 projects if the District made a decision for more solar installations.

Certainly at this point no project should be greater than 1 Megawatt (MW) per campus per year (unless incentives are increased on an annual basis). (The California Solar Initiative provides a subsidy for 5 years, but only for 1 MW per campus at present.)

These conclusions were based in large part on the results of an analysis done by an independent financial advisor, First Southwest. Their assessment, based on the materials provided to them from the investors and a review of the district’s current energy costs, was that a PPA would at least not be a financial loss to the district, though it was not likely to be nearly as profitable as the investors were suggesting.

The report from First Southwest demonstrates that the economic benefits from the project are in fact very uncertain (this is true irrespective of how the project is financed). The potential energy ‘savings’ that would be realized immediately are less than may have been initially presumed as the result of a more comprehensive analysis that reviews the actual LACCD rate structure in the SCE service territory taken in conjunction with campus demand schedules, solar production curves, etc. Whether LACCD will ultimately benefit from the projects will, however, also largely depend on what happens with respect to future energy prices. No one can guarantee whether the projects will turn out to be of positive net present value to LACCD.

The PPA structure could be the most cost effective alternative, primarily due to federal tax incentives (i.e., tax credits and depreciation benefits available to for-profit partners). The PPA structure does, however, present various risks that should be weighed against the cost savings (savings here are relative to other financing options such as tax-exempt bonds). Under the PPA structure, LACCD can expect its total energy cost to increase in the near-term and savings, if any, would materialize at a later date.

Since that time, however, the committee has discussed PPA’s much further. New objections have arisen. For example, it has not yet seen an actual agreement from Chevron/Hannon Armstrong, and it does not know what the actual energy cost (which is tied to the time of day of usage) will be. Some outside analyst have suggested that the actual cost could be a great deal higher than was predicted in April and May.

Additionally, access to immediate cost savings to campus budgets is not available through a PPA approach. Campus energy costs will continue more or less at the same rate as though we had not installed PV’s for a period of six years. At that time we would purchase the PV’s at a discounted price and receive direct benefit from their energy production. This delay, in light of current economic conditions may not be an appropriate strategy at this time. It would be fair to conclude that many members of the committee now have serious reservations about the wisdom of pursuing a PPA.

Finally, a new possibility with DWP, called SunShares, which apparently involves buying into DWP’s PV array for (relatively) free energy, was just presented to the committee recently. It may offer a much safer approach than PPA’s. Other financial alternatives should continue to be explored to determine what approach will be in the best financial interest of the District.

A more detailed summary of First Southwest’s analysis is available for your review in the office of the Chief Financial Officer.

Summary Recommendation:

In addition to the aforementioned recommendations the committee further recommends that it continue to monitor, review, and approve future energy initiatives and funding mechanisms.