HomeMy WebLinkAbout2021-04-29; Maerkle Reservoir Solar Study Project Update (District 2); Gomez, PazTo the members of the:
OUNCIL
Date CA ✓ CC ✓
CM_ ACM ✓ DCM {3} ,/
CMWD Board Memorandum
April 29, 2021
. To: Carlsbad Municipal Wat Di trict Board of Directors
From: Paz Gomez, Deputy City M ublic Works
Vicki Quiram, General Ma a~~,__
Via: Scott Chadwick, Executiv, Ma e
Re: Maerkle Reservoir Solar tudy eject Update {District 2)
Ccarlsbad
Municipal Water District
Memo ID #2021087
This memorandum provides an update to a previous Council Memorandum dated Feb. 18, 2021,
(Attachment A) on the Maerkle Reservoir Solar Study Project, Capital Improvement Program (CIP)
Project No. 4722 (Project) and provides the Carlsbad Municipal Water District (CMWD) Board of
Directors (Board) information on an unsolicited proposal on this Project.
Background
The Maerkle Reservoir complex, which is over 100 acres in size and located in the northeastern
part of the city, is a potential site for constructing a solar photovoltaic energy generating facility.
In fiscal year (FY) 2015-16, the Project was included in the city's CIP with a budget appropriation
of $250,000 to conduct a feasibility study. If feasible, the Project could offset ongoing energy
costs, contribute to the city's use of renewable energy sources and promote sustainability in
keeping with the city's Climate Action Plan.
Attachment A informed the City Council that staff planned to include the Project as part of the
FY 2022-23 CIP Budget unless directed otherwise. Since then, CMWD staff have had discussions
with Clean Energy Alliance (CEA) staff on the Project. Moving forward, CMWD will be leading the
CIP Project effort instead of the city since the Project is on CMWD property.
On April 13, 2021, the city received an unsolicited proposal from Dr. Phil Watts of Resource
Renewable Energy, Inc., which proposed an exclusive negotiating agreement with the city to
develop a 25 MW solar power and 20 MW energy storage project on approximately 56 acres of
undeveloped land at the Maerkle Reservoir (Attachment B).
Discussion
Staff plans to respond to Dr. Watts informing him that the city currently does not have funds in
the FY 2020-21 CIP Budget for this Project. Additionally, Carlsbad Municipal Code (CMC) Section
3.28.060(A)(1) encourages the use of a request for proposals (RFP) process when soliciting
professional services. Staff regards the exclusive negotiating agreement attached to his email as
an offer to perform professional services on behalf of the city.
Carlsbad Municipal Water District
5950 El Camino Real I Carlsbad, CA 92008 I 760-438-2722 t
Board Memo -Maerkle Reservoir Solar Study Project Update (District 2)
April 29, 2021
Page 2
If funds are later allocated to study the feasibility of energy generation at the Maerkle Reservoir,
CMWD staff will follow CMC section 3.28.060(A)(1) and solicit bids from proposers through a
competitive solicitation process.
· Next Steps
Staff will respond to Dr. Watts on his unsolicited proposal, Attachment B. CMWD staff will
continue to discuss the feasibility of the Project with CEA staff and propose it for inclusion in the
FY 2022-23 CIP Budget for the CMWD Board's consideration and/or seek other funding
opportunities.
Attachments: A. Council Memorandum dated Feb. 18, 2021
B. Dr. Phil Watts' email of April 13, 2021
cc: Geoff Patnoe, Assistant Executive Manager
Celia Brewer, General Counsel
Gary Barberio, Deputy City Manager, Community Services
Laura Rocha, Deputy City Manager, Administrative Services
Robby Contreras, Assistant General Counsel
Ryan Green, Finance Director
Jason Haber, Intergovernmental Affairs Director
Dave Padilla, District Engineer
John Maashoff, Public Works Manager
James Wood, Environmental Manager
Curtis Jackson, Real Estate Manager
Steve Stewart, Municipal Projects Manager
To the members of the:
c;:1TY COUNCIL
Date ~l$/.R/ CA ~CC ~
CM _L ACM _il_ DCM (3) .:!._
Feb. 18, 2021
ATTACHMENT A
Council Memorandum
To: Honorable Mayor Hall and Members of the City Council
From: Paz Gomez, Deputy City Manager, Public Works
Via: Geoff Patnoe, Assistant City Manager @
Re: Maerkle Reservoir Solar Study Project Update (District 2)
{city of
Carlsbad
Memo ID #2021043
This memorandum provides an update on the status of t he Maerkle Reservoir Solar Study
Project, Capital Improvement Program (CIP) Project No. 4722 (Project).
Background
During the City Council Meeting on Feb. 11, 2021, a Council Member requested status of the
Project and asked whether energy battery storage was included in the scope of work.
The Maerkle Reservoir complex, which is over 100 acres in size and located in the northeastern
part of the city, is a potential site for constructing a solar phot ovoltaic energy generating
facility. In fiscal year (FY) 2015-16, the Project was included in the CIP with a budget
appropriation of $250,000 to conduct a feasibility study. If feasible, the Project could offset
ongoing energy costs, contribute to the city's use of renewable energy sources and promote
sustainability in keeping with the city's Climate Action Plan. ·
In May 2019, during a presentation of the preliminary FY 2019-20 CIP Budget, staff provided
City Council an update that the Project had not yet started due to lack of staff resources and
prioritization. Approximately $830 of the $250,000 had been expended for an application with
San Diego Gas & Electric to obtain energy data. No additional work has been completed to date.
As part of the FY 2020-21 CIP Budget development process presented to City Council in
May 2020 and adopted in June 2020, capital projects were re-evaluated against anticipated
revenue decreases as a result of the COVID-19 pandemic and other factors. As a result, the
remaining budgeted Project funds of $249,170 were disencumbered and reprogrammed to be
included in the FY 2022-23 CIP Budget during the FY 2022-23 CIP Budget development process.
Discussion
The Project's scope of work is to prepare a study to determine the feasibility of constructing a
solar photovoltaic energy generating facility at the Maerkle Reservoir complex, which is owned
by the Carlsbad Municipal Water District. It does not include energy battery storage.
Public Works Branch
Fleet and Facilities Department
405 Oak Avenue I Carlsbad, CA 92008 I 760-434-2980 t
I ·
Council Memo -Maerkle Reservoir Solar Study Project Update (District 2)
Feb. 18, 2021
Page 2
Staff is in the process of developing the FY 2021-22 CIP Budget. Currently, it does not include
the Project as one of the proposed projects that will be presented to City Council as part of the
preliminary budget in May 2021. Staff will include the Project in the FY 2022-23 CIP Budget and
in the CIP Budget development process next year unless City Council directs otherwise.
Next Steps
Staff will include the Project as part of the FY 2022-23 CIP Budget unless City Council directs its
inclusion in FY 2021-22. If approved by City Council for inclusion in the FY 2021-22 CIP Budget,
staff will prepare a scope of work for a consultant to conduct the feasibility study in FY 2021-22.
cc: Scott Chadwick, City Manager
Celia Brewer, City Attorney
Laura Rocha, Deputy City Manager, Administrative Services
Robby Contreras, Assistant City Attorney
Ryan Green, Finance Director
Vicki Quiram, Utilities Directo'r
John Maashoff, Public Works Manager
James Wood, Environmental Manager
Dave Padilla, Engineering Manager
Steven Stewart, Municipal Projects Manager
ATTACHMENT B
-----Original Message-----
From: phil@resourcerenewables.com <phil@resourcerenewables.com>
Sent: Tuesday, April 13, 2021 11:31 AM
To: Matthew Hall <Matt.Hall@carlsbadca.gov>; Manager Internet Email <Manager@CarlsbadCA.gov>; City Clerk
<Clerk@carlsbadca.gov>; Attorney <attorney@CarlsbadCA.gov>
Cc: Council InternetEmail <CityCouncil@carlsbadca.gov>; Keith Black burn <Keith .Blackburn@carlsbadca.gov>;
Cori Schumacher <Cori.Schumacher@carlsbadca.gov>; Priya Bhat-Patel <Priya.Bhat-Patel@carlsbadca.gov>;
Teresa Acosta <Teresa.Acosta@carlsbadca.gov>; Jason Haber <Jason.Haber@carlsbadca.gov>; Dan King
<dking@cosb.org>
Subject: Another Look at Maerkle Reservoir Energy Project
Dear Mayor Hall,
After careful deliberation and months of work, we believe the proposed
25 MW solar power and 20 MW battery storage Maerkle Reservoir renewable energy project wo1th roughly $60MM
and supplying up to 5% of the reg\onal electricity load deserves another look by the City of Carlsbad.
We have recently achieved a notable milestone: a new way forward for cities to install large renewable energy
projects on city land.
We seek your feedback regarding this new way forward.
We accomplished this milestone by signing a no cost bilateral contract with another California city to develop 10
MW of solar power and l O MW of battery storage on city land. Using that contract as a template, we have attached
here a DRAFT no cost bilateral contract for you and yow-staff to review for a similar kind of renewable energy
project at Maerkle Reservoir.
Existing projectRFPs typically assume project specifics are both well-known and relatively fixed, criteria which do
not fit most early stage energy projects. Meanwhile, energy procurement by CCAS usually occurs for projects that
have already been built. We are not aware of any other solution for cities and their CCAs to take charge of their
lower price and higher resilience energy future, independent of large energy markets that favor utilities, experience
losses, suffer curtailment, and strut wild fires. Having lower energy prices than SDG&E is a given these days. We
offer a solution that involves a public/private prutnership, local energy savings (for both residents and corporations),
local jobs, local investments, and a substantial land lease payment to the City of Carlsbad.
This new way forward is congenial to your staff. At no direct cost to the city, significant plruming information and
pricing transpru·ency become available. Let's review some of the details: ·
1) Bilateral Co11tracts Work. The reason why they work is because
the contract gives the energy developer the exclusivity that is needed to study and design the energy project at no
direct cost to the city.
There are too many factors that can influence (or change or kill) the project for an RFP to make sense as a means to
get such projects struted.
2) Public/Private Partnership. The residents and corporations of
Carlsbad would demand lower energy prices now if they knew what savings could be made avail ab.le from city land
alone. This is especially true of some energy intensive companies, and their trade representatives, who would seek
and appreciate lower energy expenses ASAP.
3) Information Is Power. The bilatel'al contract foresees an
exchange of energy project information that guarantees the city and its CCA technical sophistication, pricing
transparency, portfolio planning, RA rebates, oversight controls, and other benefits that usually reside only within
the largest utilities --do what those same utilities thought you would never be able to do and match their
sophistication.
4) Highest and Best Use. The city Climate Action Plan and the
heartfelt climate priorities of Carlsbad residents are met by a renewable energy project at Maerkle Reservoir. This is
deserving of special consideration, because the long term view of a viable and sustainable planet is perhaps the
single biggest driving force for all of humanity at this time.
5) City Revenue. The total land lease amount received by the city
for an energy project dwarfs the sales value of the land to a real estate developer by 3X or more. Even with yearly
property taxes, the renewable energy land lease is expected to beat any other possible revenue for the Maerkle
Reservoir land. This is a financial winning proposition.
6) RFQ Welcome. The bilateral contract is not about money; itis
about time. The city and developers alike deserve the time we both need to carefully study, negotiate, and confirm
our respective positions. If an RFQ on land use supports such a process, then let that be the starting point. Public
workshops would likely prove worthwhile as well.
7) No Transmission. Transmission lines in California are
overloaded due to large cities and hot weather. The power losses dw'ing transmission are huge and have been
cleverly hidden by utilities.
Curtailment clauses in energy contracts force CCAs to pay for undelivered energy. The CCA then gets fleeced by
exorbitant spot market prices. Deadly wild fires with devastating consequences are rampant.
8) Local Benefits. With a local renewable energy project at
.Maerkle Reservoir, what you see is what you get. There are no hidden costs. There are no pricing surprises. There
are only low energy prices (for residents and corporations), RA rebates, local jobs, and a roughly $60MM
investment within the City of Carlsbad, plus the economic multiples.
We seek )'.OW' feedback regarding this new way forward.
Sincerely yours,
Dr. Phil Watts
·Dr.Phil Watts
CEO, Chair Resource
Cell: 562-607-2132
https://urldefense.com/v3/ http://www.resourcerenewables.com :! !E 4xU6-vwMWK-
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CAUTION: Do not open attachments or click on links unless you recognize the sender and know the content is safe.
EXCLUSIVE NEGOTIATING AGREEMENT
TIDS EXCLUSIVE NEGOTIATING AGREEMENT ("ENA") is entered into as of
2021 ("Effective Date"), by and between the CITY OF CARLSBAD, a
municipal corporation and charter city (the "City"), and RESOURCE RENEWABLE ENERGY,
INC., a Delaware C corporation (the "Company"), on the terms and provisions set forth below. The
City and Company are sometimes referred to individually herein as a "Party" and, collectively, as the
"Parties."
RECITALS
A. The Company is interested in investigating the possibility of constructing and operating
a solar facility on certain undeveloped land owned by the City. To that end, the Company desires to
establish a period during which (i) the City will negotiate exclusively with. the Company concerning
development of such land, (ii) the Company will conduct the investigations and studies it believes are
necessary, and (iii) the Company will prepare and submit to the City a development proposal for a solar
facility on such land that shall include the solar facility's design, construction, commissioning, and
financing.
B. The City is interested in the possibility of the development of a solar facility on city-
owned land that may provide power to Clean Energy Alliance ("CCA").
C. The City and Company accordingly desire to enter into exclusive negotiations
regarding the terms of the various agreements needed for the Company to develop and operate the solar
facility, such as a land lease with the City, power purchase agreement for power offtake by CCA,
resource adequacy agreement for energy reserves with CCA, and other necessary agreements.
NOW, THEREFORE in consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the City and Company
agree as follows:
1. Exclusive Negotiation. The City arid Company agree for a period of one (I) year from
the Effective Date (the "Negotiation Period") to negotiate diligently and in good faith to agree on the
tenns and fonn of any and all agreements necessary for the Company to design, construct and operate
a solar facility as fmther described in Section 3 of this ENA (the "Project") on approximately 56 acres
of undeveloped City-owned land located at Maerkle Reservoir (Assessor's Parcel Number 169-5000-
500) (the "Site"), including, without limitation, the te1ms and form of the following agreements: (i) a
land lease agreement pursuant to which the Company will lease the Site from the City; (ii) a power
purchase agreement for power offtake by CCA; (iii) a resource adequacy agreement for energy reserves
with CCA; and (iv) such other agreements that may be necessary for the design, construction and
operation of the Project. During the Negotiation Period, including any extension thereof, the City
agrees that it shall not negotiate with any other person or entity for the development of the Site and
shall make commercially reasonable efforts to enter or help the Company enter into the site lease,
power purchase and resource adequency agreement.
2. Option to Extend Negotiation Period. The Company may extend the Negotiation
Period once for one ( 1) additional year by giving written notice to the City at least sixty ( 60) days prior
to the initial expiration of the Negotiation Period.
3. Proposed Project. The Project consists of one or more solar power and energy
storage facilities, with a medium voltage interconnection to the distribution grid. The Project is
expected to be placed in a special purpose entity ("SPE"), and to have third party financing and
ownership. Depending on the results of various interconnection, distribution circuit, and load studies,
the Project may nominally be of the following size, subject to change as necessary:
Solar Power: 25 MW and Energy Storage: 20 MW
4. Required Actions. The Parties agree to take the following action during the
Negotiation Period:
(a) The Patties agree to exchange information for the purpose of evaluating the
Project. Subject to all legal and/or contractual limitations, the City shall make available data on
electricity generation costs, settlement costs, overhead expenses, load profiles, and other related
infonnation that enable energy arbitrage opportunities to be identified and the total cost of energy
delivered to be calculated. The Company shall make available data on project performance such as
energy production, project cost, yearly revenue, yearly profits, cost of energy, internal rate of return,
among other pro forma metrics that enable the highest · and best use of City-owned land to be
demonstrated and the economic viability of the Project to be guaranteed.
(b) The Parties agree to diligently and in good faith negotiate the terms and f01m
of the following agreements: (i) a land lease agreement pursuant to which the Company will lease the
Site from the City; (ii) a power purchase agreement for power offtake by CCA; (iii) a resource
adequacy agreement for energy reserves with CCA; and (iv) such other agreements that may be
necessary for the design, construction and operation of the Project. Neither Paity shall be obligated to
execute any of the foregoing agreements. Any agreement(s) resulting from the negotiations hereunder
shall become effective only after and if such agreement has been considered and approved by City in
the manner required by law.
( c) The Company agrees to provide to the City comprehensive development plans
for the Project. Such development plans must comply with all applicable laws, rules and regulations
of City and all other government entities having jurisdiction. The Company further agrees to make
oral progress rep01ts and written reports from time to time as requested by the City, advising the City
on all matters and all studies being made with respect to the Project. The Company agrees to generally
cooperate with the City and agrees to supply such other documents and info1mation as may be
reasonably requested in writing by the City.
( d) The Company shall submit to City satisfactory evidence of its ability to meet
its responsibilities relative to financing (both construction and long-term) the lease of the Site and
construction/operation of the Project. The Company shall make and maintain full disclosure to the
City of its methods of financing to be used in the development of the Site and construction/operation
of the Project.
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( e) The Company shall make full disclosure to the City of its principals, officers,
major stockholders, major partners, joint ventures, key managerial employees and other associates, and
all other material infotmation concerning the Company and its associates. Any significant change in
the principals, associates, partners, joint venturers, negotiators, development manager, consultants,
professionals and directly involved managerial employees of the Company is subject to the approval
of the City, such approval shall not be unreasonably withheld or delayed.
5. Fees, Costs & Expenses. The Company shall be solely responsible for all fees, costs
and expenses of investigating and studying the Site and designing, constructing and operating the
Project.
6. City Approval of Subsequent Agreement(s). If negotiations culminate in one or
more agreement that is/are mutually agreeable to the Parties, such agreement(s) shall not become
effective until all state and local requirements for the lease of City-owned property have been complied
with and approved by the City Council and any other applicable legislative or administrative body
required by law. The Parties agree and acknowledge that, while this ENA provides that the Parties
shall negotiate in good faith, this ENA does not obligate either the City or Company to enter into any
agreement(s) or other instrument(s) for development of the Project, and approval of such agreement(s)
or other instrument(s) for development of the Project shall require the approval of both Parties, with
the City Council giving its approval, if at all, only after consideration at a regular meeting of the City
Council and following all other proceedings required by law, including, without limitation, compliance
with the California Environmental Quality Act (California Public Resources Code §§21000, et seq.).
7. Event of Default. The failure of the City or Company to reasonably and timely comply
with its obligations under this ENA, if not due to circumstances beyond the reasonable control of the
City or Company, as the case may be, shall be considered a default hereunder. Prior to exercising any
remedies hereunder for the default of this ENA, the Party asserting a default shall provide written
notice to the other Party describing the alleged default, and such Party shall have thirty (30) days to
cure such default.
8. Notices. All notices under this ENA shall be given in writing by personal delivery, or
by certified mail or registered United States Mail, return receipt requested, postage prepaid, or by
facsimile and shall be deemed communicated when received if given by personal delivery or upon
receipt or rejection if mailed as provided above or upon receipt by facsimile on a business day during
business hours in the location where received, and if not then on the next business day, as the case may
be. Mailed notices shall be addressed as set fo11h below, but either patty may change its address by
giving written notice thereof to the other in accordance with the provisions of this section.
City:
Company:
City of Carlsbad
Carlsbad City Hall
1200 Carlsbad Village Drive
Carlsbad, California 92008
Attn.: ---------
Dr. Philip Watts, CEO
Resource Renewable Energy, Inc.
3
6216 E Pacific Coast Hwy #23 7
Long Beach, California 90803
9. Assignment. This ENA shall not be assigned by the Company, except to the SPE
meant to hold the project assets, without prior written approval of the City, which the City may grant
or refuse at its sole discretion.
10. Warranty of Authority. The signatories to this ENA represent and warrant that they
have the authority to execute this ENA on behalf of the principles they purport to represent.
11. Broker's Fee. Each Party represents to the other Party that no broker has been engaged
in connection with this transaction and no fee shall be paid in connection herewith.
12. Attorneys' Fees. In any action between the parties to interpret, enforce, award,
modify, rescind, or otherwise in connection with any of the tenns or provisions of this ENA, the
prevailing patty in the action shall be entitled, in addition to damages, injw1ctive relief, or any other ·
relief to which it might be entitled, to reasonable costs and expenses including, without limitation,
litigation costs, reasonable attorneys' fees and expert witness fees.
13. Applicable Law, Jurisdiction and Venue. This ENA has been executed and
delivered in the State of California and the validity, interpretation, and enforcement of any of the
clauses of this ENA shall be detennined and governed by the Jaws of the State of California. Both
Parties further agree that San Diego County, California, shall be the venue for any action or proceeding
that may be brought or atise out of, in connection with or by reason of this ENA.
14. Limitations of ENA. By its execution of this ENA, the City is not committing itself
to or agreeing to undertake: ( a) disposition of land to the Compat1y; or (b) any other acts or activities
requiring the subsequent independent exercise of discretion by City. This ENA does not constitute a
disposition of property or exercise of control over property by the City and does not require a public
hearing. Execution of this ENA by the City is merely an agreement to enter into a period of exclusive
and good faith negotiations according to the terms hereof, reserving final discretion and approval by ,
the City as to any subsequent agreement(s) and all proceedings and decisions in connection therewith.
15. Complete Agreement. This ENA reflects the complete and total understanding
between the Patties hereto and all agreements or understandings between the Parties hereto are
contained herein. Any changes, modifications, amendments or addenda to this ENA must be in writing
and signed by all Patties to be effective.
[Signatures begin on next page.]
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above.
IN WITNESS WHEREOF, the Parties have executed this ENA as of the date first set forth
COMPANY:
RESOURCE RENEW ABLE ENERGY, INC.,
a Delaware C corporation
. By:---------------
Name: _______________ _
Its: ________________ _
CITY:
CITY OF CARLSBAD, a California municipal
corporation and charter city
By: ---------------
Name: _______________ _
Its: ________________ _
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