REPORT TO COUNCIL
SUBJECT
Title
Action to Authorize the City Manager to Complete Negotiations and Execute a Third Phase Agreement for the Purchase of Renewable Energy with Zero Waste Energy Development Company, LLC, for Compliance with Senate Bill 1383
Report
COUNCIL PILLAR
Deliver and Enhance High Quality Efficient Services and Infrastructure
Promote Sustainability and Environmental Protection
BACKGROUND
In 2016, California Senate Bill 1383 (SB 1383) was adopted, setting goals to divert organic waste from landfills to reduce greenhouse gas emissions. The final SB 1383 regulations require jurisdictions to:
• Provide organics collection services to residents and businesses
• Establish an edible food recover program
• Conduct education and outreach to the community
• Monitor compliance and conduct enforcement
• Procure recyclable and recovered organic products
The City has implemented measures towards achieving these requirements and is looking for a more cost-effective way to meet the procurement requirements for the recyclable and recovered organic products (procurement requirements). The procurement requirements are designed to help build markets for the products derived from organic recycling facilities. The California Department of Resources, Recycling and Recovery (CalRecycle) established annual procurement targets based on a city’s 2021 estimated population multiplied by a 0.08 ton per capita factor. Santa Clara’s annual recovered waste procurement target is 10,460 tons of organic waste based on a population of 130,746. The City of Santa Clara is required to meet this target as follows:
• 30 percent (3,138 tons) of the recovered waste target on or after January 1, 2023
• 65 percent (6,799 tons) of the recovered waste target on or after January 1, 2024
• 100 percent (10,460 tons) of the recovered waste target on or after January 1, 2025
The annual procurement mandates can be achieved with purchases of compost, mulch, electricity, or renewable fuel for transportation derived from organic waste collected through a curbside diversion program. CalRecycle developed conversion factors to enable jurisdictions to calculate the amount of mulch, compost, electricity, or renewable fuel needed to achieve the 10,460 tons of recovered organic waste target. Cost estimates for each recovered organic waste product were also developed by a county-wide work group to determine financial implications. The table below provides converted organic waste targets and annual cost estimates for the City of Santa Clara to achieve its SB 1383 compliance target.
|
Recovered Organic Waste Product |
CalRecycle Conversion Factor (1 ton organic waste equivalent) |
Annual Procurement to Meet Requirement |
Estimated Unit Cost |
Annual Cost |
|
Compost |
0.58 ton |
18,034 cubic yards (cy) |
$35 - $105 per cubic yard |
$631k - $1.9 M |
|
Mulch |
1 ton |
10,460 tons |
$115 - $345 per ton |
$1.2 M - $3.6 M |
|
Electricity |
242 kWh |
2,531 MWH |
$100 - $200 per MWH |
$253k - $506k |
Any combination of recovered organic waste products totaling 10,460 tons can be used to achieve compliance, although the purchase of renewable electricity appeared to be the lowest cost solution.
Santa Clara’s Department of Public Works (CSC DPW) and Silicon Valley Power (SVP) collaborated with the City of Palo Alto’s Department of Public Works (CPA DPW) and the City of Palo Alto Utilities (CPAU) to discuss the potential of purchasing renewable electricity to satisfy the SB 1383 procurement requirement. The cities agreed to have the Northern California Power Agency (NCPA), a joint powers agency which both Santa Clara and Palo Alto are members, to conduct a Request for Proposals (RFP) to see if there were qualifying power producers interested in selling electricity output to meet SB 1383 procurement requirements. NCPA received two offers; however, the Zero Waste Energy Development Company, LLC (ZWEDC) was the only bidder with an existing facility and existing generator.
ZWEDC operates an aerobic digestion facility in San Jose to process organic waste collected through curbside diversion programs. The 1.6-megawatt (MW) ZWEDC power plant produces about 4,000 MWH of electricity per year. The total annual facility production was near the combined SB 1383 organic procurement requirements of both cities. The City of Santa Clara will receive 1.07 MW (approximately 2675 MWH) of the output and Palo Alto will receive 0.53 MW of the facility’s output annually. Even though this should be enough to meet Santa Clara’s requirements, DPW will continue with the twice annual compost give away events because of the event’s popularity.
DISCUSSION
To meet SB 1383 targets, biofuel or electricity must be derived from curbside diversion programs. However, there is no commercially available renewable fuel in the marketplace that is derived from curbside diversion programs. As such, City of Santa Clara fleets utilizing biodiesel fuel and energy procurement of biomass and biowaste electricity cannot be counted towards SB 1383. Fortunately, the electricity purchased from ZWEDC will help Santa Clara meet its targets, provided that the power is used at City facilities and not resold to customers. The City’s municipal operations use approximately 16,000 MWH of electricity annually, so the ZWEDC’s facility can be used to offset this load.
Not only will the ZWEDC project assist with SB 1383 compliance, the project, as an eligible renewable energy resource, is expected to generate renewable energy credits (REC) which the City can use to meet the State’s Renewable Portfolio Standard (RPS) requirements. The facility is also capable of providing capacity attributes to meet the State’s Resource Adequacy Program’s requirements.
On November 30, 2023, the NCPA Commission approved both the Power Purchase Agreement (PPA) between ZWEDC and NCPA and the Third Phase Agreement for Power Purchase Agreement with ZWEDC between NCPA, City of Santa Clara, and City of Palo Alto. In order for NCPA to be fully authorized to enter into the PPA with ZWEDC, NCPA needs an executed Third Phase Agreement from both the City of Santa Clara and the City of Palo Alto.
Staff is requesting that the City Council delegate authorization to the City Manager to complete negotiations and execute the NCPA Third Phase Agreement for Power Purchase Agreement with Zero Waste Energy Development Company, LLC. The City of Palo Alto is also moving forward with having its city council consider this agreement. If both city councils approve this request, NCPA and ZWDEC intend to execute the Power Purchase Agreement (PPA) in the first quarter of 2024.
ZWEDC has an existing 2016 PPA with PG&E that will need to be terminated prior to delivering power to Palo Alto and Santa Clara. The initial delivery date to the City of Santa Clara will not occur until the PPA with PG&E has been lawfully terminated. In the event the PG&E agreement does not terminate by eighteen months after the PPA effective date, either NCPA or ZWEDC may terminate the agreement.
SVP will provide the City Council with updates as needed by e-mail to the City Council.
ENVIRONMENTAL REVIEW
On December 22, 2011, the City of San Jose approved a special permit and a mitigated negative declaration for the ZWEDC power plant. Since the agreements do not require any change to the facility or its operations, there are no substantial changes to the project or new information of substantial importance which will require subsequent or supplemental environmental review under the California Environmental Quality Act (“CEQA”).
FISCAL IMPACT
The contract price of the renewable electricity in its first year is $185.00 per MWh, which is approximately $493,000 and would be funded by the Solid Waste Fund. There is an annual escalation percentage equal to the average Consumer Price Index percentage increase with a maximum annual escalation percentage increase of no greater than 2.00%. Future costs for the agreement would be built into the solid waste rates.
COORDINATION
This report has been coordinated with the Finance Department and City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
1. Authorize the City Manager to complete negotiations, approve, and execute a Third Phase Agreement (Agreement) with the Northern California Power Agency (NCPA) for the Purchase of Renewable Energy at approximately $493,000, with future annual escalations per the contract terms, from Zero Waste Energy Development Company, LLC, funded by the Solid Waste Fund, subject to the review and approval as to form by the City Attorney; and
2. Authorize the City Manager or designee to (a) take any and all actions as are necessary or advisable to implement and administer the Agreement; and (b) approve and execute future amendments to the Agreement so long as the contract price and term are not modified, subject to the review and approval as to form by the City Attorney.
Staff
Reviewed by: Manuel Pineda, Chief Electric Utility Officer
Reviewed by: Craig Mobeck, Director of Public Works
Approved by: Jovan Grogan, City Manager