Hello everyone. Welcome to Solar Tea Time. I’m Craig Noxon, Vice President of Enterprise Sales, and we have a very special guest expert for this month: Cal Poly’s Director of Energy, Utilities and Sustainability, Dennis Elliott.
So Dennis, Cal Poly just finished their 4.5-megawatt solar installation in beautiful San Luis, Obispo. It will power 25 percent of the campus’s energy and save Cal Poly more than $10 million over the next 20 years. That’s a pretty good story that we thought you all might be interested in learning more about and hearing tips firsthand from the team that brought it to fruition.
So before we get started, I will just do a little housekeeping. I wanted you all to be aware that your line is muted. But you can type questions inside the webcast under the “Questions” tab. We will try and get to answer those questions at the end of the webcast or if we run out of time, we will email you after the webcast.
OK. So that’s it for logistics. Hope everyone has a cup of tea and we will get started with tips from Cal Poly in going solar. So Dennis, welcome to Solar Tea Time.
Dennis Elliott: Good morning.
Craig Noxon: We appreciate you and Cal Poly joining us to discuss your recent solar project and sharing some hopefully gems of wisdom with people, that you embarked on this solar journey. So with that, we will get straight into the questions, Dennis.
What were the motivations that led Cal Poly to consider solar?
Dennis Elliott: There are a number of them. Cal Poly, as a member of the Cal State University System, is working within some system-wide energy and sustainability policies, which have been setting goals to motivate the campuses to develop these type of projects for many years, to increase onsite generation, energy independence, be good stewards of the environment and public tax dollars and student dollars, and to reduce our operating costs. So all those were very much in alignment with this particular project.
Craig Noxon: OK, that’s great.
How did Cal Poly decide to move forward with solar procurement?
Dennis Elliott: Well, this is not our first solar project. We participated in several rounds of solar project development that have been managed centrally either by the Cal State University or the California Department of General Services.
Those have been challenging for us in the past because our cost of electricity was so low. We happen to own our own substation and therefore pay power under a transmission level tariff. So our cost of electricity was fairly low and this opportunity really depended upon the solar industry becoming competitive enough to compete with that cost of energy.
Another driver for us was our president’s signing of the Second Nature Climate Commitment a couple of years ago, committing our campus to go beyond CSU climate policy, all the way to climate neutrality. So developing a large solar project was really key to our success to move the needle both on our operating costs and our carbon emission.
Craig Noxon: That’s interesting. So is this something that you have had in mind for a while and just kind of kept an eye on the solar industry until it got to the point that a project like this might make sense?
Dennis Elliott: Certainly. We’ve been watching the industry, watching costs, participating in previous realms of solicitation where we did not get a successful, viable project based really on price. We also knew that in the three different flavors of how to construct solar, rooftop versus covered parking shade, pursuing a large ground mount array would allow us to minimize the capital costs for unit of energy production and to build a much larger system that could take advantage of the economy of scale.
Craig Noxon: OK, great. So when you were doing this evaluation, I’m curious if you added any kind of specialist, your staff, to help you manage this energy procurement, what kind of roles they played.
What sort of team did you need to put together in order to manage this project?
Dennis Elliott: Sure, great question. So I manage a small team. Our little department with the facilities, known as Energy, Utilities, and Sustainability is a team of three.
Two of us are engineers by trade and by training. So we have some skillset in this space. We have a larger project management organization that handles major capital for new construction of new academic buildings, housing buildings, major renovations, and tenant improvements.
So we have an organization that is skilled at taking all types of construction projects from conception to completion and closeout. We have the ability to manage this type of construction projects internally, and the type of skills that we needed to bring to the table that were not in-house were really focused on on-track document development on the frontend, as well as some specialty inspection skills that we were able to contract for just out of the local market to do our due diligence during the construction process.
The majority of those costs were for inspection project oversight, which we were able to roll into the cost of the project since this is a power purchase agreement. We were able to set up the fee structures to cover those costs by requiring a payment from the selected developer at the frontend of the project, so that we will have capital to cover those costs – really minimizing the need for capital out of pocket.
So is that one of the ways that you help sell this project internally?
Dennis Elliott: Absolutely. The triple bottom line for sustainability always talks about the three Ps: people, planet, profit, or the three Es: environment, economy and every time we talk about these large projects, I’m always reminded by the folks that are in charge of the first strings, that these things need to pencil out financially. So we were very focused on that in developing this project and making proposals to our leadership to make use of roughly 20 acres of land for this purpose, and how to achieve maximum benefit out of it.
Craig Noxon: Yeah, that’s interesting.
How did you evaluate and compare the different vendors once you had the RFP down the street?
Dennis Elliott: It was really a combined RFQ-RFP: request for qualifications and request for proposals. It’s a standard process that we use when selecting consultants or contractors for designer construction tasks. Based on our experience and the CSU’s experience and that of our selected consultants to help us develop those documents, we established minimum criteria for the experience of the selected team, to ensure that they had designed and constructed successfully projects of this type and scale, had a track record of successful projects with similar institutional clients, and that they were financially healthy to make sure that we were entering into a long-term agreement with a firm that we could rely on.
Craig Noxon: And can you talk a little bit about what that meant internally, how you went about that approach of selecting them? I think you kind of created your own calculator. Is that right?
Dennis Elliott: Yeah, for the selection process, once you have a qualified firm that you can rely on and know is going to be around for a long time, it really boils down to the dollars and cents. So in order to evaluate the different vendor proposals on an apples to apples basis, at the advice of our consultants, we developed a simple Excel spreadsheet calculator that could take vendor proposals and quantify the system size, and estimate its energy performance on an hour by hour and monthly basis. So then we could populate this calculator with the value of the energy generated at each hour of the day, each month of the year, to quantify the financial value of what each proposed design would produce.
Then there were some contractual elements built into our documents to ensure with performance guarantees that those would be met. Ultimately, our calculator would compute what is called the “net present value” of the cash flow of the 20-year project, so that we could evaluate the price proposal given to us on an apples to apples basis. Some vendors might propose a larger size than another. Some might generate more energy than another and we wanted to give the marketplace flexibility to design the system that best fit each developer’s skillset, experience and financial drivers because each might have a different set of financial criteria that drove their cost of funds for the project.
What other factors beyond price mattered to Cal Poly?
Dennis Elliott: Well certainly qualifications, the ability to deliver similar projects. But it was a very interesting opportunity for us to think about academic applications of this system and so I reached out to colleagues in the College of Engineering prior to development of the contract documents and I asked some folks that I know. If you have an opportunity to influence the way facilities went about this project to make it more useful for you and the classroom and the laboratory, what do you wish would be included? I had feedback from electrical engineering faculty with a laundry list of metering, telemetry, weather station, so that they would have access to performance data to inform problem assignments, class assignments, lab experimentation to do design and modeling of systems and then compare those designs or those models to actual performance data from the solar farm.
So we included in our contract specifications a wealth of metering, monitoring and telemetry to create a performance database with a dashboard interface, so that interested faculty and students could query that database to collect their own data sets without relying on us to produce them manually. That database would be very granular with hopefully all the data that somebody might think they need in the future and the ability to serve it up to themselves.
Craig Noxon: Yeah. So the Cal Poly case seems interesting to me because it appears you really integrated the solar array into your core mission, which I believe is learned by doing.
How is that solar farm integrated into Cal Poly’s core mission?
Dennis Elliott: It’s something that’s very near and dear to my heart as a Cal Poly graduate. I’m a graduate of the Mechanical Engineering Program. I’ve had the opportunity to teach a couple of times in that program and so I was very attuned to what could possibly be done in envisioning this solar farm to support that. So absolutely, Cal Poly’s motto and pedagogy is hands-on learn by doing and as a graduate, I experienced that firsthand.
The amount of time you spend in the laboratory in small classroom settings of roughly 24 students where you are being taught face-to-face by a Ph.D. professor rather than a graduate student, those are some of the things that make a Cal Poly education special. So the opportunity to fine-tune an important facility’s project to support the academic mission was very exciting for me, and making a system like this available and relevant to the classroom for not just electrical engineering but a wide variety of programs. You can imagine the disciplines that might be interested in either the technology or the financial aspects of the environment aspects of a solar farm of this scale.
So we worked with faculty partners that we have met through providing tours to classes that were interested in seeing a particular building or system or sharing energy data about our utility systems because Cal Poly is essentially a small city that manages electricity, natural gas, water, sewer, just like a city does. It has all those infrastructure systems to design, construct, maintain and manage all the time.
That we have incredible assets that are very relevant to the classroom and the lab. So thinking through those intentionally and strategically on the frontend to serve that need was an interesting challenge to me and I’m very proud of what it’s going to be able to do and it’s not just going to be a benefit to the Electrical Engineering Program. That’s where we’re starting as the most obvious point of connection. But I have great hope that it’s going to be relevant to many more programs than that.
Can you tell us more about how you’re integrating with sheep around the solar installation itself?
Dennis Elliott: Sure, thank you. There’s really two different applications academically that we’re focusing on. As you mentioned, the sheep connection. So in preparing for this project, we went through a very robust due diligence process to review potential sites to build a solar farm of this scale on.
We were really targeting roughly a five-megawatt system that is an aspect of the utility turf that we are using, RES-BCT, which stands for Renewable Energy Self-Generation Bill Credit Transfer. That is a utility program that is available to local governments and that the CSU campus qualifies, cities and counties would qualify.
That tariff allowed us to build a system that number one, could be up to five megawatts in size and number two, didn’t necessarily have to be behind our customer meter. It opened up a world of possibilities that could be developed offsite, either on our own land, which Cal Poly is a significant landholder, or on somebody else’s land, under some kind of lease agreement.
So within that framework, we evaluated a lot of sites. We evaluated 11 different potential sites, most of them on campus land, and a couple of privately-owned. The particular site that we arrived on as ideal was a 20-acre parcel of sheep pasture that was used by Cal Poly’s Animal Science Program and Sheep Unit for grazing land for the sheep herd, as part of an academic program.
Certainly in developing a solar farm that takes up a significant footprint on the sheep pasture, we wanted to think through the potential impacts on that program and potential opportunities to collaborate with them.
In the utility world where large multi-hundred megawatts solar farms are being developed in California and elsewhere, the environment impact in the land used is a significant challenge and opportunity there. Vegetation management is a key part of operating and maintaining a solar farm of this scale.
So immediately the opportunity was evident in front of us. We have an active sheep unit, sheep grazing pasture. From all the other design criteria of siting, constructability, shading, proximity to utility infrastructure, for interconnection, the sheep unit pasture was the ideal site of all those that we evaluated.
The ability to build the solar farm in such a manner that it could still be used as grazing land to provide feed for the sheep herd and in addition provide new academic opportunities for research around both site management practices for storm water control, erosion control, but more specifically how to perform vegetation management on the utility scale solar farm using sheep as a method with really the lowest environmental footprint possible.
That was an opportunity that in the conversation with our animal science and college agriculture partners was a big part of the sales pitch. We want to disrupt your operation for a few months to build this solar farm. But when it’s done, we want to bring your herd back onto this land to continue grazing and provide some additional academic opportunities for hands-on learn by doing and applied research.
How else have you managed this process without overloading your own staff?
Dennis Elliott: Well, back to the concept of how we are financing the entire project as a power purchase agreement, for listeners that might not be familiar with that, what that means is our contract documents were looking for a qualified solar developer that also had the ability to finance a project like this.
What that means is we don’t actually own the solar equipment. It’s owned by REC Solar under a 20-year agreement in which we’ve agreed to essentially lease the land that it sits on for zero dollars and in return, we’ve executed a 20-year agreement over what Cal Poly will pay for the energy that that system generates.
The RES-BCT tariff that I mentioned earlier makes that more attractive and that we get to pick the tariff at our point of generation and that establishes the dollar value of the energy generated and on the backend, we have a power purchase agreement with REC that ensures that REC has adequate cash flow to cover the cost of the material, the design, the construction, the maintenance and provides an adequate return on investment for its financier.
Within that, there were tasks that Cal Poly had to perform as the owner of the site and the owner of the power purchase agreement. So things like developing the contract documents, providing project management oversight, construction inspection, testing those kind of things.
We could budget in advance having familiarity with other large capital projects, so what those expenses would be, and just build into the language of the RFQ/RFP a requirement of an upfront payment of those dollars from the selected developer to make sure we had adequate cash in hand to perform the services that we needed to as part of the project implementation process.
Craig Noxon: That’s great. Well, thanks Dennis. Thanks for your time. That wraps up the time we have today. So I just wanted to extend my thanks and appreciation to you and the Cal Poly team for being a great partner not only on this podcast but as a customer of REC.
So enjoy tomorrow’s Valentine’s Day. I hope everyone appreciates that and if anyone would like to talk to REC Solar or Cal Poly about going solar, please feel free to email us at email@example.com and you can also email in if you have any questions that we weren’t able to get to today.
So on behalf of everyone in REC, thanks Dennis.
Dennis Elliott: Sure, thank you.
Craig Noxon: Bye.