Power Purchase Agreement for the D.C. Department of General Services
In early 2015, the District of Columbia Department of General Services (DGS) sought to develop one of the largest municipal portfolios of onsite solar energy projects in the United States. The portfolio would consist of 10.9 megawatts of solar electric capacity installed across 35 projects including schools, hospitals, recreation centers, police training facilities, and one carport. They engaged Sol Systems—a solar finance and development firm located in Washington, D.C.—to implement these projects using a power purchase agreement (PPA).
Despite the challenges, the portfolio was successfully completed in July 2017. This work created 140 jobs during installation, produces about 13,800 MWh annually, and is expected to save $25 million in taxpayer dollars over its lifetime.
This portfolio was unique in that the projects were implemented across a very diverse set of facilities at the same time. Facilities included schools, hospitals, recreation centers, and police training facilities. Each site within the DGS portfolio had its own limitations in terms of rooftop layout and system design, in addition to strict requirements not to disrupt operations at schools and public safety facilities. The total size of the rooftop space was approximately 1.5 million square feet.
To finance this portfolio, Sol Systems used a power purchase agreement, a common structure used across the solar industry.
A PPA is an arrangement in which a third-party developer (in this case, Sol Systems and its investor WGL Energy) installs, owns, and operates a renewable energy system, and a host customer (D.C. DGS) agrees to site the system on its property and purchases the system's electric output from the owner for a predetermined period. This arrangement allows DGS to receive stable and lower-cost electricity, while Sol Systems and WGL Energy receive income from the sale of electricity as well as the tax credits and renewable energy credits from the projects.
However, in order to accommodate the unique needs of this large and diverse project portfolio, this arrangement was different than a typical PPA in several ways. First, Congressional approval was required for a contract of this size to be signed by the District of Columbia. Second, Sol Systems arranged for the PPA rate to be “bucketed” so that a single rate was used for the rooftop projects and a second rate for the carports, using a risk-adjusted and weighted average number. This avoided the complexity of having to spec and renegotiate each facility individually. Third, it was explicitly stated in the PPA document that certain systems might need to be cancelled or added to the original portfolio, either by DGS or Sol Systems. This was critically important to allow the parties to execute the PPA early in the development process before the precise final details of each project were known, thereby unlocking funding for additional studies, diligence, and development work.
Figure 1: PPA structure used for this deal
As one of the largest and most complex onsite municipal solar projects in the country, the DGS portfolio presented several notable challenges. Sol Systems developed unique tools and processes during the planning phase to overcome each:
Challenge: Large number of offtakers with unique needs
Solution: Coordinate reliable scheduling for each offtaker
In a PPA structure, the offtaker is the entity that purchases the electricity generated by the renewable energy system—typically the organization that operates the host facility where the system is installed. For this portfolio, there were 34 individual offtakers (i.e. agencies within the D.C. government) occupying buildings owned by DGS and for which DGS handles electricity procurement. Each offtaker had separate challenges and requirements for project approval. This meant that a single project schedule would not be feasible. Instead, Sol Systems worked individually with each offtaker to establish a customized timeline that met its unique needs. Because the sites had sensitive operations (e.g. education, healthcare, public safety), special attention was paid to installation timing, necessary outages for interconnection and, most importantly, safety of the contractors and host occupants. The team worked closely with on-site staff to schedule construction activities around the needs of the building occupants, which often meant doing work during off-hours.
Challenge: Design, construction, and closeout of over 90 percent of the 35 projects simultaneously in 12 months
Solution: Provide transparent communication and coordination channels for all parties involved
To overcome the sheer size, complexity, and tight timeline of this portfolio, establishing a transparent channel of communication between Sol Systems and the offtakers became a major focus. Sol Systems customized the project delivery plan using web-based project management tools and established a state-of-the-art coordination, tracking, and communication system. Sol Systems, in conjunction with Nextility, developed a series of dashboards to manage the flow of 35 concurrent projects with thousands of individual requirements. The dashboards and tools streamlined project flow and allowed for real-time tracking by project staff, as well as the ability to easily report progress to stakeholders. All meeting minutes were cloud-based, creating a transparent and accountable work environment for the project team. This provided clarity and transparency for DGS, each offtaker, and Sol Systems’ delivery partners. Furthermore, these tools allowed for more effective project management of the contractors, the ultimate system owner, and the host. At the peak, more than 13 organizations were involved in the portfolio.
Challenge: Numerous space and locational constraints
Solution: Customize system design for each project to meet design requirements
Each site within the DGS portfolio had its own limitations. Array designs that worked within different layouts of each rooftop were therefore a necessity for implementation. The Sol Systems team maximized space for the arrays, and created optimal designs during diligence, using super high-efficiency dense modules for many of the projects. The unusual “network” as opposed to “radial” style of distribution grid prevalent in parts of the District of Columbia meant that Sol Systems had to carry out load analysis and in some cases install special equipment on the systems to prevent export. This was especially true as DGS’ leading efficiency and building management efforts meant that schools, in particular, drop to a tiny fraction of their usual load when under lower usage on the weekends.
Furthermore, many facilities were not yet "solar-ready" due to roofing or surface parking lot conditions or other issues. DGS was able to use "make ready" funds (i.e. money allocated for engineers and/or construction workers to prepare a site) to enable necessary repairs in several cases, and Sol Systems and DGS worked together to synchronize already-scheduled capital improvements with the work to be conducted as part of this portfolio.
The Sol Systems team opted for a high-efficiency module that is not often employed in commercial and industrial settings. Due to the limited roof space available, the team wanted to maximize installed capacity to allow for the maximum amount of electricity generation. Specifically, the modules used were dual tilt. These modules allow for multiple orientations on the same rooftop, which produces more energy per square foot of roof space.
For the carport project, Sol Systems chose a supplier that specializes in the logistics of providing solar in urban environments to develop a custom solution for the location. As a result, they were able to deliver the carport with no net loss of parking spaces after construction, while keeping much of the parking lot open during construction.
The D.C. Department of General Services carries out a broad range of real estate management functions for the District of Columbia government. In addition to managing capital improvement and construction programs for a variety of District government agencies, DGS also executes real property acquisitions by purchase or lease, disposes of property through sale, lease, or other authorized method, manages space in buildings and adjacent areas, and provides building management services for facilities owned or operated by the District. For this portfolio, DGS provided the space for the installation of solar systems and continues to purchase the electricity that they generate.
Sol Systems is a solar finance and development firm located in Washington, D.C. The company delivers sophisticated, customized services for institutional, corporate, and municipal partners. Sol Systems managed the planning, development, installation, and financing of the projects and communicated with all parties throughout the process.
WGL Energy is a leader in efficient and environmentally-friendly energy technology solutions to residential, government, commercial, and industrial customers. WGL Energy delivers a full spectrum of energy solutions, including electricity, natural gas, renewable energy, carbon reduction, distributed generation, and energy efficiency provided by WGL Energy Services, Inc. and WGL Energy Systems, Inc. For this portfolio, WGL Energy served as the financier and owner/operator of the solar systems once installed, building on a long-standing history serving DC DGS, where WGL Energy Services has provided a range of diverse energy solutions since 2001.
Despite the scale and complexity of these projects, all 35 were successfully designed, engineered, and generating electricity for the city in approximately 18 months. The Department of General Services estimates the projects created 140 temporary jobs during construction and design, as well as a projected five permanent jobs for ongoing operation and maintenance. Over the 20-year term of the PPA, D.C. taxpayers are expected to save $25 million in reduced electricity costs. The projects are expected to generate 13,800 MWh of electricity per year, which will reduce greenhouse gas emissions equivalent to over 10 million pounds of coal burned.
In 2015, the District of Columbia Department of General Services engaged Sol Systems to develop one of the largest municipal portfolios of onsite solar energy projects in the U.S., using a power purchase agreement.
D.C. DGS wanted to implement a large and ambitious portfolio of solar projects spread across a diverse set of facilities with unique operating requirements, all on a 12-month timeline.
Sol Systems employed a PPA, in which WGL Energy Systems owns the equipment but DGS purchases the power they generate at a reduced rate with no upfront cost. Sol Systems used a unique process to work with each facility individually to meet their various operating requirements.
January 2016 - July 2017
Portfolio is substantially complete.
Sol Systems, D.C. Department of General Services, WGL Energy Services, Nextility, Standard Solar, M+W Energy Group, and numerous local electrical contractors.