Title
Discussion of a battery storage system proposal for the City’s municipal electric system.
Brief Description: Council President Foster would like to discuss with City Council and the Mayor the consideration of a battery storage system proposal for the City’s municipal electric system.
Body
Legislative History
None
Purpose & Explanation
A private company (Distributed Electric LLC) has approached the City with an interest in installing, owning, and operating a battery storage system for interconnection with the Hudson municipal electric system.
This type of system is a utility scale battery storage system that is built to reduce the City’s peak load, thereby reducing the cost of electric transmission and capacity charges to HPP customers. Typically, the solar / storage company would build, own, and operate the system and often would purchase or lease the land they need for the battery storage.
There are several different options that can be executed when developing and constructing a battery storage system at the utility level:
1. Option #1: The City owns and provides the land for the project. The developer installs, owns, and operates the system, and the City allows the developer to use the land exclusively for the project, or implements a land lease agreement. The City signs a power purchase agreement (PPA) for a defined term with the company.
2. Option #2: The City owns the land, installs, owns, and operates the system. Upfront investment and proforma projections with ROI would need to be considered.
3. Option #3: The developer owns the land and installs, owns, and operates the system and sells the energy back to the City through a PPA for a defined term.
The City could also purchase land and use it specifically for the system installation. The City would purchase power from the system owner through a power purchase agreement (PPA) at a pre-determined term. This has typically been the arrangement between municipalities and solar/energy storage companies that we have seen in the past.
The location that was discussed at the meeting with Distributed Electric LLC is currently not owned by the City, and the City would need to acquire the land for this site in order to make the project feasible. We understand that the land is currently for sale and we have had discussions in the past on the land with the owner regarding what could be constructed at this site.
If Council decides to pursue this project, the City will need to enter into a power purchase agreement (PPA) with a vendor to use the stored energy at peak times when rates are higher at a lower cost to the City.
The preliminary estimates for a battery storage system would depend on its size needed. Estimated costs for a 20MW battery storage system in this region of the country are as follows:
• Capital cost: $143/kWh * 20MWh = $2,860,000
• O&M cost: $6/kW/year * 20MW = $120,000/year
If City Council would like more detailed information on this idea, staff would recommend a meeting with American Municipal Power (AMP) and the City’s power consultant Courtney & Associates, as well as our local electrical engineering firms, who are able to assist the City in this capacity to establish a system feasibility study and ultimate savings verification, prior to putting out to bid a Request For Proposals.
The City could release a Request For Proposals (RFP) for this type of project design and construction and award to the best bidder as approved by City Council in accordance with the City Charter and Codified Ordinances.
Timing Considerations
None
Fiscal Impact
Currently Budgeted (Account #, $)
Supplemental Appropriation Required (Account #, $)
X Appropriation Not Required.
Recommendation
Suggested Action
Staff recommends that if City Council wishes to pursue this type of battery storage system for the City’s municipal electric system, that a feasibility study and verification of costs be performed prior to releasing an RFP.
Submitted by,
Thomas J. Sheridan, City Manager
Frank J. Comeriato, Jr., Asst. City Manager-Operations