By Alan Pryor and Richard McCann
At the last City Council meeting, 22 people called in in opposition to the City of Davis entering into a lease option agreement with BrightNight to develop a solar project on a 235-acre City-owned parcel next to the City’s waste water treatment plan. After the controversy has risen to a high profile, the City Staff issued a “Q & A City of Davis Solar Lease 4/15/20” to defend its decision. Unfortunately, this response is misleading and filled with errors.
We go through the Staff’s responses, question by question in their order. Our responses address the gist of the question. You can follow the link to the Staff’s answers if you are interested, but you should have a good understanding of the issues from this article. Because answering these questions completely is a lengthy endeavor, we have divided this into four parts. This is Part 4 covering Questions 19 through 23 .
The questions posed in Parts 1 & 2 & 3 are posted at the end of this article
Q19. What was the hurry to apply for connection to the California Independent System Operation (Cal ISO)?
The City’s Answer: Without a site selected, developers can’t conduct accurate engineering studies and submit competitive power sale proposals. City staff were aware that the application window to Cal ISO was April 1-15; however, BrightNight had made it clear to City staff during the negotiations process that it wanted to submit its application early in the submittal window in order to give the solar company time to correct any deficiencies identified in its application. Demonstrating site control was an essential part of the application. According to the application, BrightNight had to show “documentation reasonably demonstrating: (1) ownership of, a leasehold interest in, or a right to develop a site for the purpose of constructing the Generating Facility; (2) an option to purchase or acquire a leasehold site for such purpose; or (3) an exclusivity or other business relationship between Interconnection Customer and the entity
having the right to sell, lease or grant Interconnection Customer the right to possess or occupy a site for such purpose.
This again is an erroneous statement by Staff. BrightNight could have either 1) submitted a $250k refundable bond or 2) gotten site control and submitted without a deadline. Under the CAISO’s Cluster Study Option, which has an application window of April 1 to 15, site exclusivity is not required, and a fully refundable deposit of $250,000 can be made in lieu.
Under the Independent Study Process, no deadline exists where site exclusivity is required. BrightNight appears to have combined the most stringent aspects of these two different processes in its representations to the Staff. (See CAISO presentation at http://www.caiso.com/Documents/2-InterconnectionApplicationOptionsandProcess.pdf). This fact was presented to the City Council and the Staff in comments that we submitted with others before the Council’s April 7 meeting. It is disingenuous for the Staff to continue to repeat this false statement when it has been corrected.
And we ask the further question, if a company cannot afford to post a refundable $250,000 bond, how should the City expect that company to finance a $25 million plus project? A plea of poverty is not reassuring.
Q20. What is BrightNight’s track record? Isn’t it a new company?
The City’s Answer: The City understood that BrightNight itself was a relatively young company started by an experienced renewable energy entrepreneur. The staff report should have been clearer that the experience noted in the staff report was attributable to the founder and owner of BrightNight, Martin Hermann, as opposed to BrightNight itself. During his career, Mr. Hermann has developed many renewable energy projects across the United States, which together generate 3,000 megawatts of renewable energy. Those projects are attributable to Mr. Hermann, who was the signatory on the Lease Option Agreement. In total, the team of professionals who work for BrightNight has been key players in the development of renewable energy projects around the world generating more than 6,700 megawatts of renewable energy. That includes 22 solar projects generating 2,380 megawatts of solar power in California, Nevada, Texas, New Mexico, and North Carolina, and 17 wind projects generating about 3,238 megawatts of wind power in California, Washington, Arizona, Oregon, Minnesota, Missouri and Wyoming. The BrightNight team also has completed 20 renewable energy storage projects in the United States and around the world.
BrightNight is the third company that Mr. Hermann has founded. The first company was sold to Intel in 2003. He founded the second company (8minutenergy) in 2009. He sold his interest in 8minutenergy in 2018 and is the sole investor in BrightNight.
Let’s be clear here. This is not just a situation where Staff should have been more clear. This was another outright false statement by Staff. Consider only Council’s statement in the resolution authorizing the signing of the option agreement,
“WHEREAS, BrightNight is an energy company that focuses on delivering safe, reliable, high-value, low-cost renewable energy. BrightNight has developed, financed, constructed and operated more than 3,000 megawatts of renewable energy since 2009.”
This is simply a completely untrue statement and they got this information from BrightNight themselves. If you look at BrightNight’s website, they still clearly are stating that they have done projects which were, in fact, done by the company that previously employed Mr. Hermann. We do not believe BrightNight has done a single solar deal to date since their founding.
Further, if BrightNight actually has worked with $10 billion in project financing as its website claims, then coming up with $250,000 should be easy.
And while Mr. Hermann’s experience is interesting and perhaps even compelling, the City is NOT signing an agreement with one man here who happens to have a track record with another company. The City is signing an agreement with a company and that company appears to have a single US office which happens to be his private home in El Dorado Hills. Knowing this, Staff continues in this deception in their above answer stating “(t)hose projects are attributable to Mr. Hermann, who was the signatory on the Lease Option Agreement.” That also is not true. Mr. Hermann was only one person in a much larger team of professionals at 8minute Renewables which support he does not have available in his current company.
This blatant misrepresentation continues a pattern by Staff that when they are caught making false statements (e.g. the statement they made re the incorrect ISO filing requirements). When confronted with the true facts, Staff quickly pivots and say they perhaps, ” should have been more clear” instead of simply admitting that what they said to Council and the public was not true. This is not a confidence building step on Staff’s behalf.
Q21. The negotiating party identified on the February 11, 2020, City Council closed session agenda is listed as Davis Energy Technology Center. What is that?
The City’s Answer: The February 11, 2020, City Council meeting agenda under “Closed Session” actually states the negotiating party is: “Davis Energy Technology Center, LLC. or an Affiliate, in Either Case a Subsidiary of BrightNight, LLC (“BrightNight”). The Davis Technology Energy Center, LLC is a Delaware corporation wholly owned by BrightNight, LLC and licensed to do business in California.
Research on Davis Energy Technology Center LLC finds no existing entity, even as a registered Delaware corporation. This oversight calls into question the oversight and diligence on the part of the Staff.
Q22. Are there potential conflicts of interest between BrightNight and its affiliates and PVEL and its affiliates?
The City’s Answer: In Section 15(m) of the Lease Option Agreement, BrightNight represents that it does not have a conflict of interest for purposes of the Lease Option Agreement. Should any questions arise during the option period or negotiation of the lease, they would be addressed at that time.
This simple dismissive statement by the Staff in response is meaningless. Did the Staff look for these conflicts? Did the Staff look for other conflicts, even between these entities and those affiliated with the City?
Finally, we were shocked by a response by the City Attorney to a question by a Councilmember. Why wasn’t the City attorney familiar enough with the agreement to know what the termination provisions were in the agreement?
Q23. What about CEQA concerns?
The City’s Answer: The Lease Option Agreement addresses CEQA, along with any other consents, approvals, permits or entitlements that would need to be obtained before the City would consent to enter into any lease. The potential solar field will be evaluated under CEQA during the option period, which may extend up to five years.
It is nice to have one of the City’s FAQ answers that we agree on the answer. What the City answer does not address is the fact that Yolo County will be administering the CEQA process, not the City
Part 1. published on Thursday answered the following questions that exposed the City’s misguided efforts surrounding this lease and lease option agreement:
Q1. Did the City enter into a lease for a solar farm?
Q2. Is the lease rate at market value? Were all uses considered?
Q3. How was the lease rate determined?
Q4. The City did not utilize the RFP process for this solar deal. Why?
Q5. Is a sole-source procurement process consistent with the City’s procurement policy?
Part 2. published on Saturday answered the following questions that further exposed the City’s misguided efforts surrounding this lease and lease option agreement:
Q7. Were there other land uses that were considered?
Q8. Why is the City using a fixed-rate rental rate escalator?
Q9. What is the Term Sheet in the Lease Option Agreement?
Q10. Were there any other solar leases to comparable to the City’s deal with BrightNight?
Q11. How does the City solar deal compare to the County’s project at the Grasslands Regional Park?
Part 3. published yesterday answered the following questions that once again exposed the City’s misguided efforts surrounding this lease and lease option agreement:
Q12. The option period and lease period seem long. Are they typical for this industry?
Q13. What are the City’s rights to decommission the site or restore it down the road?
Q14. What if the lessee defaults on the project?
Q15. Why doesn’t the agreement stipulate that Davis residents will benefit from the solar power generated at the site? Can the lessee sell power to Valley Clean Energy (VCE)?
Q16. What will happen to the deal if the lessee goes out of business?
Q17. It appears that the term sheet attached to the lease option agreement contains two conflicting assignment clauses. Can you clarify this?
Q18. How is the City protected from any future claims made against this project?
About the Authors:
Richard McCann: Richard is a Davis resident and much of his work has focused on identifying market trends, and developing and assessing incentive structures in both energy markets and environmental regulations. He has analyzed and designed both wholesale and retail electricity pricing and identified key technological and institutional factors driving pricing factors. In particular, he has addressed both the market and environmental barriers to increased renewables energy development. That work has included utility-scale, community or neighborhood, and customer-side resources. He also successfully persuaded electric utilities to institute asset acquisition programs that produced benefits for both specific customer classes and larger communities. On water policy, he analyzed water transfer markets, water efficiency measures, and agricultural water management. And he has participated in a broad range of regulatory forums beyond energy and water, including air quality and greenhouse gases, and land-use planning. He is a member of the City of Davis Natural Resources Commission, a past member of the Utilities Commission, and a former member of the Technical Advisory Subcommittee of the city’s Community Choice Energy Advisory Committee which recommended a community energy agency. That recommendation eventually bore fruit in the form of Valley Clean Energy (VCE), which saves Davis and Yolo County residents money on their monthly electric bill, with cleaner renewable energy to boot. Richard was just selected as a group member for city’s 2020 Environmental Recognition Award for his work on behalf of that Technical Advisory Subcommittee
Alan Pryor: Davis resident Alan Pryor has a long career in commercializing large-scale alternative energy projects and other environmentally benign technologies. He is the founder and a director of Yolo Clean Air, a nonprofit organization that focuses on improving air quality for the benefit of environmentally sensitive individuals suffering from respiratory health problems – particularly children and senior citizens. He is also the current chair of the local Sierra Club Yolano Group (which has taken no position in this matter), a member of the city’s Natural Resources Commission, and former Chair of the city’s Community Choice Energy Advisory Committee.