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CITY COUNCIL AGENDA REPORT
City of Anaheim
PUBLIC UTILITIES DEPARTMENT
DATE: MAY 7, 2024
FROM: PUBLIC UTILITIES DEPARTMENT
SUBJECT: BATTERY ENERGY STORAGE AGREEMENT
ATTACHMENT (Y/N): YES ITEM # 17
GOVERNMENT CODE § 84308 APPLIES: YES
RECOMMENDATION:
That the City Council, by Motion:
1) Approve the Energy Storage Agreement (Agreement), in substantial form, with Roadhouse Energy Storage, LLC (Roadhouse) pursuant to which Roadhouse will design, construct, own, operate, and maintain a 300 megawatt (MW) battery energy storage system (Project) and sell to the City of Anaheim (City) the Project’s energy, capacity, resource adequacy, and associated attributes, for an approximate cost of $67.5 million per year over a twenty-year delivery term; and 2) Authorize the Public Utilities General Manager or designees, on behalf of the City, to (a) execute and deliver the Agreement with any de minimis changes that, as determined by the City Attorney’s Office, do not materially change the terms and conditions of the Agreement; (b) execute and deliver amendments to the Agreement, inclusive of any costs that are contemplated by the Agreement, and any documents necessary to carry out the transaction contemplated by the Agreement, such as collateral assignment agreements, power scheduling agreements, and scheduling coordinator agreements; and (c) take such actions as are necessary or advisable to implement and administer the Agreement.
DISCUSSION:
At its meeting on April 24, 2024, the Public Utilities Board recommended that the City Council approve the Agreement for the Roadhouse Project.
Anaheim Public Utilities’ (APU) is on a pathway towards achieving a 60% renewable energy target by 2030, consistent with greenhouse gas emissions reduction levels established by the California Air Resources Board and compliance requirements most recently adopted by California Legislature through Senate Bill (SB) 350 – the Clean Energy and Pollution Reduction Act. To meet these ambitious statewide policies, APU is in the process of acquiring new renewable energy resources such as wind and solar.
However, both of these resources are intermittent, which means they are not always consistent in their production. As a result, APU is seeking to add utility-scale batteries to mitigate fluctuations in renewable energy as the industry transitions away from fossil fuel resources.
Battery Energy Storage Agreement
May 7, 2024
A Request for Proposals (RFP) was issued in October 2023 seeking renewable energy resources and energy storage solutions. One battery-only proposal was submitted by NextEra Energy Resources, LLC (NextEra), a direct parent company of Roadhouse. An evaluation of the proposal included a review by Ascend Analytics, a consulting firm with energy industry expertise. The review considered the project’s location and access to transmission lines, ability for APU to dispatch the resource when needed, developer experience, ability to meet agreement terms and conditions, and a cost-benefit assessment.
NextEra has completed similar battery storage projects for Southern California Edison, Pacific Gas & Electric, and Clean Power Alliance.
The proposed Agreement with Roadhouse is for a 300 Megawatt (MW) battery storage system that provides four-hour duration, which is capable of providing 60% of APU’s summer peak demand. The proposed project will be located in Ontario, California, in an industrial area, and will meet applicable safety (including fire suppression) and local building permit requirements. As part of the Agreement, the battery system will be required to meet performance guarantees for capacity and availability over the 20-year term. Should performance fall below the Agreement terms, the developer would be required to make necessary improvements. APU retains operational flexibility to dispatch the battery system when needed and is not responsible for decommissioning the system at the end of the term.
The financial analysis considered expected costs that include the Agreement annual payments of approximately $67.5 million, and the cost to charge the batteries estimated at $3.5 million per year, or a total of $71 million annually. The project benefits include wholesale energy revenue and avoided capacity payments to the regional grid operator, the California Independent System Operator (CAISO), which total approximately $78 million per year. The net benefit of $7 million per year would be used to acquire additional renewable energy resources to meet state compliance requirements. If approved, the developer would initiate procurement and construction activities, with the commercial operation date expected in June 2027, but no later than October 2027.
The battery storage project helps integrate more renewable energy, improves grid resiliency against weather, wildfires, or other regional disruptions, provides financial benefits that maintain affordable rates, and supports a cleaner, more sustainable energy future.
IMPACT ON BUDGET:
The Agreement will require expenditures of approximately $67.5 million per year over 20 years, commencing upon the Project’s operation date. Funds will be proposed in APU’s Fiscal Year 2027/28 restricted Electric Utility Fund budget, with future years subject to City Council approval of budget appropriations.
Respectfully submitted,
Dukku Lee
Public Utilities General Manager
Attachment:
1. Energy Storage Agreement