Item 12
VALLEY CLEAN ENERGY ALLIANCE
Staff Report – Item 12
____________________________________________________________________________________ TO: Board of Directors
FROM: Gordon Samuel, Chief Operating Officer
SUBJECT: CC Power Tumbleweed Long-Duration Energy Storage Project Amendment 2 DATE: September 12, 2024
Recommendation
Authorize VCE’s continued participation in the Tumbleweed Energy Storage Services Agreement under the terms of the Second Amendment.
Background
In February 2022, the Board approved VCE entering a joint procurement of the Tumbleweed Long-Duration Storage (LDS) project through California Community Power (CC Power) which is a joint powers agency made up of multiple community choice aggregators (CCAs). The JPA was created for the purpose of aggregating CCA buying power and to taking advantage of economies of scale and joint action on energy related matters (e.g. joint programs). The Tumbleweed LDS project was procured in response to the California Public Utilities Commission’s (CPUC) Mid-Term Reliability (MTR) procurement mandate for development of new long-lead time resources including LDS capacity, which is defined as storage that can discharge to the grid for eight or more hours. The project is 75 MW / 600 MWh and VCE’s share is 4.15%, or 3.11 MW / 24.9 MWh.
Since execution of the Tumbleweed Energy Storage Services Agreement (ESSA) by CC Power and the developer, REV Renewables (REV), the agreement has been amended once to increase the capacity from 69 MW to 75 MW, which the parties agreed to (Resolution 2022-030). Since then, REV has been working to develop the project in advance of the 2026 contractual commercial operation date (COD).
Earlier this year, REV came to CC Power requesting amendment of the ESSA’s commercial terms under the premise that the project is no longer economic at the contracted price given increases in equipment costs and uncertainty related to tariffs on Chinese imports depending on the 2024 presidential election outcome. Since then, CC Power staff, consultants and member CCA staff have been analyzing and deliberating what is the best path forward, and under the direction of the CC Power Board of Directors, has negotiated an amendment with the counterparty. Note: CC Power retained a respected outside consultant firm to provide additional analysis of the developer’s reasoning for the contract amendment request. The consultant confirmed the market conditions that are the basis for the amendment request.
2 Overview of Project
Project Name Tumbleweed Energy Storage, LLC
Technology Li-Ion Storage
Storage Capacity 75 MW / 600 MWh
Commercial Operation Date 6/1/2026
Developer REV Renewables, a subsidiary of LS Power
Location Kern County, CA
Summary
Staff are seeking Board approval of VCE’s continued participation in the Tumbleweed LDS contract under the terms of the Second Amendment to the ESSA, including 1) a 15-21% contract price increase that would be indexed to the import tariff rate on Chinese goods up to a cap, 2) removal of language that entitles CC Power to a share of the tax benefits from the project, 3) increase in the penalty rate if the project is unable to provide the expected amount of resource adequacy (RA) during the delivery term, and 4) opportunity to procure RA from the partially-built project for approximately a year and a half before of the contractual COD. This amendment was approved by the CC Power Board of Directors on August 21. Once the amendment is fully executed, the developer can secure supply in time for the batteries to be imported before any potential increases to the import tariff rate, which is currently
10.9% and could be increased to 60% or more. If batteries are successfully imported before the potential tariff increase goes into effect, the contract price increase would be at the low end of the range provided above.
The Tumbleweed project is the first project for CCAs to procure together through CC Power, and the first LDS project contract to be executed to meet the MTR procurement mandate. CC Power is actively negotiating another LDS project, which will satisfy the remaining MTR need and staff plans to bring that project to the CAC and Board in the future. In addition, Staff is continuously assessing other LDS opportunities as this type of resource diversifies VCE’s portfolio needs beyond regulatory compliance requirements.
Attachment
1. Second Amendment to Energy Storage Services Agreement (approval draft ESSA - redacted)
2. Resolution 2024-XXX
Item 12
VALLEY CLEAN ENERGY ALLIANCE
RESOLUTION NO. 2024- _____
A RESOLUTION OF THE BOARD OF DIRECTORS OF VALLEY CLEAN ENERGY ALLIANCE
AFFIRMING THE CONTINUED PARTICIPATION IN THE TUMBLEWEED LONG DURATION
STORAGE PROJECT AND THE TERMS OF SECOND AMENDMENT TO THE ENERGY STORAGE SERVICES AGREEMENT.
WHEREAS, the Valley Clean Energy Alliance (“VCE”) was formed as a community choice aggregation agency (“CCA”) on November 16, 2016, under the Joint Exercise of Power Act, California Government Code sections 6500 et seq., among the County of Yolo, and the Cities of Davis and Woodland, to reduce greenhouse gas emissions, provide electricity, carry out programs to reduce energy consumption, develop local jobs in renewable energy, and promote energy security and rate stability in all of the member jurisdictions. The City of Winters, located in Yolo County, was added as a member of VCE and a party to the JPA in December of 2019; and, WHEREAS, VCE is a member of California Community Power (CC Power) joint powers authority; and WHEREAS, VCE in coordination with CC Power conducted a request for offers for long duration storage (LDS) projects and engaged in negotiations for the Tumbleweed project; and WHEREAS, CC Power executed agreements to effectuate its purchase of its storage resource from the Tumbleweed storage project based on the project’s desirable offering of products, pricing and terms; and
WHEREAS, the Tumbleweed project will contribute to the regulatory requirement to procure LDS for each of the CCAs that are participating in this project through CC Power by providing energy storage resources for a term of fifteen years starting on or about June 1, 2026; and WHEREAS, on February 10, 2022 staff presented to the Board for its review the Energy Storage Services Agreement, Buyer Liability Pass Through Agreement and the Project Participation Share Agreement the Board approved authorization to participate; and
WHEREAS, the May 12, 2022 Resolution reaffirmed the Board’s February 10, 2022 action approving participation in the CC Power Tumbleweed project and authorizing its Executive Officer to execute Agreements and any ancillary documents associated with its action; and WHEREAS, the November 10, 2022 Resolution reaffirmed the Tumbleweed project increased the overall size from 69 MW to 75 MW resulting in additional capacity for the participating CCAs which equates 0.25 MW for VCE.
WHEREAS, the second amendment addresses contracted price increase due to increases in equipment costs and uncertainty related to tariffs on imports depending on the 2024 presidential election outcome.
Item 12
NOW, THEREFORE, the Board of Directors of the Valley Clean Energy Alliance affirms the following:
1. VCE’s continued participation in the Tumbleweed Energy Storage Services Agreement under the terms of the Second Amendment.
PASSED, APPROVED AND ADOPTED, at a regular meeting of the Valley Clean Energy Alliance, held on the ____ day of _______________, 2024, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
_____________________________________
Lucas Frerichs, VCE Chair
__________________________________
Alisa M. Lembke, VCE Board Secretary