Trolley Energy Storage Contract
City Council
Presenter:
Jim Stack, Senior Resource Planner
September 15, 2025 Paloalto.gov
2023 Integrated Resource Plan (IRP) Update
• In 2023, Council approved an IRP that
projected a significant amount of load
growth out to 2045, driven by new data
centers and electrification
• Palo Alto electric load grew 12% from
2022-2024, closely tracking the IRP
projections
• Legacy Power Purchase Agreements
(PPAs) set to expire 2026-2034
• New resources are needed to meet
growing energy and capacity needs
Energy Procurement Efforts & Challenges
• Northern California Power Agency (NCPA) Renewable Energy & Storage RFP – April 2024
• 9 solar proposals
• 8 battery energy storage system (BESS) proposals
• 10 solar + storage proposals
• Market challenges and uncertainty
• Interconnection timelines are now 5+ years
• Federal policy changes creating lots of pricing uncertainty Trolley Pass Project LLC – Battery Energy Storage System (BESS) • Energy Storage Agreement between NCPA and Trolley Pass Project LCC (subsidiary of project developer Aypa Energy) for 400 MW BESS in San Bernardino County • Palo Alto share: 50 MW
• Others: SVP , Lodi, Redding, Alameda, smaller members • 20-year term, starting ~June 2029
• Contract price of $12.71/kW-mo*
• Annual cost to Palo Alto: $7.6M*
• Energy value: $11-13/kW-mo
• Resource Adequacy (RA) value: $4-11/kW-mo
• Net value (projected): ~$8/kW-mo ($4.6M/yr)
*Contract price subject to refresh until July 2026, with potential 6% price increase if supplier’s costs increase due to tax law changes or supply chain issues.
Resource Adequacy Overview
• Resource Adequacy (aka System Capacity) is an energy market product designed to ensure grid reliability during all hours of the year
• The California Independent System Operator (CAISO) requires all Load Serving Entities (LSEs), such as Palo Alto, to procure enough RA capacity to satisfy their peak demand – plus a Planning Reserve Margin (PRM)
• Electric generators on the grid are assigned an amount of Qualifying Capacity (QC) each month based on their operating characteristics
• Thermal generators (available 24/7) > Storage & Hydro > Wind & Solar • RA capacity is bought and sold completely independently from the energy produced by the generator
Average System Capacity Balance
Capacity at risk
starting 2027
Annual Load-Resource Balance through 2045
Next Steps
NCPA Commission approved Trolley Pass contract – June 2025 Utilities Risk Oversight Coordinating Committee (UROCC) recommended approval – June 23, 2025
Utilities Advisory Commission (UAC) recommended approval – July 9, 2025 Participating members seek approvals – Summer 2025
Redding, Ukiah, and Lompoc have already approved
Other members expected to approve by late September
City Council review – September 15, 2025
Recommended Motion
The City Council:
1. Authorizes the City Manager, or their designee, to execute a Third Phase Agreement with NCPA to purchase the output of a 50 MW share of the Trolley Pass Project LLC battery energy storage system (BESS) over a period of 20 years, at a total cost not to exceed $161.7 million;
2. Authorizes the City Manager, or their designee, to execute on behalf of the City all related documents or agreements necessary to administer the Third Phase Agreement that are consistent with the Palo Alto Municipal Code and City Council approved policies, and take all actions to administer the Third Phase Agreement; and,
3. Authorizes the City Manager, or their designee, to approve and execute amendments to the Third Phase Agreement, as may be required from time to time, so long as the contract price and length of the agreement remain unchanged.
Jim Stack, PhD
Senior Resource Planner
[email protected]
(650) 329-2314