6/20/2024
1 RiversideCA.gov1
RiversideCA.gov
RESOURCE ADEQUACY PURCHASE AND SALE AGREEMENT FROM THE SHIRK ENERGY STORAGE FACILITYCity CouncilJuly 2, 2024Public Utilities Department RiversideCA.gov2
1. Resource Adequacy (RA) describes an electric utility’s procurement of sufficient power supply capacity to serve its customers’ projected electricity requirements, plus an additional amount to be held in reserve for unanticipated circumstances.2. RA Program requirements are governed by the CAISO Tariff.–CAISO Tariff provides an option for the local regulatory authority of publiclyowned utilities to adopt their own guidelines that meet certain criteria.BACKGROUND 6/20/2024
2 RiversideCA.gov3
1. May 23, 2006 – City Council established its own RA Program in accordance with the CAISO Tariff. 2. June 5, 2016 – City Council approved a revised RA Program which reflected the current market conditions and ensured efficient implementation while enhancing reliability. 3. August 18, 2020 – City Council approved specific revisions to the RA Program to eliminate provisions that were no longer applicable and facilitated the ability to acquire less expensive RA. RPU RA PROGRAM HISTORY RiversideCA.gov4
1. RPU meets most of its RA requirements by purchasing the capacity attributes from generation resources under long term power purchase agreements (PPAs). However, RPU still needs to buy additional RA for non-winter months, with most of this need occurring during July, August, and September. 2. This additional RA need has grown over time as the City has procured more wind and solar resources, since these resources do not provide the same amounts of qualifying RA.3. California’s accelerated retirements of natural gas resources has now created a supply shortage of RA. RPU RA PROGRAM HISTORY 6/20/2024
3 RiversideCA.gov5
SOCAL RA PRICES SINCE 2019Q3 Marks – System RA ($/kW-month)YearUnder $10.002019$10.00-$15.002020$15.00-$20.002021$20.00-$40.002022$35.00-$55.002023$65.00-$100.002024 RiversideCA.gov6
RECENT RPU RA PRICE DATAAverage PriceMarket Operations RA Request for Offers ResponsesYear$6.65/kW-month7 Offers2022$13.06/kW-month4 Offers2023$35.53/kW-month2 Offers2024012345678$0.00$5.00$10.00$15.00$20.00$25.00$30.00$35.00$40.002022 2023 2024RPU RA Request for OffersAverage PriceOffersWhile such exorbitant price increases are unsustainable over the long-term, staff expect that the CA merchant capacity market may remain excessively volatile for the next 2-5 years. 6/20/2024
4 RiversideCA.gov7
SHIRK ENERGY STORAGE AGREEMENT1. In 2023, staff began looking for Battery Energy Storage solutions to address the following concerns:–RPU has a growing need for RA–RA Prices continue to increase–RPU’s sustainability and carbon reduction goals2. The Shirk RA Agreement will be RPU’s first long-term RA contract. –Located in Visalia, CA (industrial site)–80 MW of RA Capacity (decreases 2% annually)–Qualifies as both Local and Cat 2 Flex RiversideCA.gov8
AGREEMENT TERMS1. Contract Price:$7.94/kW-month, fixed for 15 years2. Commencement Date:3/1/2026a. Failure to achieve commencement by March 1 will result in damages of $200,000/month paid to RPU. b. Outside Commencement Date: 12/31/2026 - RPU Termination right3. Early Commencement Date Bonus: a. Incentivize facility to begin deliveries prior to Summer of 2025Early Commencement Date Bonus ($/kW-month)Commencement Date$1.35On or before June 1, 2025$1.10After June 1, 2025 but on or before July 1, 2025$0.60After July 1, 2025 but on or before August 1, 2025 6/20/2024
5 RiversideCA.gov9
AGREEMENT TERMS1. Delivered Product:All RA attributes including Local and FlexCategory 2 RA benefits.2. Resource Adequacy Guarantee:a. Provides RA benefits throughout the term of the agreement.b. Failure to deliver RA benefits could result in the payment ofliquidated damages.3. Development Security:$3,600,000 RiversideCA.gov10
AGREEMENT TERMS4. Performance Security:$4,800,0005. Compliance Expenditure Cap:$400,000 annually with a totalof $1.2M for the duration of the agreement. 6/20/2024
6 RiversideCA.gov11
FINANCIAL ASSESSMENTContract Expected Contract Price Expected 2023 IRP RA NetYear Year RA (MW) ($/kW-mo) Annual Cost ($) Value ($/kW-mo) Value ($)1 2026 79.8 $7.94 $7,603,344 $14.00 $5,803,0562 2027 78.0 $7.94 $7,431,840 $12.00 $3,800,1603 2028 76.5 $7.94 $7,288,920 $11.50 $3,268,0804 2029 75.1 $7.94 $7,155,528 $11.00 $2,757,6725 2030 73.7 $7.94 $7,022,136 $10.00 $1,821,8646 2031 72.4 $7.94 $6,898,272 $9.75 $1,572,5287 2032 71.2 $7.94 $6,783,936 $9.50 $1,332,8648 2033 70.0 $7.94 $6,669,600 $9.25 $1,100,4009 2034 68.9 $7.94 $6,564,792 $9.00 $876,40810 2035 67.8 $7.94 $6,459,984 $9.00 $862,41611 2036 66.7 $7.94 $6,355,176 $9.25 $1,048,52412 2037 65.7 $7.94 $6,259,896 $9.50 $1,229,90413 2038 64.6 $7.94 $6,155,088 $9.75 $1,403,11214 2039 69.5 $7.94 $6,621,960 $10.00 $1,718,04015 2040 68.3 $7.94 $6,507,624 $10.25 $1,893,276Average:71.2 $6,785,206 $2,032,554Total:1068.2 $101,778,096 $30,488,304•Provides < $8/kW-month RA price hedge for 15 years.•Protects against hyper-inflated RA costs that may continue for the next 2-5 years.•Contract has an expected net positive value of 30.5 M$.
RiversideCA.gov12
Priority 2 – Community Well-BeingGoal 2.6:Strengthen community preparedness for emergencies and disruptiveevents to ensure effective response and recovery.Cross-Cutting ThreadsSTRATEGIC PLAN ALIGNMENT Community Trust
Equity Fiscal ResponsibilityInnovation Sustainability & Resiliency 6/20/2024
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That the City Council:1. Approve the Resource Adequacy Purchase and Sale Agreement with Vesi 15 LLC for 80megawatts of capacity from the Shirk Energy Storage Facility for a term of fifteen yearsand an estimated average annual cost of $7,600,000; and2. Authorize the City Manager, or designee, to execute the Resource Adequacy Purchaseand Sale Agreement and all documents necessary to administer the Agreementincluding the ability to make non substantive changes, as well as to execute futureamendments to the Resource Adequacy Purchase and Sale Agreement under termsand conditions substantially similar or superior to the Resource Adequacy Purchase andSale Agreement or, if needed, to terminate the Resource Adequacy Purchase and SaleAgreement in accordance with Agreement terms and conditions.RECOMMENDATIONS