City Council Agenda Report
Meeting Date: January 17, 2023
From: Todd Dusenberry, General Manager of Public Utilities Department: Public Utilities
Submitted by: Adriana Ramos, Administrative Analyst
Subject
Sapphire Solar Power and Battery Storage Project Power Sales Agreement Recommendation
A. Find that approval of the proposed action is exempt from California Environmental Quality Act (CEQA) review, because it is an administrative and fiscal activity that will not result in direct or indirect physical changes in the environment, and therefore does not constitute a “project” as defined by CEQA Guidelines Section 15378. Pursuant to the Power Purchase Agreement between Southern California Public Power Authority (SCPPA) and EDF Renewables North America, the lead agencies have obtained, or will reasonably and timely obtain, all CEQA determinations required for the construction, operation, and maintenance of the facility; and B. Approve and authorize the City Administrator to execute a Power Sales Agreement (PSA) with Southern California Public Power Authority (SCPPA), in substantially the same form as submitted, to purchase 39 megawatts of solar power and up to approximately 19.7 megawatts of battery storage with associated green attributes through the Sapphire Solar Project for a projected annual amount of $6,665,000 over a 20-year term.
Background
California Public Utilities Code Section 399.30(a) requires Publicly Owned Electric Utilities (POUs) to adopt and implement a Renewable Energy Resources Procurement Plan. Such plans describe a POU’s commitment to procuring a minimum quantity of electricity and/or renewable energy credits from eligible renewable energy resources as a percentage of its net retail sales.
These requirements are known as Renewable Portfolio Standard (RPS) Regulations. Senate Bill (SB) 350 and SB 100 increased RPS compliance targets to 60% by 2030. Vernon Public Utilities (VPU) has complied with the 2020 RPS requirement of 33% and is confident in meeting the 2024 requirements of 44% of total retail sales with eligible renewable energy.
VPU recognizes the intent of California’s regulations, which encourage the utilization of renewable resources while considering the effect on customer rates, reliability, financial resources, and environmental impact on the community. Pursuant to Vernon’s RPS Procurement Plan and Enforcement Program, adopted by City Council via Resolution No. 2012-02 on January 3, 2012, the City must take action to acquire renewable energy resources to meet its RPS requirement.
In response to the RPS requirements, staff regularly surveys the market for cost-effective eligible renewable energy resources. VPU is diligent in its search for affordable renewable energy to meet RPS regulations while maintaining competitive electric rates for its customers. One of the ways VPU learns about and participates in these types of opportunities is through the Southern California Public Power Authority (SCPPA), which serves its members by creating operational efficiencies and cost savings through joint procurement and financing of projects, value-added services, and providing collaborative advocacy.
Unfortunately, the current renewable energy project market has been impeded by several factors, including life cycle and achievable Commercial Operating Date (COD), current supply chain and labor constraints, and procurement and construction timelines. When considering today’s high inflation-high interest rate environment, there were very few responses to SCPPA’s Request for Proposal (RFP): Procurement and Contract Review issued on March 15, 2022. EDF Renewables, Inc. (EDFR) was one of the few firms to respond to SCPPA’s RFP and was then selected as the most viable option due to its price and completion date.
The Sapphire Solar Project is a solar photovoltaic (PV) and battery storage project developed by EDFR and is located on 1,140 acres of private land in Riverside County. It is expected to produce 117 megawatts (MW) of solar PV and be paired with a Battery Energy Storage System (BESS) with a maximum storage capability of 59 MW and operate on a 4-hour basis for a total capacity of 236 MWhs. The Project will interconnect on an existing Desert Harvest transmission line and deliver to the California Independent System Operator (CAISO) System. As structured, the agreement would require EDFR to sell fully bundled energy products and participants to purchase from the Project for a 20-year period. The bundled energy products include Renewable Energy, Renewable Energy Credits, Resource Adequacy, and all other energy attributes.
Due to today’s high inflation-high interest rate environment and supply issues, the agreement has an adjustment feature that can increase or decrease the established base price. This adjustment would be based on open-book Engineering, Procurement, and Construction Costs (EP&C) for both the solar PV and the battery storage at the start of construction and once again at the COD. A base price of $33/MWh for solar power and $10.90 kilowatts (kw)-month for the battery storage are based on EDFR’s estimate for both the PV and BESS as of the date of the signed Term Sheet between the parties. As a result of the price adjustment concept, the parties have agreed to have a floor and a ceiling price for both PV and BESS. If the price is greater than the ceiling price, SCPPA and its participating members have the right to terminate the power purchasing agreement.
Similarly, if the price is below the floor price, EDFR has the right to terminate the agreement. The ceiling price is $35.36/MWh for the PV system and $11.70/kw-Month for the BESS. The floor price is $28.00/MWh for the PV system and $7.00/kw-Month for the BESS. The COD will set the project’s final price and remain fixed for the agreement term. VPU will purchase 39 MW of solar power and up to 19.7 MW of battery storage, for a projected annual amount of $6,665,000, with an expected start date of December 31, 2025—when the Project is anticipated to become operational.
For the Project to be studied with the highest priority for deliverability in the CAISO Transmission Planning Deliverability (TPD) process, SCPPA and EDFR must execute a PPA and submit a redacted version to the CAISO. The capacity of the battery will be determined once the CAISO determines an award of capacity for the BESS. It is anticipated that the CAISO’s deliverability study results will be finalized by April 2023. The Base capacity of the BESS is anticipated to be 59 MW. If CAISO does not assign the expected 59 MW capacity, the parties have agreed to continue to submit the necessary applications to the CAISO seeking full capacity approval or until the 2027 submission deadline. The minimum amount of capacity the parties have agreed to purchase from EDFR is 20 MW.
SCPPA's Board of Directors approved a Power Purchase Agreement (PPA) with EDFR on December 15, 2022 to procure the proposed Sapphire Solar project’s entire capacity. Further, SCPPA has developed Power Sales Agreements (PSAs) with participating member utilities to purchase the energy. Vernon seeks to participate alongside the City of Anaheim and the City of Pasadena for equal project shares.
The proposed PSA with SCPPA will allow the City to obtain Portfolio Content Category 1 (PCC1) “bucket one” solar energy and Renewable Energy Credits that meet the RPS compliance requirements for Category 1, as set forth in the California Public Utilities Code, Section 399.16(b)(1)(A), which states, “Consistent with the goals of procuring the least-cost and best-fit electricity products from eligible renewable energy resources that meet project viability principles adopted by the commission pursuant to paragraph (5) of subdivision (a) of Section 399.13 and that provide the benefits set forth in Section 399.11, a balanced portfolio of eligible renewable energy resources shall be procured consisting of Eligible renewable energy resource electricity products that have a first point of interconnection with a California balancing authority.” In addition, the project will have the potential to provide up to 25 MW of Resource Adequacy (RA) capacity which will help the City meet its RA requirement.
The proposed PSA is exempt from competitive bidding and competitive selection pursuant to Vernon Municipal Code Sections 3.32.110(A)(5) and (B)(1), which exempts contracts with other governmental entities for supplies, equipment, or services. SCPPA conducted a competitive selection process to select EDFR. The PSA has been reviewed and approved as to form by the City Attorney’s Office.
Fiscal Impact
The fiscal impact is estimated at $6,665,000 annually. Funds for purchasing renewable energy from the Sapphire Solar Project through the proposed PSA with SCPPA will be budgeted accordingly during the annual City budget process for Fiscal Year 2025-26 and for subsequent years in Public Utilities Electric Enterprise Fund, Renewable Energy Credit Account No. 055-050- 590- 520154.
Attachments
1. Sapphire Solar, LLC - SCPPA Power Sales Agreement