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Home My WebLink AboutE-1.1. Approval of Bonanza Power Sales Agreement with SCPPASCHEDULED ITEM E-1 TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD FROM: TIKAN SINGH, GENERAL MANAGER DATE: FEBRUARY 26, 2024 SUBJECT: APPROVAL OF A RENEWABLE POWER SALES AGREEMENT BETWEEN CITY OF AZUSA AND SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY SOURCED FROM A CO-LOCATED SOLAR AND BATTERY PROJECT DEVELOPED BY BONANZA SOLAR, LLC BACKGROUND: To maintain clean air standards, reduce greenhouse gas emissions, and provide for a sustainable energy future, California has established Renewable Portfolio Standards (RPS) that require all electric utilities to serve a minimum percentage of retail sales of electricity from eligible renewable energy resources, such as wind, solar, geothermal, and small hydro. Senate Bill 100 (2018) requires Azusa to serve at least 60% of electricity sales from renewable energy resources by 2030. Senate Bill 1020 (2022) requires Azusa to serve 90% of electricity from zero-carbon resources by 2035. Azusa Light and Water (ALW) began its renewable resource portfolio in 2003. Since then, a few power purchase agreements have met their useful life and expired. To ensure continued compliance with statutory RPS requirements, it is necessary to further contract for renewable generation. RECOMMENDATION: Staff recommends the Utility Board take the following action: 1) Approve Power Sales Agreement between Southern California Public Power Authority and City of Azusa for purchase of 20 Megawatts (MW) of solar energy and 10 MW of energy storage for 20 years; and 2)Authorize the General Manager, or his designee, to enter into the long-term Renewable Power Sales Agreement between the City of Azusa and Southern California Public Power Authority ANALYSIS: Renewable Portfolio Standard History Approved Utility Board 02/26/2024 Bonanza PSA February 26, 2024 Page 2 Under California law, all load-serving entities are mandated to serve a specific fraction of their retail load with renewable energy resources, which is called a Renewable Portfolio Standard (RPS). The initial RPS was signed on April 12, 2011, under Senate Bill X1 2. Before that, ALW and other utilities established their own renewable energy goals, which were around 20%. SB X1 2 mandated all electric utilities and entities serving electric load in California produce and/or procure specific volumes of renewable energy products, as measured by percentage of retail electricity sales. The law further stipulated that the minimum volume of renewable energy had to be derived from resources interconnected within, or first scheduled directly into California. These would be called Portfolio Content Category 1 (PCC1) resources. Other amounts of procured energy could be satisfied by imported renewable energy (Portfolio Content Category 2) and/or by “unbundled” renewable energy credits (Portfolio Content Category 3). In 2015, the state Legislature passed SB 350, “The Clean Energy and Pollution Reduction Act” which set a 50% clean energy standard to be achieved by 2030. That bill also set new requirements for doubling energy efficiency and for wide-scale transportation electrification. In 2018 the state Legislature passed SB 100 which set a 100 percent carbon free target by 2045 and a 60% renewable energy requirement by 2030. In 2022 SB 1020 sets a 90% zero-carbon target by 2035 and a 95% zero-carbon goal by 2040. Azusa’s Current Renewable Energy Portfolio Azusa’s commitment to clean energy began in 2003 by purchasing the wind output of the High Winds Energy Center in Solano County, CA, for 20 years. ALW’s latest participation in a renewable project transpired with the purchase of the wind output of the Mesa Wind Project located in Palm Springs, CA. ALW’s current renewable energy portfolio consists of: The modeled generation output from these variable resources place ALW initially in the mid 60% RPS range and subsequently leveling down due to the 50% range due to expiring contracts and resource degradation. By 2030, ALW is expected to be shy of a 60% renewable resource composition, unable to meet the SB 100 target. Renewable Resources MW Garnet Wind 6.5 Mesa Wind 30 San Dimas Hydro 1.05 DSR2 Solar 5 Columbia II Solar 1.3 Kingbird Solar 3 Summer Solar 3.5 Big Sky Ranch Solar 3.5 Bonanza PSA February 26, 2024 Page 3 Planning post-2030, staff assessed a proposed resource via a Southern California Public Power Authority (SCPPA) Request for Proposal. Out of that proposal, the Cities of Pasadena and Azusa pursued further interest in the Bonanza Solar and Battery Energy Storage Project. ALW values three components from renewable projects: 1) the reasonably-priced energy output and its proximity to the load zone, 2) the Resource Adequacy value, if any, from a renewable project, and 3) the environmental attributes for ALW to claim the resource as RPS-eligible. The commercial operation date of a project is also important so that ALW can promptly meet the target RPS mandates. The Bonanza project, commencing operations in 2029, fulfills ALW’s need to boost its RPS portfolio further. The Bonanza Solar Project includes both PV solar and a Battery Energy Storage System (BESS) with a 4-hour duration. The BESS output will be offered into the market and will offset project costs. The proposed agreement also offers “Full Capacity Deliverability Status,” a critical attribute allowing a project to claim Resource Adequacy (RA). This status ensures full output to the California grid. This RA commodity has become critically scarce as the grid transitions from fossil-fueled resources. The project will be capable of providing output from the battery during the critical evening hours. The Bonanza project costs $47.76/MWh for delivered solar energy and $16.84/kW-Month for BESS. Adding the Bonanza resource will raise ALW’s RPS portfolio to the mid-70 % range through 2035-2036. 0 50000 100000 150000 200000 250000 300000 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 Current Renewable Portfolio 2024 Garnet Wind Mesa Wind (est)San Dimas DSR2 Solar Columbia II Solar Kingbird Solar Summer Solar Big Sky Ranch Solar Retail Load Bonanza PSA February 26, 2024 Page 4 After agreement review and negotiations, Pasadena, ALW, and SCPPA staff recommended the project to the SCPPA board. As offtakers to the Bonanza project, Azusa and Pasadena recommended to SCPPA, as facilitators under the Joint Powers Agreement, to have the SCPPA Board approve a power purchase agreement with Bonanza. In January 2024, with the condition precedent based upon the approval of the Power Sales Agreements from the Pasadena and ALW Boards, the SCPPA board approved a Power Purchase Agreement with Bonanza. It is recommended that the Utility Board approve this agreement with SCPPA. FISCAL IMPACT: The expected cost for delivered solar generation and BESS usage is approximately $4.4 million annually. Sufficient funds will be budgeted from Capacity and Energy Fund 33-40-775-550-6590. 0 50000 100000 150000 200000 250000 300000 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 Renewable Portfolio 2029 > Garnet Wind Mesa Wind (est)San Dimas DSR2 Solar Columbia II Solar Kingbird Solar Summer Solar Big Sky Ranch Solar Bonanza Solar Retail Load Bonanza PSA February 26, 2024 Page 5 Prepared by: Reviewed and Approved: Richard Torres Danny Smith Assistant General Manager - Utilities Admin & Finance Manager Power Resources Reviewed and Approved: Reviewed and Approved: Tikan Singh Sergio Gonzalez General Manager City Manager Attachment: 1) Power Sales Agreement Between Southern California Public Power Authority and City of Azusa.