Regulators Sign Off on Higher Priced PG&E Energy Storage Deals

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Supply chain constraints continue to impact utility energy storage projects, leading state regulators to approve more changes to agreements for battery projects, including price increases. The latest revisions affect four Pacific Gas & Electric contracts for 530 MW of stand alone lithium ion batteries, initially approved to provide grid reliability between 2023-26.

On Dec. 1, the California Public Utilities Commission okayed without discussion PG&E’s request to raise the prices paid for the 15-year agreements and to extend the online dates. This was in response to the soaring costs of lithium and that of other metals used in batteries, construction constraints and inflationary pressures.

What price increase the Commission agreed to for the battery storage contracts was not revealed. The utility said it negotiated “aggressively with the counterparties with respect to the price increase, and has conducted due diligence on the proposed price increase,” according to the CPUC resolution signing off on the contract amendments.

The resolution added that the “capacity is needed for system reliability, and, therefore, it is appropriate to take steps to avoid default of projects currently under development.”

Back in October, the CPUC also approved changes to the terms of two other PG&E energy storage contracts. It okayed the price increase PG&E worked out with NextEra Energy Resources Development for 132 MW of lithium-ion batteries over 15 years. The Commission also approved changing the utility’s 15-year deal with Nexus Renewables, lowering the 27 MW of lithium ion battery capacity to 10 MW, and extending the project's installation date by one year.

On Oct. 18, the Clean Power Alliance of Southern California approved higher prices for signed agreements for six solar/storage projects. The developers said turmoil in the marketplace made it impossible for them to build the 1,500 MW on time and at the agreed upon price.

Subsequently, Southern California Edison agreed to alter its $1.2 billion, 537.5 MW/2,150MWh energy storage agreement with Ameresco because of marketplace turmoil. During its third quarter earnings report in November, company officials said the projects at three utility substations should be online before next summer. Edison expects to reap $270 million in tax credits under the Inflation Reduction Act.

PG&E storage deal extensions okayed

The latest reworked PG&E deals allow utility customers to pay higher prices for the 300 MW Nighthawk Storage, 100 MW Inland storage, and two TerraGen battery projects: its 80 MW Canyon Country and 100 MW Beaumont. The revisions also permit the Inland battery project capacity to be lowered from 100 MW to 50 MW, and to extend online dates for the Canyon Country, Beaumont and Inland Empire storage projects to June 1, 2024, from Oct. 1, 2023, Aug. 1, 2023, and April 1, 2024, respectively.

The agreements were initially approved as part of the CPUC’s directive for 11.5 GW of resources over the next three years, of which PG&E was ordered to line up 2.3 GW of new resources. The resources are to fill in supply gaps from the closure of seawater cooled gas fueled power plants on the Southern California coast, and the previously expected 2024-25 closure of Diablo Canyon Nuclear Plant’s two units. (Diablo may now be online until 2030 because of a new law and if awarded a license extension by the Nuclear Regulatory Commission.)

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Regulators Sign Off on Higher Priced PG&E Energy Storage Deals

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