Bankrupt PG&E trading time for solar and storage discounts

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As a residential solar power salesman, a decade ago, one of my pitches was, “Dear homeowner – you made the move from renting to homeowner, because you believed in bigger up front money in exchange for long term stability. Why would you continue to rent your electricity, when you have a solution?” This pitch helps on the finance and utility sides also – finance people want to make sure they get paid, and utilities want stability and long term electricity sources. With that, 20, 25 and even longer power purchase agreements get signed to align with solar modules warranties of 25 years.

In a filing with the United States Bankruptcy Court, Bankruptcy Case No. 19-30088 (DM) / Doc# 3346 (pdf), Pacific Gas & Electric (PG&E) has requested discounts on power purchase agreement (PPA) prices from three solar power projects and two energy storage projects, and is offering (do note that this author is taking the optimist angle on the project delivery timeline extension) these developers extensions on their time to delivery working projects. The utility is suggesting the renegotiations will save $20 million over the agreed terms.

The two energy storage projects were part of PG&E’s summer 2018 procurement totaling 567 MW / 2.27 GWh (image of the four projects above – the second and third of which are covered in this filing) that included two 1 GWh projects.

Specifically, the documents to be renogiated were:

  • Behind the Retail Meter Capacity Storage Agreement between the Utility and mNOC AERS LLC (“mNOC”), dated June 1, 2018, as previously amended by letters dated October 11, 2018 and November 27, 2018 (the “mNOC ESA”); and
  • Energy Storage Resource Adequacy Agreement between the Utility and Hummingbird Energy Storage, LLC (“Hummingbird”), dated June 1, 2018, as previously amended by letters dated October 11, 2018, November 27, 2018 and March 28, 2019

Examples of these documents were noted here (.docx) and here (.docx).

The mNOC AERS project has negotiated an 11% discount and will get an additional 15 months to deploy, while Hummingbird has accepted a 10% discount and will get 12 extra months.

PG&E has requested that the three solar projects, noted in the above image found in the RPS Executed Project data through April 30, 2018 published by the California Public Utilities Commission. lower their electricity pricing by 10% in the 15-year PPA. As well, the two agreed to extend project and construction related deadlines, and consequently, the time by which the debtors would be obligated to commence purchasing power, by up to 24 months. These deals have already been negotiated between these developers and PG&E.

The solar power projects were noted as being owned by Recurrent Energy (Canadian Solar’s solar development subsidiary).

  • Power Purchase Agreement between the Utility and Re Gaskell West 3 LLC dated September 22, 2017
  • Power Purchase Agreement between the Utility and Re Gaskell West 4 LLC dated September 22, 2017
  • Power Purchase Agreement between the Utility and Re Gaskell West 5 LLC dated September 22, 2017

An example of the agreements is noted here (DOC). Each of the solar power projects are listed as 20 MWac, however, do note the very nice AC Capacity Factor of 34%).

Standard & Poor’s and other Wall Street analysts have estimated that PG&E could save $2 billion or more by scuttling some of the pricier solar contracts. PG&E has more than $40 billion worth of contracts with clean energy suppliers and has suggested it could cancel some of them.

As well, the developers themselves might see benefit by being allowed to deploy their projects further in the future, allowing them to avoid the solar module tariffs as well, taking advantage of general solar and energy storage price decreases, along with technology increases, that are still ongoing.