NextEra and California utility agree BESS offtake deal with protections against future Federal actions and market volatility

As reported by Energy-Storage.news, EDP Renewables and CCA Ava Community Energy have agreed to share the financial risk associated with future import tariffs as part of a 1GWh BESS offtake deal.

During the recent BoD meeting, after hearing from OCPA’s Director of Power Resources, Louis Ting, regarding the CCA’s portfolio obligations, NEER’s Executive Director of Origination, Ted Beatty, delved into the specifics of the project behind the contract.

Under the terms of the power purchase agreement (PPA), OCPA is set to receive resource adequacy and hedging values from a portion of NEER’s 500MW Lock Energy Center BESS, located approximately 45 miles southwest of the City of Fresno.

Lock Energy Center is located on the same site as NEER’s Key Energy Storage development, with the two BESS projects sharing a gen-tie line connecting them both to the California Independent System Operator (CAISO) electricity grid via Pacific Gas & Electric’s (PG&E’s) 500kV Gate substation.

Under two separate offtake agreements, CCAs Marin Clean Energy (MCE) and Clean Power Alliance (CPA) are set to receive capacity from the first 300MW phase of NEER’s Key Energy storage project, which Beatty explained is due to commence construction imminently.

NEER has already obtained the go-ahead to develop its Lock Energy Center, after receiving the environmental greenlight from California Environmental Quality Act (CEQA) officials alongside a conditional use permit (CUP) from Fresno County.

“We are ready to build as soon as we get the site design finalized,” said Beatty.

Although the base contract stipulates OCPA receiving 115MW of capacity from the Lock Energy Center, the CCA has the option to reduce this contract to as low as 30MW, as long as it informs NEER prior to February 28 next year.

Alongside this, the contract contains a provision whereby OCPA can elect to change the contract length from 20 to 15 years.

“There’s still a lot of uncertainty at this point – it seems like every other week we get some type of executive order action from the federal government at the moment, whether that’s a tariff or something else that may impact this project,” said Ting, as part of a statement explaining the reasoning behind these contractual provisions.

As explained within documentation produced for the recent meeting, these provisions were included due to the “uncertainties of the Federal actions and the volatility in the energy and capacity markets.”

“The negotiated options for OCPA … may present opportunities to optimise both the positions within OCPA’s power portfolio and the impacts on our financial models,” explained the CCA.

Although specific costs are redacted, the offtake agreement contains a framework with fixed cost increases due to potential import tariffs, with OCPA having the option of terminating the contract if costs increase beyond a predetermined limit.

“The specified fixed cost was negotiated to ensure the burden of the tariff(s) are shared between NextEra and OCPA,” outlines the meeting documentation.

Regarding energy storage investment tax credits (ITCs), as OCPA’s portion of Lock Energy Center is contracted to come online by June 1 2028, the two parties are confident that the project will qualify for benefits provided by the Inflation Reduction Act (IRA).

Interestingly, as part of the RFP selection process, OCPA said NEER’s Lock project offered a huge 1,300% higher net dollar value on an annual basis compared to the second-highest standalone BESS project.

This isn’t the first time the two organisations have worked together, with OCPA having struck up a deal back in 2023 relating to offtake from NEER’s Grace Orchard Solar and Storage facility located in Riverside County.

Under the agreement, OCPA is set to receive 90MW of solar and 30MW/120MWh of storage capacity from NEER’s 500MW Grace Orchard hybrid complex for a 20-year period.

OCPA’s portion of the project is expected to commence delivery sometime during 2027.