Virtual Power Purchase Agreements Draw Increasing Interest from Corporations
April 13, 2023
by Paul Ciampoli
APPA News Director
April 13, 2023
Virtual power purchase agreements are drawing increased interest from U.S. corporations looking to grow their renewable energy portfolios.
With a virtual PPA contract, the corporate buyer does not own and is not responsible for the physical electrons generated by the project, energy group RMI notes.
In a report released in February examining global renewable energy purchase trends, BloombergNEF said that private companies and public institutions signed contracts to secure a record 36.7 gigawatts of renewable power to power their operations in 2022, up 18% from 2021.
“In the U.S., companies embraced the virtual PPA model under which a clean power project sells directly into the wholesale market to capture the spot price, rather than literally delivering its electrons directly to the customer,” the report said. “Such contracts are comparatively easy for buyers to sign and allow them to hedge against power price spikes,” BloombergNEF said.
The primary advantage of a virtual PPA lies in its flexibility, the American Cities Climate Challenge notes on its website. The American Cities Climate Challenge, sponsored by Bloomberg Philanthropies, was formed with an investment of $70 million “to enhance the work already being done by mayors across the U.S. and to support cities in the fight against climate change,” it says.
The flexibility offered by virtual PPAs “has made them the favored large-scale renewable energy procurement mechanism for large companies in the U.S.”
McDonald’s, Other Corporations Enter Virtual PPAs
McDonald’s has been a major player among corporations entering into virtual PPAs.
In late 2019, McDonald’s announced the signing of two long-term, large-scale virtual power purchase agreements under which McDonald’s agreed to buy renewable energy generated by Aviator Wind West, a wind power project located in Coke County, Texas and a solar project located in Texas.
More recently, McDonald’s entered into a number of virtual PPAs in 2022.
In September of that year, EDF Renewables North America announced a 15-year virtual PPA with McDonald’s tied to a solar project in Texas that is scheduled to come online in 2024.
In December 2022, McDonald’s and all five members of the restaurant chain’s North American Logistics Council signed agreements with Enel North America to purchase renewable energy and the associated renewable energy certificates from Enel Green Power’s Blue Jay solar project in Grimes County, Texas.
The virtual PPAs are for 189 MW from Enel’s Blue Jay solar project, which is expected to be fully operational in 2023.
In February, EDF Renewables North America announced the execution of a 20-year virtual power purchase agreement with Thermo Fisher Scientific. The virtual PPA covers the full output of the 200-MW Millers Branch Solar Project, which is located in Texas and slated for commercial operation in December 2025.
Another corporation embracing virtual PPAs is Campbell Soup. In November of last year, Campbell Soup and Enel North America announced a 12-year virtual renewable PPA.
Through the agreement Campbell will purchase the electricity and the associated renewable energy credits from a 115-MW share of Enel’s Seven Cowboy wind project in Oklahoma.
Meanwhile, earlier this month, Duke Energy Sustainable Solutions reported that the 250-MW Pisgah Ridge Solar project in Navarro County, Texas, came online.
Charles River Laboratories International has a virtual power purchase agreement for 102 MW of the project over the next 15 years. Midwest retailer Meijer signed a separate 15-year virtual PPA agreement for 83 MW of solar energy generated by the Pisgah Ridge Solar project. One other company has a third 15-year virtual PPA agreement. Together, the three agreements account for more than 90% of the facility’s output.
All three virtual PPAs associated with the site will settle on an as-generated basis tied to the project’s real-time energy output.
Why Texas?
“Several factors have made Texas an attractive market for renewable energy development and virtual PPAs,” Greg Rizzo, Head of PPA and Renewable Energy Solutions at Enel North America, told Public Power Current.
Strong solar and wind resources, land availability, transmission investments “and straightforward permitting have enabled Texas to produce more renewable electricity – and associated RECs – than any other state. Texas’ deregulated, wholesale market with spot power prices has facilitated a robust market for VPPAs,” he said.
“However, this environment may be jeopardized by pending legislation in the Texas Legislature, which would undermine the state’s nation-leading renewables sector by increasing regulation and costs,” Rizzo said.
Fixed-Priced Virtual PPA
In February, Ever.green announced that it was partnering with Watershed, a climate platform, to launch the first fixed-price virtual PPA.
The long-term commitments of Watershed customers including Samsara, Stripe, and TaskUs will help build a new solar plant in Laredo, Texas.
The new fixed-price virtual PPA developed by Ever.green and Watershed allows companies to fix their long-term costs. This eliminates exposure to the volatile pricing inherent to a traditional virtual PPA, while still increasing a project’s likelihood of full financing by lowering the project’s overall financial risk, Ever.green said in a blog.
Ever.green helps companies fund new solar projects through long-term contracts for Renewable Energy Certificates and a marketplace for transferable clean energy tax credits.
Pro-Public Power Group Raises Concerns About Michigan City Pursuing Virtual PPAs
Meanwhile, Ann Arbor for Public Power, a group formed to support the creation of a public power utility in Ann Arbor, Mich., recently came out in opposition to the city’s possible pursuit of virtual PPAs.
Virtual PPAs appear in the Ann Arbor Office of Sustainability and Innovation’s draft budget for the Community Climate Action Millage.
Ann Arbor for Public Power endorsed this millage and supports other initiatives in this draft budget, but does not support the funding of virtual PPAs. Virtual PPAs “are financial arrangements which are easy to frame as effective tools of decarbonization, but are complex, making them difficult to understand, and prone to pitfalls that undermine their effectiveness,” the group said, adding that it believes the costs of virtual PPAs outweigh the benefits.
Ann Arbor for Public Power said that while virtual PPAs may allow for the construction of new wind or solar, they will not reduce carbon emissions unless they replace fossil fuel generation.
“If there’s not enough demand for the energy where it’s built, building it at all actually increases carbon emissions,” the group said. It said that pursuing a virtual PPA “also means the financial and legal firms which will facilitate the deal charge the city a fee that could otherwise be more effectively used for decarbonization.”
The group said the money OSI is considering allocating to virtual PPAs “should instead be used for programs that make direct, local change to reduce carbon emissions, such as building local solar and energy efficiency programs.”
New APPA Reports Outlines Public Power Strategies for Cryptocurrency, Cannabis Operations
April 13, 2023
by Paul Ciampoli
APPA News Director
April 13, 2023
A new report issued by the American Public Power Association details strategies that public power utilities can utilize in response to cryptocurrency mining operations and cannabis grow facilities.
APPA enlisted Utility Financial Solutions to develop the report, “Managing New Electric Loads in a Changing Industry: A Look at Cryptocurrency Mining and Cannabis Grow Facilities.”
“An increasing number of public power utilities have received inquiries from cryptocurrency miners or cannabis grow facilities on the cost to provide electricity,” the report noted. “In addition to the increased demand, electric load from such facilities raise considerations for utilities, including legal questions, customer stability, and community perception.”
Cryptocurrency mining operations and cannabis grow facilities are being built throughout the U.S. Cryptocurrency miners often seek to locate in communities where electricity prices are relatively low because of the high amount of electricity they use. Due to limited building needs, miners can locate almost anywhere, the report said.
“Cryptocurrency operations often have a consistent usage pattern and may have flexibility in their operations to shift usage if needed. Cannabis grow facilities locate in states where cannabis has been legalized for medical or recreational use and have load patterns similar to commercial or general service customers,” according to the report.
Before a cryptocurrency miner or cannabis grow facility chooses a location, it will often inquire about the cost for electric service. Most utilities, including public power utilities, have procedures in place to provide guidance when speaking with a prospective customer. The utility typically assesses its ability to provide the service, estimates the connection costs, and determines what rate structures are available, the report said.
“Additionally, for public power, a key consideration is a prospective business’ value to the community. Cryptocurrency miners and cannabis grow facilities may present potential benefits, such as additional employment or increased tax base for the community, but could also create adverse impacts, such as noise, odor, or negative community perception.”
The report said that utilities might consider developing new rates and policies or updating existing rates and policies when adding cryptocurrency mining or cannabis grow facilities to their system to ensure that this new growth does not adversely impact existing customers. “When rates and policies are designed according to the utility’s cost structure, they often result in more efficient use of infrastructure and lower rates for existing customers.”
The paper reviews key aspects of rate tariff development, potential rate offerings, characteristics of cryptocurrency operations and cannabis grow facilities, considerations for managing cryptocurrency mining and cannabis grow facility loads, and utility experiences with these types of customers.
Utilizing a marginal cost recovery approach to rate design, requesting the ability to interrupt service, and putting in place a formal line extension or contribution margin policy are tools for electric utilities to manage cryptocurrency miners, cannabis grow facilities, and other emerging loads, the report said.
“As individual utilities strive for growth, resiliency, and reliability, work at the state and federal levels is being done to better understand the effects of cryptocurrency mining and cannabis grow facilities on the electric grid. Even with new loads and progression toward the ‘grid of the future,’ the goal of utilities remains to maintain reliable and affordable electricity for the communities they serve.”
The following public power utilities contributed to the report: City of Hamilton, Ohio; City of Shasta Lake, Calif.; Denton Municipal Electric, Texas; Electric Cities of Georgia; Stanton County Public Power District, Nebraska. A public power utility in Michigan also contributed but wished to remain anonymous.
Click here for the report.
Officials From Austin, San Antonio Voice Opposition to Bill Aimed at Revenue Transfers
April 12, 2023
by Paul Ciampoli
APPA News Director
April 12, 2023
Officials from the public power communities of San Antonio and Austin, Texas, recently voiced opposition to proposed legislation that would prevent municipalities from transferring revenue to their general fund from a public power utility if the transfer would result in a deficit for the utility or a rate increase for customers.
At issue is Texas Senate Bill 1110, which would also prevent public power utilities from including these general fund transfers as part of the utility’s cost of service study.
The Texas Senate Business and Commerce Committee on March 21 held a hearing on the legislation where a number of witnesses voiced opposition to the measure.
The prohibition on transfers proposed in the bill would be contrary to standard practices in the electric utility industry, said Mark Dombroski, Deputy General Manager and Chief Financial and Administrative Officer at Austin Energy.
“All electric utilities compensate their owners,” Dombroski said. “Municipal electric utilities make a general fund transfer to the city. Co-ops pay capital credits to their members. Investor-owned utilities pay dividends to their shareholders.”
He noted that Austin Energy returns a portion of its revenue to the community to reinvest. The utility’s general fund “is set according to a strict numeric formula established in 2012.” The formula “provides stability to the city and to the creditors by ensuring that rising costs or wholesale market volatility do not increase the transfer amount.”
Dombroski also noted that according to data from the Texas Public Utility Commission, Austin Energy’s rates are lower than the competitive market average and the utility’s latest AA- bond rating from Standard & Poor’s is well above the industry average.
“Competitively lower rates and high creditworthiness are evidence of our sound financial policies and prudent management,” he said. The legislation “would undermine our ability to prudently operate our electric utility and return that value to our community and customers as we have done for over 125 years.”
Also testifying in opposition to the bill was Ed Van Eenoo, CFO for the City of Austin.
He said at the hearing that over the past 10 years the city has seen funding from the general fund transfer grow by less than 1% on average, while Austin Energy’s wage and employee benefits costs over that same period have grown at much faster rates. “The point being that the general fund transfer has not been the primary driver” of the growth in Austin Energy’s budget.
“The transfer does, however, add stability and diversity to the city’s sources of revenue, which is viewed positively by bond rating agencies and allows the city to fund crucial general fund services while helping us to maintain a tax rate significantly lower than that of other major Texas cities.”
Ben Gorzell, Chief Financial Officer for the City of San Antonio, who also serves as the city’s Supervisor of Public Utilities, also testified in opposition to the bill. San Antonio is served by public power utility CPS Energy.
He said that the legislation would require significant cuts to city services and/or tax increases “and upend a municipal utility model that has benefited the San Antonio community for more than 80 years.”
Those benefits, he noted, include reliable gas and electric service, competitive rates, a transparent governance model and a financial return that supports a lower property tax burden and funds basic services for the residents of San Antonio.
Gorzell also noted that “this past year the city chose to give back $50 million to CPS Energy ratepayers to soften the impact of the extreme heat, high natural gas prices and high inflation” experienced this past summer.
APPA Launches Search for New President and CEO
April 12, 2023
by Paul Ciampoli
APPA News Director
April 12, 2023
The American Public Power Association has launched a search for a new President and CEO through consulting firm Lyceum Leadership Consulting. Applications for the position must be received by April 28, 2023, for consideration.
As part of the search process, a podcast interview with Tony Cannon, Board Chair of APPA, Dave Osburn, Chair-Elect and Search Committee Chair and Jolene Thompson, previous Board Chair from 2020 to 2021, offers candidates a more in-depth look at APPA and its mission, as well as what the search team is looking for in APPA’s next leader.
Cannon is General Manager and CEO for Greenville Utilities Commission in North Carolina, Osburn is
General Manager for Oklahoma Municipal Power Authority and Thompson is President and CEO of Ohio-based American Municipal Power.
Additional details about the process including key dates for next steps is available here.
California Community Choice Aggregator’s Board Approves Long-Duration Storage Project PPA
April 11, 2023
by Paul Ciampoli
APPA News Director
April 11, 2023
The Board of Directors for the Clean Power Alliance, a California community choice aggregator, has approved a 15-year power purchase agreement with NextEra Energy Resources for a 75-megawatt long-duration standalone energy storage project.
The project is located at NextEra’s Desert Sands Energy Storage facility in Riverside County, California. CPA will begin storing and discharging energy from the facility in June 2026.
The project marks CPA’s first executed contract incorporating eight-hour storage capabilities. CPA’s other battery storage projects incorporate four-hour battery technologies.
In June 2021, the California Public Utilities Commission issued a decision requiring load-serving entities, such as CPA, to increase procurement to address mid-term reliability concerns. As a result of this decision, CPA was required to procure a total of 679 MW of new reliable capacity between 2023 and 2026, including 59 MW of long-duration storage by 2026.
Founded in 2017, CPA is the locally operated not-for-profit electricity provider for 30 cities across Los Angeles County and Ventura County, as well as the unincorporated areas of both counties.
Department of Energy Seeks Feedback on Transformers Through RFI
April 11, 2023
by Paul Ciampoli
APPA News Director
April 11, 2023
The U.S. Department of Energy’s Office of Electricity recently announced a request for information seeking feedback from transformer manufacturers, utilities, academia, research laboratories, government agencies, and other applicable stakeholders regarding distribution and power transformers.
DOE said it is looking “to obtain public input regarding a potential future funding opportunity announcement seeking the research, development, and demonstration of innovative advanced transformers that can be readily utilized across a range of distribution to transmission scale applications.”
DOE is inviting stakeholders to provide feedback on these categories:
- Priority Transformer Research Questions: the highest priority distribution and power transformer research questions most relevant to a successful U.S. transformer industry.
- Transformer Technology Development: distribution and power transformer technology gaps.
- Transformer Supply Chain Constraints: developing a domestic supply chain to support competitive, efficient, high-quality, and cost-effective U.S. transformer manufacturing.
- Market Adoption and Industry/Sector Sustainability: reliable supply and demand, factors for product adoption, and opportunities to build a sustainable U.S. market.
Submit responses to the RFI (DE-FOA-0003021) to RFI-3021@NETL.DOE.GOV no later than 5:00 pm on May 5, 2023.
Click here for the RFI.
DOE Urged to Withdraw Proposed Conservation Standards Rule for Distribution Transformers
More than 60 House members on April 3 urged Secretary of Energy Jennifer Granholm to withdraw the Department of Energy’s proposed rule to increase conservation standards for distribution transformers.
In December, DOE announced it was proposing new energy efficiency standards for distribution transformers.
Since 2021, electric utilities have been communicating their troubles with procurement of distribution transformers to DOE, the letter noted.
“The lead time for procurement of a distribution transformer can take 16 months or longer. This lead time is a significant problem for electric utilities seeking to bolster the reliability and resilience of the grid and other critical infrastructure, particularly against severe storms and other hazardous weather events,” the House members said in the letter.
Seven Northeast States Submit Bid for Regional Clean Hydrogen Hub
April 11, 2023
by Peter Maloney
APPA News
April 11, 2023
A group of seven Northeast states has submitted a bid to compete for a $1.25 billion share of the $8 billion in federal funding for the Department of Energy’s clean hydrogen hub funding made available as part of the Infrastructure Investment and Jobs Act.
Specifically, Connecticut, Maine, Massachusetts, New Jersey, New York, Rhode Island, and Vermont submitted their joint proposal for a Northeast Regional Clean Hydrogen Hub.
Together with the federal portion, the northeastern states’ proposal represents a $3.62 billion investment and includes over 12 projects across the seven states. The projects are designed to advance clean electrolytic hydrogen production, consumption, and infrastructure projects for hard to decarbonize sectors, including transportation and heavy industry.
The multi-state group said its strategy is to create an ecosystem that connects hydrogen producers and users and associated safety experts, equipment manufacturers, researchers, and labor representatives that will work together to prioritize electrolytic production of hydrogen without creating greenhouse gas emissions by using clean electricity and water.
Clean hydrogen projects developed by the group would include hydrogen production for use in transportation, high-temp industrial thermal applications, and heating for utilities. The projects would also be designed to form strategic connections with other clean hydrogen hubs.
A group that includes the Tennessee Valley Authority is pursuing federal funding for a Southeast Hydrogen Hub. Four western states, Colorado, New Mexico, Utah and Wyoming, have signed a memorandum of understanding for the development of a regional clean hydrogen hub. And Salt River Project, along with several partners in Arizona, is working on a Southwest clean hydrogen initiative.
If selected by the Department of Energy, awardees would develop projects in four phases over the course of 10 to 12 years. Each phase would have a set of milestones to complete regarding technical data and analysis, community engagement, engineering, permitting and safety, business development, procurement, and construction, before advancing to the next phase of development.
Oversight of the Northeast group’s projects would be done through coordination and collaboration between the Department of Energy, New York State Energy Research and Development Authority as the prime awardee, along with partners in other states and project partners in communities across the region.
Major Western Transmission Project Gets Final Federal Approval Needed to Start Construction
April 11, 2023
by Paul Ciampoli
APPA News Director
April 11, 2023
The Bureau of Land Management has issued a Notice to Proceed for the TransWest Express Transmission Project, the final federal authorization needed to start construction on the interregional, 732-mile high-voltage system.
The project will connect three planning regions, while adding 3,000 megawatts of transmission capacity to facilitate the delivery of renewable energy supplies, the project’s developer said on April 11.
About two-thirds of the project is located on federal land. The Notice to Proceed represents the last step of the BLM authorization process that began in 2008, said TransWest Express LLC.
TransWest has secured 100% of the linear rights-of-way for the project, as well as the necessary authorizations from the states and 14 counties hosting the project.
Siemens Energy is the project’s HVDC technology supplier. Also, the project has conditional approval to join the California ISO balancing authority area, the initial capacity allocation process is complete and the Western Electricity Coordinating Council rating process is complete.
The project’s HVDC and HVAC segments will connect to the existing grid in Wyoming, Utah and southern Nevada.
The project will provide the region with new access to wind-generated electricity from Wyoming, home of the best onshore wind resources in the continental United States, according to the developer.
The first stage of the project is expected to be completed in 2027.
EPA Proposes to Strengthen, Update Mercury and Air Toxics Standards for Coal-Fired Plants
April 11, 2023
by Paul Ciampoli
APPA News Director
April 11, 2023
The Environmental Protection Agency on April 5 proposed to strengthen and update the Mercury and Air Toxics Standards for coal-fired power plants.
The agency released the pre-publication version of a proposed rule entitled “National Emission Standards for Hazardous Air Pollutants: Coal- and Oil-Fired Electric Utility Steam Generating Units Review of the Residual Risk and Technology Review.”
There will be a 60-day public comment period starting from the date the proposed rule is published in the Federal Register.
EPA, earlier in 2023, reinstated the appropriate and necessary finding under the Clean Air Act Section 112. That rulemaking process restored the legal underpinning for the agency’s MATS of hazardous air pollutant emissions from coal-fired plants, finding that it remains appropriate and necessary to regulate HAP emissions from electric generating units after considering cost.
With the new proposed rule, the agency would require that applicable facilities comply with the following changes within three years after the effective date of a final rule:
- Reduce the emissions standard for filterable particulate matter from 0.03 lb/MMBtu (pounds per million British thermal units) to 0.01 lb/MMBtu;
- Require that owners and operators of existing coal-fired plants only use continuous emission monitoring system to demonstrate compliance with the fPM standards; and
- Lower the mercury emissions standard for plants that burn low rank virgin coal from 4 lb/TBtu (pounds per trillion British thermal units) to 1.2 lb/TBtu, the same standard for plants that do not burn low rank virgin coal.
EPA also proposes to eliminate the alternative definition of startup. EPA proposes to no longer define startup period as lasting four hours after a unit starts to generate electricity. This provision would go into effect 180 days after the effective date of a final rule.
However, EPA is not proposing any changes to the current hydrogen chloride limits for coal-fired units. The agency has also not proposed any new standards that would apply to oil-fired units or integrated gasification combined cycle units.
According to EPA, 91 percent of the existing coal-fired power plants already meet the newly proposed fPM emissions standard. The agency does not expect the remaining units to have to incur significant costs to meet the new standard.
The agency is soliciting comments on the possibility of introducing an even lower fPM emissions standard at 0.006 lb/MMBtu.
EPA estimates that the cost of compliance for the entire industry will range from $33 million to $38 million on an annualized basis. On the other hand, the proposed rule is expected to yield $300 million to $350 million in annualized value net benefits, which includes $170 million to $220 million in health benefits and $170 million in climate benefits. EPA projects that retail electricity prices would increase by an average of less than 0.1 percent in 2028, 2030, and 2035.
These proposed amendments result from the EPA’s review of the May 22, 2020, residual risk and technology review (RTR) of MATS. EPA is only proposing changes to the MATS standards based on the technology review provisions of the Clean Air Act. The agency is not proposing any changes to the emissions standards as part of the residual risk review.
EPA is planning to host a virtual public hearing and registration details will be made available on its website.
Jacksonville, Florida, City Council Resolution Critical of Legislation Aimed at Public Power
April 10, 2023
by Paul Ciampoli
APPA News Director
April 10, 2023
The City Council of Jacksonville, Fla., recently passed a resolution critical of legislation that would limit the ability of public power electric utilities to transfer revenues to cities’ general funds.
At issue are two bills, HB 1331 and SB 1380. The Florida Legislature’s current session began on March 7. Both bills as amended the afternoon of March 21 would take effect July 1, 2024, if signed into law by Florida’s governor.
On March 21, the Florida Municipal Electric Association said the legislation would substantially limit the ability of public power electric utilities to transfer revenues to cities’ general funds, which will inordinately affect rural, often economically distressed, communities that have a weaker tax base.
“Municipal utilities have constitutional authority to transfer revenue generated from assets owned and operated by the local government to the general government budget. These dollars are often used to provide residents with critical life and safety services, including police and fire departments,” said Amy Zubaly, Executive Director of FMEA.
Jacksonville City Council Resolution
A resolution passed by the Jacksonville City Council in late March notes that Jacksonville’s public power utility JEA makes an annual contribution to city’s general fund in support of general governmental functions and operations of the consolidated City of Jacksonville.
Those include public safety and emergency services, parks and recreation programming and services, library services, local services and programs designed to mitigate costs and utility disruptions to customers who are neighbors in Jacksonville, and other operational services and expenses that may be paid using general fund dollars.
The JEA contribution to the city’s general fund for fiscal year 2022-2023 totaled $122,424,496 and supported a multitude of programs and services, the resolution said.
The resolution states that the City Council strongly opposes and urges the Florida Legislature to defeat passage of House Bill 1331 and Senate Bill 1380 “which would, together or individually, provide for a not-to-exceed cap on the transfers of municipal 30 electric, natural gas, water, or wastewater revenues to a municipal general fund to finance general government functions.”
This action “would only serve to further hamstring a local government’s ability to effectively utilize its financial resources to provide the programs and services it deems most appropriate to meet the needs of its community,” the resolution states.
“Our community-owned system works well, with a local board appointed by City Council and the mayor. Our board does a great job for all of our customers throughout Northeast Florida, ensuring that we have reasonable rates now and lasting solutions for the future,” JEA said in an April 5 statement to Public Power Current in response to the resolution.
“We really appreciate the Jacksonville City Council and our local legislators who are pushing back on this legislation,” the utility said.
Several other cities in Florida have also passed resolutions in opposition to the legislation.