Powering Strong Communities
Distributed Energy Resources

SMUD signs 30-year PPA for 160-MW solar project

The Sacramento Municipal Utility District (SMUD) recently signed a 30-year power purchase agreement (PPA) with Lendlease Energy Development for the output from a 160-megawatt solar project on the site of the decommissioned Rancho Seco Nuclear Generation Station.

The Rancho Seco Solar II project will be the largest solar facility in Sacramento County, California, when it comes online, scheduled for the end of 2020. Construction is expected to begin in August.

The project supports both SMUD’s strategic direction, as well as California's renewable energy and greenhouse gas emission goals, Amanda Beck, SMUD senior project manager, said. The project will also help support SMUD’s retail green pricing programs, such as SolarShares.

California has set a target of having 33% of all retail electricity sales derived from renewable resources by 2020, ramping up to 50% by 2026 and 60% by 2030. The state also has set a goal of reaching zero utility carbon dioxide emissions by 2045.

Those targets apply to investor owned utilities, but not to public power utilities, however, SMUD’s board has voted to voluntarily adopt and meet those goals.

SMUD is on track to achieve both the 33%-by-2020 goal and the 60%-by-2030 goal, but “We will need to add additional RPS renewables in the 2025-2027 time frame,” SMUD spokesman Christopher Capra said.

“We are looking at doing more solar projects,” Beck said, noting that the utility’s integrated resource plan calls for about 1,000 MW of solar power by 2040.

SMUD is also in the planning stages for the Solano 4 wind farm, which would replace existing wind turbines at the existing 230-MW Solano wind farm with up to 22 new, modern turbines, adding 91 MW to the facility’s capacity. Construction is expected to begin late in 2020 and be completed in early 2022.

SMUD is building the wind expansion project itself, but not the solar project because the Investment Tax Credit (ITC) available for a solar project is not useful for a not-for-profit entity such as SMUD. The ITC does provide value for the developer of the solar project and helps reduce the developer’s capital costs, savings that can be passed on to customers. “It makes sense for us to work with a developer” in order to take advantage of tax credits “to get the best price for our customers,” Beck said.

SMUD is also exploring the addition of energy storage to its renewable energy portfolio. The Rancho Seco II project does not currently include energy storage, but it is permitted for the technology, Beck said. “We are working with the developer” and actively looking at energy storage, “when the pricing starts to make sense.”

Overall, the pricing in the solicitation for the Rancho Seco II “was very competitive,” Beck said. The pricing in the PPA is flat for 30 years, but it could come down, but it cannot exceed $34.24 per MWh, she said.

The 30-year term of the PPA is also long compared with industry standards, which run closer to 20 years. “We have learned a lot over the last 10 years about how long these facilities can last,” Beck said.