Title
Adoption of Resolution Approving an Amendment to the Power Purchase Agreement with Ameresco Half Moon Bay, LLC and Alameda Municipal Power, for a 20-Year Extension and Expansion of the Renewable Landfill Generation Plant and Authorize the Alameda Municipal Power General Manager to Execute the Amendment with Minor Modifications. (Alameda Municipal Power 10491900)
Body
To: Honorable Mayor and Members of the City Council
From: Jennifer Ott, City Manager
EXECUTIVE SUMMARY
Alameda Municipal Power (AMP) purchases energy to supply the residents and businesses within the City of Alameda. Over the last year, staff have negotiated an amendment for an extension and expansion of a renewable landfill generation facility in Half Moon Bay to meet projected energy needs starting in 2026.
BACKGROUND
AMP purchases energy to supply the residents and businesses within the City of Alameda. With the passage of Senate Bill 100, AMP must meet the State of California Renewable Portfolio Standards (RPS), where AMP must procure 60 percent of its retail sales from renewable energy sources by 2030. AMP’s Strategic Plan also includes a target to maintain a 100 percent carbon-neutral energy portfolio.
AMP has reviewed its load and resource balance projections for fiscal year (FY) 2025 and 10 years into the future. Figure 1 illustrates that the projected load forecast starting in 2026 has a widening gap in available resources with a much larger drop-off in 2028 that would otherwise need to be filled with additional short term carbon free purchases.
Figure 1: Load and Resources Energy Balance
On January 24, 2005, the Public Utilities Board (Board) adopted Resolution No. 4656 approving an agreement between Ameresco Half Moon Bay, LLC (Ameresco) and Alameda Municipal Power, formerly Alameda Power and Telecom, for the purchase of renewable energy from a proposed landfill gas generating project located at the Ox Mountain landfill in Half Moon Bay, CA. City Council approved the agreement on February 2, 2005. The power purchase agreement (PPA) was officially executed on February 2, 2005.
On April 17, 2023, the Board delegated authority to the General Manager to sign a non-binding letter of intent with Ameresco for the purchase of additional electricity from a possible expansion at Ameresco’s Ox Mountain landfill power plant. AMP and the City of Palo Alto (Palo Alto) are the two buyers of the full electricity output from the Ox Mountain landfill gas generator, with power production shared equally under the terms of two separate, but essentially identical, PPAs with Ameresco. Palo Alto and AMP staff have negotiated with Ameresco over the past several months on pricing and terms for the plant expansion. An agreement must be signed by April 29, 2024, for Ameresco to exercise its contractual right over the additional landfill gas. The attached draft First Amendment is the result of negotiations between the Parties to date; any further modifications will be minor and only as approved by the City Attorney in alignment with the goals of this Staff Report and the accompanying resolution.
The current Ox Mountain landfill gas generator has an installed gross capacity of 10.6 megawatts (MW) operating as a baseload energy facility. AMP’s 50 percent project participation share is 5.3 MW of power. The contract term is for 20 years, and the original contract price was specified at $52/megawatt-hour (MWh) with an annual price escalator of 1.5 percent. The current contracted price is $64.20/MWh. The Ox Mountain landfill gas generator became commercially operational in 2009 and the PPA will terminate in 2028. The proposed expansion of 3 MW will result in a gross capacity of 13.6 MW with AMP’s share at 6.8 MW.
DISCUSSION
AMP staff have internally reviewed the proposal from Ameresco to determine how it would fit within AMP’s energy portfolio and the potential level of interest.
Pricing - The blended price of the contract expansion and extension is competitive with AMP’s expiring landfill contracts and the recently approved Calpine geothermal contract (February 2023). The proposed contract price is $74/MWh with an annual escalator of either one (1) (if the Consumer Price Index is less than 3 for the prior year) or two (2) percent (if the Consumer Price Index exceeds three (3) percent for the prior year). The term of the contract will be 20 years from the commercial operation date of the expansion, which is currently estimated in 2026. It should also be noted that the expansion and extension is contingent upon Ameresco receiving a lease extension on the landfill with Browning-Ferris Industries as well as applicable government permits. In addition, Ameresco may terminate by later of May 1, 2025, or 30 days after receiving government permit approvals, whichever is later, in its discretion for economic reasons.
Figure 2: Pricing
Attributes - AMP’s contracts with Ameresco for Santa Cruz landfill, expiring in 2026, and Silicon Valley Power (SVP) for renewable energy, expiring at the end of 2027, are both baseload in nature. Baseload contracts continue to be a good fit for AMP’s hourly resource needs. This contract includes both resource adequacy (RA) capacity and power content category 1 renewable generation attributes. RA is the qualifying and deliverable capacity of generation units that must be demonstrated to be under contract to the California Independent System Operator (CAISO) to meet the expected peak demands of load serving entities in each month. While the RA for the existing plant is guaranteed, the 1.5 MW of RA from the expansion will need to go through a CAISO approval process. The current resource adequacy value of 6.8 MW is approximately $2,000,000, although this value will vary by year. If the full RA amount of the expansion is not approved the parties have agreed to a $0.93/MWh reduction in purchase price for all energy generated by the project.
New vs Existing - Based on recent experiences at AMP and with other NCPA members and community choice aggregators (CCAs), AMP staff have learned that many PPAs with new facilities have frequently been delayed and/or faced requests for cost increases from the developer for impacts to supply chains. New projects stuck in the CAISO interconnection queue face long delays and considerable uncertainty around the status of full deliverability required for RA. Existing resources avoid the uncertainty around costs and timing.
ALTERNATIVES
Given the April 29, 2024, deadline for the parties to reach agreement, it is not possible to renegotiate the terms of the current agreement and return for City Council approval.
The only viable alternative is to not enter into the agreement. In this case AMP staff will seek out replacement renewable resources. It should be noted that staff is not aware of any existing offers for baseload renewables at comparable pricing.
FINANCIAL IMPACT
The contract agreement estimates pricing to be up to $4.21 million per year, with annual escalation over the 20-year agreement period, for up to 6.8 MW of renewable landfill energy and resource adequacy capacity.
Funding for the purchase of renewable energy will be included in the Alameda Municipal Power’s Power Cost budget beginning in the fiscal year 2026 or 2027 budget.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is consistent with the Alameda Municipal Code and policy documents. This action is subject to the Levine Act.
ENVIRONMENTAL REVIEW
This action does not constitute a “project” as defined in California Environmental Quality Act (CEQA) Guidelines Section 15378 and therefore no further CEQA analysis is required.
CLIMATE IMPACT
This amendment for renewable power support’s AMP’s 100% clean energy goal as well as the City’s GHG reduction goals to reduce GHG emissions to 50 percent below 20005 levels by 2030 and achieve net zero emissions as soon as possible.
RECOMMENDATION
Adopt a resolution approving an amendment to the Power Purchase Agreement with Ameresco Half Moon Bay, LLC and Alameda Municipal Power, for a 20-year extension and expansion of the Renewable Landfill Generation Plant and authorize the Alameda Municipal Power General Manager to execute the amendment with minor modifications.
Respectfully submitted,
Nico Procos, General Manager of Alameda Municipal Power
By,
Alan Harbottle, Supervisor Energy Resources
Financial Impact section reviewed,
Margaret O’Brien, Finance Director
Exhibits:
1. Power Purchase Amendment
2. Original Agreement