The Clean Power Alliance’s central mission is to decarbonize California’s electricity grid by procuring and providing to its customers 100% clean energy resources - solar, hydrogen, battery storage, water, and wind. VX News, to inform our readers, spoke with Ted Bardacke, CEO of Clean Power Alliance, on the role that CCAs (Community Choice Aggregates) are playing in successfully bringing renewables to everyday power users and the regulatory decisions framing how consumers are being offered both greater choice re how their needs are met and more affordable electric rates. Bardacke also elaborates on CPA’s recent deal with SunZia, a massive wind farm project in New Mexico that will bring 3000 megawatts of wind energy to California; and, why the state should not abandon efforts to unify the power grids of the Western States.
VX News: Let’s begin by informing our readers again about the central mission of Southern California’s Clean Power Alliance (CPA).
Ted Bardacke: There are three core objectives of Clean Power Alliance. The first is in the name, which is to rapidly develop clean energy resources and decarbonize the Southern California electricity grid. Given our size, as the third largest load serving entity in the CAISO system – it’s PG&E, Southern California Edison and then us with our over one million retail customers – what we do here in Southern California has a statewide and western-wide impact.
The second objective is to bring some choice and competition into what has been a monopoly sector. We believe that competition spurs innovation. It gets people to sharpen their pencils. And it gives customers more choices around what type of energy they want to be consuming, and at what price point. For example, we have a lot of large corporate customers who have environmental, social, and governance goals around renewable energy. We offer a 100% renewable energy product that helps them meet those goals for their energy consumption in Southern California. Edison’s 100% renewable product is capped in terms of how many customers they can serve. Our 100% renewable energy product does not have a cap, so we can help those corporate entities to meet their ESG goals. We believe this demand is going to increase with the passage of the SB253 carbon disclosure law because large corporations are now going to be required to do Scope 3 Emissions Reporting for their suppliers. This means smaller and medium sized businesses in Southern California will begin to have a compliance obligation in terms of reporting. We believe they will turn to us to help them meet those obligations.
The third objective is to imbue both our products and our procurement with the local values of our members. We have 35 member in Los Angeles and Ventura Counties and 33 cities within those two counties. Our board of directors is made up of local elected officials. They have made how we do procurement and what programs we offer consistent with local priorities and very rooted in local community values. We have a strong relationship with our local labor partners because almost all the procurement we do is through project labor agreements. This is coming directly from our board. In our programs we're aiming to do a lot for our local governments, who can be so catalytic to on the ground climate transformation but are often under-resourced and may not have the technical expertise to do difficult decarbonization and resiliency work in their communities. So, we offer a platform to them to help pursue that local climate action.
Many, if not most of our readers, are aware that the Clean Power Alliance of Southern California was established in 2017 as a California Joint Powers Authority and an administrator of a Community Choice Aggregations (CCA) Program. Please define the niche that CCAs through the CPA serve.
We procure energy on behalf of our customers and then sell that energy to our customers. At our core, we are a procurement entity. Our procurement division is the largest division in our organization. It allows us to be very market aware. In the procurement world, we don't need to go through the California Public Utilities Commission, which makes us quite nimble. For new clean energy resources, we can go from proposal to contract in as little as three months. Across the state, CCAs now have a close to 80% market share in SDG&E territory, about a 50% market share in PG&E territory and about a 20% market share in Edison territory. They have become the drivers of new clean energy procurement in the state over the last five years. The IOUs did a lot in the early to mid 2010s. They got to a level where they complied with state mandates and then they pulled back for a while. It’s only now that Edison and PG&E are really looking to do new renewables procurement again. Meanwhile San Diego Gas & Electric has previously expressed a desire to get out of the energy procurement business because of how they’ve lost load to the CCAs in their territory.
CPA has a chart on your website mapping out a clean energy future. Elaborate on the clean energy future for California you envision.
Most of the CCA’s core mission is rapid decarbonization. Generally with the IOUs, statewide compliance has been seen as the ceiling. For us, statewide compliance is the floor. Many of the CCAs have not only met but far exceeded the statewide targets and goals in terms of green energy sales and customers; nine of the top 10 largest utilities in the country in terms of number of green energy customers, according to the National Renewable Energy Laboratory (NREL). Now most of the clean energy development by CCAs so far has been solar, onshore wind, and battery storage, with a bit of geothermal and biomass. Many of the CCAs are recognizing that they have a heavy solar energy portfolio, and they need to diversify. We are all looking to see what those additional technologies are going to be. Will it be new geothermal, which is very site specific and the subject of a lot of attention, particularly around the Salton Sea? The Lithium extraction with which geothermal will be built is not technologically proven at scale yet and we haven't seen any new geothermal come out of the Salton Sea yet. I tell everybody we'd love to buy it, but nobody's offering it yet. Or is it going to be some form of hydrogen combustion? Are we going to do a broad conversion of our fossil gas power plants, peaker plants, into some sort of hydrogen? Or is it going to be offshore wind, which will be logistically challenging and fabulously expensive. But that's okay; there's a lot of benefits to derive from that investment and worth the effort to get it right..
I think we're all exploring right now how to diversify our portfolios beyond solar, battery storage, and wind.
Let’s pivot to wind energy in California because you’ve now entered into a record breaking wind power procurement agreement with SunZia. Elaborate on this project & the value of bringing overnight renewable energy to California’s grid.
That's a really exciting project. It's the largest renewable energy project ever built in the United States, over 3000 megawatts. It's all coming on in one phase and it's in Central New Mexico. When you go to the site, the first thing you recognize is that it's really windy. It's an ideal spot to build wind energy infrastructure. And it comes with its own transmission lines to connect directly into the CAISO system.
One of the real challenges these days in getting new renewables onto the grid is not necessarily the land, although that too can be challenging sometimes, but rather hooking up to the grid and moving renewable energy from places where it's good to produce all the way to the customer. We’re probably going to be the largest purchaser of energy from the project and a real anchor to allow them lock down their financing, actually build it, and start to deliver in late 2026. That transmission line took 17 years to permit and we wanted to really make a commitment to those who've struggled for almost two decades to actually build something like that. Going forward we really need to reduce that kind of 17 year timeframe by three quarters to start getting the kinds of renewable resources onto the grid that we need. We've got a lot of solar, we've done a lot of battery energy storage, so we're well-resourced during the middle part of the day and into the early evening when those four hour batteries are all discharging. But we need to work on the overnight delivery of carbon free energy, and SunZia has a really good overnight profile.
This last May you participated in a VerdeXchange panel focused on not only the grid and diversity of resources, but the new funding coming from the IRA and other like federal and State programs. How is this new public investment impacting renewable energy supply?
It's impacted us in several quite positive ways. I'll start first with the Inflation Reduction Act’s name. A lot of people joke about that name because it's really about carbon emissions reduction and energy development. But because of a number of tax credit extenders and boosters, it has muted the inflationary pressures in the renewables space that we were feeling over the last few years. Prices are still not as low as they were in the late 2010s, but the upward trajectory of renewable energy prices has been muted. I believe that that is directly related to some of the tax credit provisions in the IRA. So, it is reducing inflation.
The second really important thing for us is that it codified some values that we’ve wanted to bring to our procurement and made them cost effective, particularly the domestic manufacturing of solar panels. There's a 10% tax credit boost in the IRA for products that use domestic manufactured products. There's a boost for projects that are located in what are called energy communities, which are communities that have both high levels of historic fossil fuel jobs and high unemployment rates. So it's really looking to site projects in areas where the transition can hurt existing jobs and where we will need to help. Green energy job creation has been a big part of our procurement efforts, but now there's money behind it.
The third important area of the IRA is at the consumer level. It’s filled with consumer tax credits and rebates that will help our consumers both decarbonize their own homes and businesses, particularly in water heating and space heating areas with heat pumps, and electrify their own transportation options. This not only helps us on the carbon side but it helps electricity sales, which in the long run should lower electricity costs to the consumer regardless of their energy provider.
The fourth area is that the IRA is putting a lot of money into hydrogen. We eagerly await the Treasury regulations around what qualifies as carbon-friendly hydrogen production. We dipped our toe into procurement of a 30% Hydrogen mix with a large fossil gas plant here in California. Those negotiations are ongoing. But we're really in a bit of a wait-and-see mode right now until those Treasury regulations come out. We very much want, if we ever do work to do hydrogen combustion, to be a high road, low carbon solution, and not just a fuel switch. And we need a little bit more policy development before that happens.
Share whom CPA is procuring renewable energy from, as well as about your procurement process.
We, like the IOUs who don't own much generation anymore, procure from private sector owners, developers and operators of energy generation infrastructure. That includes most of the major players in the California energy market backed by traditional names that you see in Wall Street; Morgan Stanley, JP Morgan, Goldman Sachs, Bank of America, Wells Fargo, etc. Earlier this year, Clean Power Alliance was awarded an investment grade credit rating, an A minus from Standard and Poor's, which enables our developer partners to more easily finance their projects, because we’ve been deemed credit worthy. That's a big milestone. In terms of our process, we run an annual RFO. This last year, we got over 120 offers from unique projects. Then we go through evaluation and we shortlist them and then we negotiate. It's very transparent. We're a public agency. But process-wise it's not that different from how energy has been procured for the last couple of decades, just the process can be quicker for us because we don’t have to go through the CPUC.
On your website, the California Community Choice Association, you note that part of your responsibility is to build energy market structures and regulatory paradigms that benefit all California ratepayers and facilitate affordability, reliability, decarbonization and social equity. Drill down on these goals.
Because we are so close to the market, procurement is active, ongoing, and heavy. We often find opportunities to translate that knowledge into dialogues and proposals with regulators and legislators that impact the wider market. This market awareness is something that I think the state policymakers and state regulators sometime lack because they've been operating in a monopoly setting for so long. It just hasn't been in their wheelhouse. In the energy space, I think CARB has a very, very keen awareness about how their tailpipe emissions regulations are going to impact the light and medium and heavy-duty vehicle sector. They're very, very market aware because they’ve been doing it for so long. The CPUC is just beginning to develop that understanding of how the competitive energy markets work and of how their decisions might impact that market. We're bringing that perspective to the state as it contemplates what to do next.
The prospect of a unified Western States power grid was once a priority of California environmental regulators and stewards. Is that prospect still a priority in the West?
Jerry Brown was never one to shy away from a difficult task and tried a couple of times in the mid-2010s to essentially take the CAISO model and add western states. California imports, on an annual basis, about 30% of its electricity needs. So we're a net importer. The more we restrict how and when and what type of imports can come in, the higher prices can go and the more that other states might try to buy that energy instead. So it's got an affordability piece, it's got a reliability piece and, increasingly, as the other states in the West pass their own renewable portfolio standards, it's got a decarbonization piece. If we could share the renewables across state lines more than we're doing now, that could be really beneficial for decarbonization, affordability and reliability.
In the most recent effort and much to their credit, the CPUC and the CEC have started at the regulatory level with other states to sort of build something from the bottom up before they go to the legislature with any type of governance proposal, because the proposal has always floundered around the governance issues. I think they're going about it the right way and making good progress. Our trade association CalCCA is very, very involved as a stakeholder in that process. Hopefully we'll see something come out of it sometime later in 2024 that would allow us to access those benefits and protect against the downsides. And there are downside risks. One of the downside risks is if you start to build more in other states, while you have overall job creation, you might not get the number of jobs you want in California in the clean energy economy. The other thing that you want to make sure is that California's ability to set policy is maintained even though you're in a regional setting. I think there are ways to address both of those risks.
Two things have changed politically in the past couple of years that make me more optimistic that we’ll get some form of regional integration. First, more states across the West have now passed renewable portfolio standards. So the fear from other states that California is going to impose its policies on them is less pronounced because there's more of a common effort on renewable energy. And second there is another regional entity called SPP, the Southwest Power Pool, which is based in the Midwest, that is planning to expand westward. The fear now is that if they are successful in getting a bunch of western states and utilities to join, California could end up being isolated. And remember, we are a net importer. If we lose easy access to that western energy it could be very, very problematic for both affordability and reliability. I don't want to be like Texas.
Let’s close with your assessment of COP28. Many power sector leaders in the United States are present. Speak to what you think will happen and whether it will be important to the growth of the renewables’ marketplace.
There is a spectrum between planning on the one end and on-the-ground getting it done on the other end. We're much closer to the getting it done side of that spectrum. So what happens at those global policy meetings matters in terms of framing and creating the political will to have entities like us do more on the ground. Anything positive moving in that direction is wind at our backs. But it's a psychological value driven wind, not necessarily a market transformational wind. We think it's really important that the world reach a consensus on how to decarbonize not just the energy sector, but the broader economy.