1.1 GW of New Distributed Solar is Installed in California Each Year
Electricity customers in California’s Investor-Owned Utility markets have installed an average of 1.1 GW of new behind-the-meter solar PV systems each year. Customer needs for resiliency and clean energy will continue to drive solar plus battery adoption. These market conditions present both a problem and an opportunity for CCAs.
The continued deployment of solar + battery systems in California reduces CCA retail electricity sales revenue.
The customer desire for resiliency presents an opportunity to deploy an innovative program that positions CCAs as a beneficiary of solar + battery projects.
The Distributed PPA Program
To mitigate the revenue losses to CCAs, TerraVerde has developed a Distributed PPA program that enables CCAs to partner with customers in deploying distributed solar plus battery energy storage systems. In this program, CCAs are positioned as a beneficiary of the DER projects, overcoming the revenue loss challenge, and creating additional financial opportunities. Under this program framework, the CCA engages target customers with a cost savings and energy resiliency offering in the form of a solar + battery Power Purchase Agreement. Upon securing Letters of Interest from a cohort of customers, the CCA, then procures a ”Distributed Solar + Battery PPA” from developers for projects sited at these customer locations. Based on the pricing received from the market, the CCA then offers the electricity generated from the deployed solar PV systems to their cohort of customers at a rate that is higher than the Distributed PPA rate but lower than the customer’s standard rates thus:
- Lowering customer costs & providing backup power benefits
- Generating a new CCA revenue source
- Overcoming the revenue loss challenge posed by the distributed generation
- Developing a DER portfolio that generates significant procurement cost savings
- Building a long-term relationship between CCAs and customers
Under typical customer program structures, the vendor is in the middle, effectively earning what was previously the retail electricity revenue of the CCA.
In the Distributed PPA Program, the CCA is in the middle, driving value for everyone involved.
The following, chart shows illustrates the development cycle of the Distributed PPA Program.
A Case Study
A case study of the Distributed PPA program, modeling the impacts of deploying solar + storage systems at 175 commercial customers overcomes what would otherwise be a $62 million revenue loss, and provides the CCA with a net benefit of $68 million dollars.
- Customers: 175 Commercial Customers
- DERs: Solar + Battery Storage
- DER Operation: charge battery from solar exports, discharge against CCA’s evening peak load
- Customer Benefits: energy cost savings & resiliency
- CCA Benefit: reduced RA obligation, reduced day-ahead purchases, REC purchase savings, and PPA net revenue
|Distributed PPA Program Impacts Over 20 Years|
|Electricity Sales Revenue Impact||($61.6 million)|
|Procurement Cost Savings||$11.1 million|
|RA Obligation Reduction Savings||$8.5 million|
|Avoided REC Purchases||$11.3 million|
|Distributed PPA Net Revenue||$99 million|
|Program Net Benefit||$68.3 million|
The following financials from the case study show that customers & CCAs both earn benefits under this Distributed PPA Program. The CCA charges the customer a PPA rate that is lower than the customer’s gross bill savings, but at a rate higher than what the CCA is paying to the vendor, thus generating both customer net savings, and CCA net revenue.
Additionally, this program enables CCAs to lock in a fixed margin on their electricity sales to these customers. Given the variability of wholesale procurement costs (i.e., Cost of Service), CCAs carry profitability risk on retail electricity sales. Under the Distributed PPA program, contract pricing & structure assures CCAs have a fixed margin on electricity sold through the program.
TerraVerde Energy is a leading independent energy consulting firm proudly supporting CCAs with customer programs. Informed by our 11 years of Distributed Energy Resource project & program development expertise, we have extensive experience in supporting CCAs with the design, development, and implementation of customer programs. To learn more about TerraVerde’s Distributed PPA Program Services, write to us at email@example.com.