The Clean Power Alliance this week will sign its first Energy storage contract, a 15-year deal for a lithium-ion battery project to be built on a 5-acre site near J Street in Lancaster. The contract with sPower is one of up to a half dozen others the community choice aggregator will consider over the next month or so.

The capacity is needed principally to meet CPA’s state-mandated share of the resources required to reasonably ensure forecasted energy loads can be met over the 2021-2023 period. The Board of CPA, which now serves over a million consumers in the LA/Ventura County region, is chaired by South Pasadena Mayor Pro Tem Diana Mahmud.

Under the contract, CPA will receive the benefits of the Luna Storage Project, a 100-megawatt (MW) battery sPower is developing near an SCE substation that serves sPower’s 75 MW DSR solar power farms. Luna will be able to supply 100 MW hours for four hours.

As CPA continues to build its long-term, carbon-free renewable resource portfolio of wind, solar and other resources that generate electricity more intermittently than gas-fired power plants, batteries can be used to meet variations and peak loads.

Storage allows CPA to capture excess renewable energy during the middle of the day when prices are low and use it to meet evening peak demands, the agency said in background materials. It can ramp up immediately to meet grid fluctuations and will be critical to ensure reliability as the state moves to 100 percent renewable energy by 2045.

As part of state-wide set of allocations, the California PUC in November required CPA to acquire a total of 196.9 MW of this “resource adequacy” product, including at least half of that by Aug 1, 2021. The Luna battery is scheduled to go online July 31, 2021.

Based in Salt Lake City, sPower is a subsidiary of a joint venture between a Canadian investment firm and AES Corp., an electric power distribution conglomerate in Virginia. SPower develops and operates renewable energy plants throughout the US, has a strong balance sheet and has been growing its share of the storage market, CPA said.

Twenty-seven members of the CPA’s 32-member board voted to sign the contract, with none opposed, the agency said. All public and board testimony supported the deal.

CPA’s packet said the project got “high” marks for location, development risk and workforce development value—it will create 50 construction jobs but only one permanent position; and “medium” marks for environmental stewardship and benefits to disadvantaged communities.

Only three members of the Board and a handful of staff know the price CPA is paying for Luna. Besides statements that it will pay a fixed monthly rate with no escalation and earn more revenue from the project than it will cost over its lifecycle, the agency declined to release pricing information, including “notional” values it has released for previous much larger contracts.

“Customers expect us to negotiate the best possible price and protect them from market manipulation,” spokesperson Allison Mannos said in an email. “Keeping some market sensitive project information confidential for a period of time increases our negotiating leverage and maintains a robust pool of bidders for future projects, as our potential business partners know their trade secrets won’t be revealed.”

There are three types of “resource adequacy” (RA) capacity: system, local and flex. Last August, the CPUC published the results of a survey it did among the state’s energy suppliers. It said that in 2019, the weighted average price for system RA capacity was $3.25/kW-month; higher for local RA and $2.84/kW-month for flex RA.

Luna was one of 41 proposals CPA received in response to its October 2019 Reliability request for offers. Based on a recommendation from three board members and the executive staff, the Board’s Energy Planning and Resources Committee narrowed that down to 12, only half of which agreed to put down the deposit required to enter exclusive negotiations. Now that Luna has been approved, CPA is still negotiating with the five remaining, “and we expect to bring some of those to the board for future consideration,” CPA executive director Ted Bardacke told the South Pasadena News.

Luna and some of the resources CPA has already contracted for can meet much of the California PUC’s RA requirement, but CPA will need more than that to integrate its growing fleet of renewable resources.

CPA still buys virtually all its energy on the short-term market. Only one small wind project is currently generating. CPA has contracted for six renewable projects with a total of 691 MW of capacity slated to come online by the end of 2022, with an average contract term of 15 years, including 321.6 MW of wind and 273 MW of solar. Three-fourths of that capacity is under contract with NextEra Energy Resource projects.