HomeMy WebLinkAboutStaff Report 2301-07065.Finance Committee and the Utilities Advisory Commission Recommend the City Council
Approve and Authorize the City Manager or Their Designee to Execute a Third Phase
Agreement With Northern California Power Agency for the Purchase of up to 87,600
Megawatt Hours per Year of Geothermal Energy From Calpine Corporation's Geysers
Power Company, LLC Over a Term of up to 12 Years for a Total not to Exceed Amount of
$76.2 Million; CEQA status: not a project under CEQA Guidelines sections 15378(a) and
(b)
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CITY COUNCIL
STAFF REPORT
From: City Manager
Report Type: Action
Lead Department: Utilities
Meeting Date: April 17, 2023
Staff Report: 2301-0706
TITLE
Finance Committee and the Utilities Advisory Commission Recommend the City Council Approve
and Authorize the City Manager or Their Designee to Execute a Third Phase Agreement With
Northern California Power Agency for the Purchase of up to 87,600 Megawatt Hours per Year of
Geothermal Energy From Calpine Corporation's Geysers Power Company, LLC Over a Term of up
to 12 Years for a Total not to Exceed Amount of $76.2 Million; CEQA status: not a project under
CEQA Guidelines sections 15378(a) and (b)
RECOMMENDATION
The Finance Committee, the Utilities Advisory Commission (UAC), and Staff recommend the City
Council:
1. Authorize the City Manager, or their designee, to execute a Third Phase Agreement1 with
the Northern California Power Agency (NCPA) to purchase up to 87,600 MWh of
renewable energy/year from a portfolio of geothermal projects owned by Calpine
Corporation’s Geysers Power Company, LLC, over a period of 12 years, at a total cost not
to exceed $76.2 million;
2. Authorize the City Manager, or their designee, to execute on behalf of the City all related
documents or agreements necessary to administer the Third Phase Agreement that are
consistent with the Palo Alto Municipal Code and City Council approved policies,
including, but not limited to, collateral assignment agreements; and take any and all
actions as are necessary or advisable to implement and administer the Third Phase
Agreement;
3. Authorize the City Manager, or their designee, to approve and execute amendments to
the Third Phase Agreement1, as may be required from time to time, so long as the contract
price and length of the agreement remain unchanged; and
4. Waive the application of the anti-speculation requirement of Section D.1 of the City’s
Energy Risk Management Policy as it may apply to surplus electricity purchases resulting
1 Third Phase Agreement: https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-
reports/reports/city-manager-reports-cmrs/attachments/03-07-2023-id-15051-ncpa-agreement.pdf
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from the City’s participation in the Calpine contract, due to the variability of the City’s
hydroelectric resources and uncertainty around the City’s long-term load forecast.
EXECUTIVE SUMMARY
Through a Request for Proposals (RFP) recently conducted by NCPA, the City has the opportunity
to enter into a 12-year agreement to purchase renewable power from a geothermal resource
owned by Calpine. NCPA has executed a power purchase agreement (PPA) with Calpine to
purchase the project output (which includes renewable energy and local resource adequacy
capacity), and the City and other NCPA members who have elected to participate would receive
shares of the output via Third Phase Agreements with NCPA. Palo Alto’s share of the 100 MW
project capacity would be 5 MW for the first two years of the agreement, and 10 MW for the
remaining ten years—the output of which would be equivalent to 10.6% of Palo Alto’s 2021 retail
energy sales.
The primary benefits of the Calpine project are: (1) the units are fully constructed and are already
in operation—hence there is no project development risk; (2) geothermal resources are baseload
generators, meaning they produce a nearly uniform level of energy on a 24-hour basis, which is
a good match for the City’s load; and (3) the units provide local resource adequacy (RA) capacity,
of which the City has a significant shortage. In addition, staff has determined that the contract
price and value are very competitive with other renewable energy offerings in the market, and
that this contract would provide a net value to the City (i.e., its total value would exceed the cost
of the contract) of at least $13/MWh, which would be equivalent to over $550k/year during the
first two years of the contract, and over $1.1 million/year during the remaining ten years.
BACKGROUND
SB 100 & Carbon Neutral Plan goals
As part of ongoing efforts to meet the City’s Carbon Neutral Plan requirements, as well as to
comply with the state Renewable Portfolio Standard (RPS) mandate of providing at least 60% of
sales from qualifying renewable resources by 2030, staff pursued a PPA opportunity presented
by Calpine to NCPA. Calpine is offering to sell power from a geothermal2 power plant, which
qualifies as an in-state “Bucket 1” renewable resource under the state’s RPS requirements.
Existing RPS portfolio
Over the past three years, the City has had an average RPS level of 63%3 and is projected to
maintain a high percentage of its power from renewable resources well into the future. Figure 1
below shows Palo Alto’s projected RPS requirements along with the City’s existing supply
2 Geothermal power plants have a small amount of carbon emissions associated with their operations from the
natural release of greenhouse gases from the geysers.
3 This value refers to the total renewable energy content of the City’s supply portfolio, including all of its in-state
(“Bucket 1”) renewable resources and its unbundled, out-of-state (“Bucket 3”) renewable energy credits (RECs).
For state RPS reporting purposes, the volume of Bucket 3 RECs that can be counted is limited; under this more
restrictive framework the City’s reported RPS level has averaged 31% over the last three years.
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resources. Starting in 2029, the City is projected to have a deficit relative to its RPS requirement
level (depending on the amount of large hydroelectric output the City receives4).
Figure 1: Palo Alto’s Existing RPS Supplies and RPS Requirement Levels
ANALYSIS
The Market for Renewable Resources in California
The pricing and availability of renewable resources in California has evolved significantly over the
past decade as state and federal policies have shifted the market landscape. While the trend over
the last decade has been the declining cost of renewable PPAs, the last two years has seen
increasing challenges to developing and building renewable projects resulting from material
shortages, supply chain issues, inflation, labor shortages, and tariffs. Before 2020, the market
would generally have been described as a buyer’s market, however, in the last two and a half
years, this characterization has shifted to a seller’s market as there are more renewable buyers,
increasing challenges to completing projects, and as a result PPA prices have risen from record
lows.
4 Under the state’s RPS law, utilities that receive significant amounts of generation from certain large hydroelectric
facilities are able to satisfy their RPS requirements with a lower RPS level than is required of other utilities. Such
utilities are only required to achieve an RPS level equal to the difference between their total retail sales volume
and the amount of generation they receive from qualifying large hydro facilities.
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While the downward trend in renewable energy pricing has reversed in the last couple of years,
staff expects the generous subsidies included in the Inflation Reduction Act (IRA), which was
signed into law August 16th, 2022, to eventually push renewable energy prices lower again. There
are many details in the IRA that are being outlined by the Treasury Department, and the initial
feedback from developers is that it is still too early to understand the net impact this law will
have on Palo Alto’s renewable resource options. Ultimately staff expects the IRA to reduce the
cost of renewables. However, the consensus view in the California market is that it will likely be
several years before these cost reductions materialize, given the extent of the current supply-
demand imbalance and the various development challenges.
While the market prices for intermittent renewable resources such as solar and wind, and energy
storage systems have fluctuated in recent years, the price for baseload firm renewable resources
such as geothermal energy has remained relatively steady. The price for energy from geothermal
resources is relatively high, reflecting its higher cost of development and its higher value to the
electrical grid.
Results of Palo Alto’s Renewable RFP (2022 RFP)
In May 2022, staff issued a Request for Proposals of new renewable and/or carbon-free
generating resources and energy-storage resources. Staff’s evaluation of the four conforming
project proposals (all of which were for solar resources) indicated that their “green premiums”
(i.e. their net cost to the City – their total value less their total cost) ranged from $3/MWh to -
$18 /MWh. In comparison, the Calpine geothermal project’s net cost is estimated at -$3/MWh
(see below for more detail on this analysis). But in the course of reviewing the four responsive
proposals, staff (1) became aware of efforts at the federal level to pass significant new clean
energy legislation (in what became the IRA), and (2) learned about the Calpine geothermal
project proposal. As a result of these two events, staff decided to reject the four conforming
proposals received through this RFP.
Calpine Geothermal Project Summary
In May 2020, Calpine submitted a proposal to NCPA’s5 Renewables RFP for the sale of energy and
associated attributes from Calpine’s6 existing portfolio of geothermal projects located in The
Geysers area of Northern California. At the time Calpine submitted its proposal, NCPA members
were evaluating other lower-cost project proposals. But shortly thereafter, the price of
renewable projects started to significantly increase, due to the confluence of factors noted
above. So in September 2021, NCPA requested proposal updates from Calpine and the other RFP
5 NCPA is a not-for-profit Joint Powers Agency whose membership includes municipalities, a rural electric
cooperative, and other publicly owned entities, including the City of Palo Alto. The mission of NCPA is to provide
members cost effective wholesale power, energy-related services, and advocacy on behalf of public power
consumers through joint action.
6 Calpine Corporation (Calpine) was founded in 1984 and, through its wholly-owned subsidiary GPC, is the largest
owner of geothermal plants in The Geysers area in Northern California, with 725 MW of green energy capacity
operating around the clock. The Geysers area is known as the world’s largest geothermal field spanning an area of
30 square miles in Sonoma, Lake, Mendocino, Marin, and Napa counties.
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respondents to see if their projects were still available and if there were any changes in price
and/or terms initially offered. Section 2.30.340(d) of the City’s Municipal Code permits the City
to procure wholesale utility commodities and services through public agencies, including NCPA.
After receiving the updated information, NCPA and member utility staff7 reviewed and analyzed
the projects again and determined the geothermal output from Calpine would best diversify their
renewable energy portfolios, aid them in achieving California RPS requirements, help meet their
sustainability goals, and meet the needs of their expected load growth.
Over the course of 2022, NCPA staff led negotiation of a PPA with Calpine for renewable energy
and RA from Calpine’s Geysers geothermal facilities on behalf of the interested NCPA members.
To enable NCPA to enter into the PPA with Calpine, participating NCPA members must execute a
Third Phase Agreement with NCPA, which specifies the rights and obligations of NCPA and
participating members regarding governance and administration of the PPA. The Third Phase
Agreement also obligates the participating members to pay their assigned contract percentage
share of all project costs (outlined in Exhibit A of the attached Third Phase Agreement), including
but not limited to, administrative services costs, scheduling coordination costs, and all other costs
related to the PPA.
Santa Clara, as the initial project participant, executed the Third Phase Agreement on December
23, 2022, which enabled NCPA to execute renewable energy and RA Agreements with Calpine for
output from the Geysers geothermal facilities. As described in Exhibit A of the attached Third
Phase Agreement, participating members become project participants by exercising their right
to accept a transfer of a portion of the project participation percentage from Santa Clara by April
30, 2023.
In total, NCPA members have expressed interest in purchasing 100 MW of generating capacity
from Calpine for a term of 12 years. Palo Alto requested up to 20 MW of this capacity, but given
the demand from other NCPA members, has only been allocated 10 MW, with 5 MW starting in
2025, and 5 additional MW starting in 2027. This total geothermal capacity is expected to
generate up to 876,000 MWh annually, of which Palo Alto would receive up to 87,600 MWh/year.
This project will increase and further diversify Palo Alto’s renewable energy portfolio in
accordance with the City’s adopted Integrated Resource Plan and RPS Procurement Plan. The
proposed 10 MW share of the Calpine geothermal output is equivalent to 10.6% of Palo Alto’s
2021 retail energy sales.
Due to increased demand for renewable energy generation resources, Calpine is limiting the
amount of time it will reserve the quantity, price and terms of a PPA for prospective buyers.
Therefore, staff recommends authorizing the City Manager to enter into the aforementioned
Third Phase Agreement with NCPA. The benefits of the Calpine project are: (1) the units are fully
constructed and are already in operation; (2) geothermal resources are baseload generators,
meaning they produce a nearly uniform level of energy on a 24-hour basis; and (3) the units
7 The City of Alameda, City of Biggs, City of Gridley, City of Lodi, City of Lompoc, Port of Oakland, and City of Santa
Clara are all expected to sign onto the Third Phase Agreement to receive output from this project.
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provide local resource adequacy (RA) capacity, of which the City has a significant shortage. Unlike
many other new renewable energy projects, this project doesn’t carry any development risk.
Economic Assessment of Calpine Geo Contract
The Calpine Geothermal PPA is expected to provide good value to CPAU customers while also
reducing the supply portfolio’s seasonal energy and RA capacity deficits, thereby reducing budget
uncertainty. The geothermal project provides three valuable products to the electric portfolio:
energy, resource adequacy, and renewable energy credits (RECs). If the sum of these three values
is greater than the cost of the power purchase agreement, then the City will see a net monetary
benefit from this contract.
The primary value provided by this PPA is from the baseload energy output that the geothermal
resource produces. Based on forward energy curves as of December 12, 2022, the average value
of this energy is $71.80/MWh between 2025 and 2030.8
In addition to the energy component, each MWh of geothermal generation qualifies as a “Bucket
1” renewable energy credit (REC), which historically has been valued between $12-$18/MWh.
Recently, Palo Alto sold surplus Bucket 1 RECs for as much as $25/MWh, and according to reports
from independent brokers, the value of RECs has recently surged to over $40/MWh.
Finally, the geothermal plant capacity qualifies as local RA, which the City can count towards its
annual local and system RA requirements. RA is typically transacted and priced on a $/kW-month
basis and has ranged between $6/kW-month to $8/kW-month recently, which would translate
to approximately $8 to $11/MWh for the geothermal project. Staff transacted for system RA at
a price around $15/MWh in October 2022, well above historical RA prices. The increase in RA
prices is driven by increasing system RA requirements and reduced qualifying capacity of solar
resources, leading to a market shortage of RA in high load summer months.
These benefits of the geothermal PPA in aggregate are estimated to range between $92 to
$101/MWh against a PPA price of $79/MWh.
With each of these revenue streams, there is a large degree of uncertainty around what will
happen to future prices from changes to macro-economic conditions, regulations,
interdependent regional power markets, and overall market uncertainty. That said, forward
pricing curves project off-peak power prices to become more valuable than on-peak prices within
the next few years, and proposed changes to the RA market rules would reward generators that
produce in times of the grid’s greatest need. Furthermore, under the state’s RPS legislation, all
load serving entities are required to increase their share of renewable energy in their portfolios
(to 60% by 2030), so there is increasing demand for RECs. All of these trends support the expected
long-term value of the geothermal project, given its ability to generate renewable energy around
8 Note that all energy prices in California have increased sharply over the past two years, not just those of
renewable energy projects: Two years ago, forward energy curves pegged the value of this product at $33/MWh,
and even three months ago its value was projected to be just $54/MWh.
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the clock. The geothermal project’s inability to reduce output during the sunshine hours will
expose it to some lower prices, but these downsides are expected to be offset by the other trends
mentioned. Staff conservatively estimates the geothermal project will provide a net benefit of at
least $3/MWh9, with the potential for significant upside if market prices stay high and there are
further challenges to bringing new resources onto the grid in the coming 5-10 years.
Risk Management Assessment
Given this project is an existing power plant, there is no development risk, and instead only
operational risk. There are some unique operational risks to running a geothermal power plant,
but NCPA, which owns and manages an existing geothermal plant nearby, has confidence in
Calpine’s history of managing their steam fields and the plant’s ability to reliably produce power
over the term of the agreement.
In general, businesses in the renewable industry lack extensive financial and operational track
records, and because of the capital-intensive nature of these projects, they tend to be highly
leveraged as well. In contrast to most of the City’s renewable energy suppliers, Geysers Power
Company, LLC (the wholly-owned subsidiary of Calpine that controls its geothermal assets) is an
investment-grade company (BBB/stable credit rating), as determined by Kroll Bond Rating
Agency, a nationally recognized statistical rating organization, approved by the Securities and
Exchange Commission. While Calpine has a higher projected default rate than the City’s other
(non-renewable) electric and gas suppliers, Calpine does have an excellent track record of
operating a large portfolio of geothermal projects in the Geysers area over many years. And the
output for this project will come from a collection of Calpine’s resources in this area, so even if
there are problems with one or two resources there is very little risk that the City will not receive
the contracted volumes of output. To further mitigate this risk, in the event of a credit downgrade
event, Calpine will provide collateral (in the form of cash or a letter of credit), in the amount of
$2.5 million for the first two years of the contract and $5.0 million for the remainder of the
contract, which would protect the City and the other PPA offtakers in a scenario where the
facilities are unable to produce the contracted output and the market price of the replacement
renewable power is higher than the price of the Calpine PPA. And perhaps most importantly,
under the terms of the proposed PPA the City is not at risk for paying for output that is not
delivered. As with all of the City’s PPAs, the City will make no payments under the PPA until
energy from the project is delivered.
Palo Alto’s Energy Portfolio with Calpine Geo
Under the City’s Energy Risk Management Procedures, staff regularly develops procurement
plans for the prompt 36-month period to mitigate the City’s market price exposure. Given the
supply portfolio’s heavy concentration of hydroelectric and solar resources, these procurement
plans typically result in staff buying market energy in the fall/winter months and selling surplus
9 The conservative net value estimate of $3/MWh is based on the lower-end estimates of the value of the project’s
RPS and RA products ($12/MWh and $8/MWh, respectively) and an energy value of $62/MWh instead of
$71.80/MWh. The lower energy value estimate is equivalent to the energy value estimate of a few months ago,
before the recent run-up in power and gas market prices.
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energy during the spring/summer months. Furthermore, within any given day, the supply
portfolio is routinely short during off-peak (nighttime) and long during on-peak (daytime)
periods. This PPA would reduce the need for market purchases and increase the opportunity for
market sales in the spring and summer months, depending on the level of output from the City’s
hydroelectric resources.
The existing supply portfolio10 is projected to have an overall surplus position from 2025 through
2028 even without entering an agreement for the geothermal project, as shown in Figure 2
below. The load forecast shown in Figure 2 is based on the mid-range scenario presented at the
December 2022 UAC meeting, which includes modest load growth from data centers, electric
vehicles, and building electrification. The hydro generation estimates are based on long term
historical averages, which have been significantly higher than actual generation in the last few
years during the drought. However, as noted in the December UAC meeting discussion, there is
significant uncertainty around both the load and hydro generation projections shown here. Staff
recently learned about commercial development plans that could result in significantly greater
data center load within the next few years; meanwhile, the impacts of climate change are likely
to significantly reduce the long-term level of hydro generation. Combined, these two factors
could flip the portfolio’s overall surplus positions of the next few years to deficit positions.—In
light of this uncertainty, staff recommends waiving the anti-speculation requirement of the City’s
Energy Risk Management Policy for this agreement.
10 All six of the City’s solar PPA extend to 2040 or later, while the landfill gas PPAs expire between 2026 and 2034.
The City has one remaining wind PPA which expires in June 2028. Furthermore, the City can renew the Western
Base Resource contract for a new 30-year term that would start in 2025, and for planning purposes it is currently
included in the supply portfolio baseline assumptions. Lastly, the City owns its share of the Calaveras project and it
is therefore expected to remain in the portfolio indefinitely.
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Figure 2: Projected Annual Load-Resource Balance, 2025-2045
While the supply portfolio, on average, has an overall surplus position in any given year, the
portfolio is short during the 1st and 4th quarters of the calendar year given the seasonal
generation from hydro and solar. Additionally, the portfolio is generally short during the non-
solar (off-peak) hours. Monthly and daily load resource balance charts are shown in Attachments
B and C. The geothermal project is a baseload power plant that produces electricity evenly across
the day and year. Given the portfolio is currently projected to have surplus positions during the
first few years of the geothermal PPA as shown above, staff is currently monitoring the City’s
actual load levels closely and will evaluate whether to sell solar energy during the 2nd and 3rd
quarters (an amount equal to the total purchase amount from the Calpine project) to hedge being
overly long on energy, while also improving the daily load-resource balance. Figure 3 below
shows a monthly load-resource balance for the City’s portfolio with both the Calpine purchase
and solar energy sales included. This would balance the portfolio supply and demand more evenly
across the seasons within any given year. While the City’s risk management policies don’t
prescribe a specific load-resource balance level, staff tries to minimize the portfolio’s overall
exposure to the market in either direction to mitigate large supply cost fluctuations from market
pricing volatility.
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Figure 3: Monthly Load-Resource Balance with Geothermal Energy Purchase and Q2/Q3 Solar
Energy Sale Included
Palo Alto’s Resource Adequacy Portfolio with Calpine Geo
Resource adequacy (RA) is another market that the City is required to participate in as a load
serving entity in the California Independent System Operator (CAISO) balancing authority. The
CAISO RA requirements dictate required levels of generating capacity the City must own or
procure to meet local, system, and flexible resource requirements on an annual and monthly
basis. Currently, staff manages the City’s RA requirements by utilizing its own resources,
participating in NCPA’s Capacity Pool Program, and through bilateral transactions with other
market participants.
The geothermal plant would qualify as local RA for the City, and it would also count towards the
City’s system RA requirements. As Figures 4 and 5 below indicate, the City has local RA deficits of
approximately 50-80 MW per month, but surpluses of system RA that average approximately 80
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MW. This PPA would reduce the city’s Local RA deficit by 10 MW and would increase the System
RA surplus by an equivalent amount.11
Figure 4: Annual Average Local RA Balance Forecast, 2025-2036
11 While the City would retain the geothermal capacity in its own portfolio to help satisfy its local RA requirements,
the addition of this contract would free up capacity from other resources (which do not qualify as local RA) that
the City could sell to generate additional revenue and reduce its system RA surplus positions.
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Figure 5: Annual Average System RA Balance Forecast, 2025-2036
Palo Alto’s RPS Portfolio with Calpine Geo
The PPA will also increase the City’s share of power being generated by renewable resources, as
required by the state’s RPS regulations. The City is already on track to meet state RPS targets
without the geothermal PPA, so this is not a driving factor for this deal, but it would further
increase the amount of Bucket 1 RECs the City is able to swap for lower-cost Bucket 3 RECs
through its REC Exchange Program. (The profits earned through the REC Exchange Program are
earmarked toward local decarbonization initiatives, so this contract would help the City’s overall
sustainability efforts.) In addition, increasing the City’s RPS level provides further flexibility in the
future if the City pursues a smaller share of the Western Base Resource contract.
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Figure 6: Palo Alto’s Existing RPS Supplies and RPS Requirement Levels, with the Calpine
Project
NEXT STEPS
The NPCA Commission approved Purchase Agreements Between Geysers Power Company, LLC
and Northern California Power Agency, and the Third Phase Agreement for Purchase Agreements
with Geysers Power Company, LLC at its December 1, 2022 meeting. Since then, NCPA, with input
from attorneys representing participating members, completed PPA negotiations with Calpine.
Santa Clara has executed the Third Phase Agreement with NCPA, and as the initial project
participant has been allocated the full PPA output. Once Palo Alto and other participating
members obtain their governing board approvals and execute the Third Phase Agreement as well,
Santa Clara will assign shares of the PPA’s energy, RECs and RA capacity to participating members,
adding those members to the Third Phase Agreement between NCPA and Santa Clara. Santa Clara
has asked all participating members to execute the Third Phase Agreement by the end of April
2023.
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FISCAL/RESOURCE IMPACT
If Council approves the execution of this Third Phase Agreement with NCPA, the City will purchase
up to 87,600 MWh/year for a total not-to-exceed amount of $6.93 million/year during the 12-
year contract term (2025-2036), up to $76.2 million. Funding for the purchase of the renewable
energy will be included in the Electric Utility Fund budget beginning in FY 2025.
POLICY IMPACT
Approval of the proposed Third Phase Agreement is in conformance with the City’s Sustainability
and Climate Action Plan (S/CAP), Integrated Resource Plan, Carbon Neutral Plan, and RPS
Procurement Plan, specifically the City’s Renewable Portfolio Standard to meet at least 60% of
the City’s electric sales from renewable energy.
STAKEHOLDER ENGAGEMENT
The UAC reviewed staff’s recommendation to recommend approval of the Third Phase
Agreement with NCPA at its meeting on February 1, 202312. At that meeting, staff provided
background on the Calpine geothermal project, the market for renewable energy in California,
and the impact that the Calpine contract would have on the City’s electric supply portfolio. The
UAC expressed strong approval for the Calpine contract, voting 7-0 to support staff’s
recommendation. The UAC also encouraged staff to seek out additional opportunities to contract
for new baseload renewable resources.
The Finance Committee reviewed the UAC’s and staff’s recommendation to approve the Third
Phase Agreement with NCPA at its meeting on March 21, 2023. At that meeting the Committee
asked several questions about the Calpine contract, the City’s RA requirements, and staff’s load
projections. Ultimately the Committee enthusiastically agreed with the UAC’s and staff’s
recommendation to support this contract and voted 3-0 to recommend that the City Council
approve the Third Phase Agreement with NCPA.
ENVIRONMENTAL REVIEW
The Council’s approval of the Third Phase Agreement to purchase power generated by existing
geothermal generating facilities does not constitute a “project” within the meaning of the
California Environmental Quality Act (CEQA) under CEQA Guidelines sections 15378(a) and (b),
because there is no potential for approval of this agreement to result in a physical change in the
environment, and because this is an administrative governmental activity that will not result in a
physical change in the environment. These facilities already underwent CEQA review, and no
subsequent or supplemental environmental review will be required as (1) there are no
substantial changes to these facilities which will require major revisions of any applicable
environmental impact report; (2) there are no substantial changes that will occur with respect to
the circumstances under which the facilities are being undertaken which will require major
revisions in any applicable environmental impact report; and (3) no new information, which was
12 UAC Meeting Minutes, 2/1/2023: https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-
reports/reports/city-manager-reports-cmrs/attachments/03-07-2023-id-15051-uac-excerpt.pdf
Item No. 5. Page 15 of 15
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not known and could not have been known at the time the applicable environmental impact
reports were certified as complete, has become available with respect to these facilities.
APPROVED BY:
Dean Batchelor, Director Utilities
Staff: James Stack, PhD