PG&E Wants to Give Ivanpah Plant More Time to Meet Power Targets

PG&E wants to give the owners of the troubled Ivanpah solar plant six extra months to get their power-generation act together.

The utility is asking state regulators to approve “forbearance agreements” with the owners of the $2.2 billion, federally backed tower-power plant in the Mojave Desert, which is on the verge of failing to meet electricity production requirements set out in its power purchase agreements (PPAs) with PG&E.

As KQED reported last week, majority owner and plant manager NRG Energy said in a November quarterly report that it won’t be able to deliver the electricity it promised to PG&E. As a result, “PG&E may, at its option, declare an event of default” when a two-year “guaranteed energy production” period comes up on Feb. 1, 2016.

In its request to the California Public Utilities Commission, PG&E said if it doesn’t get the matter resolved by March 31, “PG&E may, in order to protect its customers’ interests, need to begin a process that could lead to its declaring an event of default under the PPAs and invoking the remedies available to it (including contract termination).” The power agreements are confidential.

The benefit of forbearance to NRG and minority owners Google and BrightSource Energy would be obvious -- they get six months to continue to ramp up performance, which was up 71 percent in the first nine months of 2015 compared with the same period in 2014, Ivanpah’s first year in operation.

In a statement issued Tuesday, NRG said, “Based on the performance increases we have seen in 2015, external modeling for 2016 forecasts that we can meet these targets.”

In its filing with the CPUC, PG&E says both it and its ratepayers will also benefit from the new deals. Not only would renewable energy required under state law continue to flow, but PG&E would get undisclosed "consideration" -- payment -- for any gap in actual and promised electricity delivery. Such payments, not included in PG&E's current Ivanpah agreements, would apply to the first two years of the plant's operation as well as the proposed forbearance period.

The payments could take a bit of the sting out of the high price PG&E’s customers pay for Ivanpah power: around $200 per megawatt hour, more than three times the rate set out in new agreements for electricity from solar plants that use photovoltaic panels, according to Lawrence Berkeley Lab researchers.

The new agreements between PG&E and Ivanpah’s owners would run for six months “unless extended for an additional six months if the Projects are able to meet certain production requirements during the initial six months.”

To produce electricity, Ivanpah, just off Interstate 15 about 40 miles south of Las Vegas, uses giant mirrors that reflect light onto boilers atop 459-foot-tall towers, producing steam that is then used to spin turbines. The plant’s construction was backed by a $1.6 billion loan guarantee through the Department of Energy as well as a $535 million cash payment in lieu of a tax credit from the federal government.

While its three units were expected to produce nearly 1 million megawatt-hours annually -- enough to meet the needs of 140,000 households -- first-year output came in around 420,000 MWh. Under the PPA, Ivanpah is required to deliver to PG&E at least 70 percent of the guaranteed electricity in the first two years of operation, rising to 80 percent in subsequent rolling two-year periods.

NRG and BrightSource, the technology provider for the project, have said they expected all along it would take at least four years to get up to full speed. But production in the first year was clearly less robust than expected and put the plant in a big hole.