Supplemental Applicant Comments on Draft Proposed Order for Bakeoven Solar
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Matt Hutchinson Sr. Permit Manager – West Region February 28, 2019 VIA EMAIL Sarah Esterson Oregon Department of Energy 550 Capitol St. NE, 1st Floor Salem, OR 97301 Re: Supplemental Applicant Comments on Draft Proposed Order for Bakeoven Solar Dear Sarah: This letter provides supplemental information to support previous comments by Bakeoven Solar, LLC (“Applicant”) on the Draft Proposed Order on Application for Site Certificate for the Bakeoven Solar Facility (“DPO”) that were submitted by the Applicant to the Oregon Department of Energy (“ODOE”) on February 25, 2020. This letter also provides responses to agency comments received on the DPO. A. Decommissioning The Applicant provides the additional evidence to support its request on phased decommissioning bond, and consideration of scrape value. In its previous comments, the Applicant asserts that the Power Purchase Agreements (“PPA”) offers assurances that the project will not be abandoned because there is a guaranteed revue stream over the term of the PPA and the PPA typically include operational securities that incentive the project owner to continually operate the project for the PAA term. The following documents provide evidence that PPAs have a term and operational securities. Attachment 1 – PacifiCorp PPA template from recent procurement request for 200MW of solar generation1. PacifiCorp is one of Oregon’s utilities, so this type of PPA could be applicable to projects like Bakeoven Solar. Section 8.2 of the PPA specifics an “default security” amount of $100/kW per nameplate capacity and requires that a letter of credit for this amount that is held for the length of the PPA term. If this was applied to Bakeoven, it would account for $30.3 million for the full 303 MW build out, or $6 million for a 60MW phase. Attachment 2 – NV Energy PPA provides evidence of an executed PPA for a 600MW solar project. This PPA includes a defined term and operational securities of $68 million. This PPA can be verified by reviewing the Public Utilities Commission of Nevada docket2. 1 https://www.pacificorp.com/suppliers/rfps/2017s-request-for-proposals/2017s-rfp-docs-and-appendices.html 2 http://pucweb1.state.nv.us/PDF/AxImages/DOCKETS_2015_THRU_PRESENT/2019-6/39890.pdf 1 Attachment 3 – Riverside County Presentation summaries the PPA terms of Avangrid’s Camino Solar Project in southern California. This verifies that the PPA as a defined term (15 years) and includes delayed-development damages ($15k per day) and operational securities (undisclosed). This document can be verified by reviewing the Riverside County’s board presentation3. Attachment 4 – Portland General Electric QF contract provides another example of PPAs that are common in Oregon for smaller solar facilities (less than 10MW). This document can be verified on Portland General Electric’s website4. Attachment 5 – Stoel Rives article on PPA terms describes how the PPA provides a revenue stream to the project owner over a defined term. This article also discusses creditworthiness of the project owner and offtaker, and states that operational securities are common. This article can be used as evidence to support the Applicant’s statements on the typical PPA terms and conditions from its previous comment letter. The following evidence supports the Applicant’s statement that other jurisdictions allow for delayed implementation of decommissioning bond. Attachment 6 – Montana DEQ Wind Generation Facility Decommissioning and Bonding Rules allow for issuance of the decommission bond at year 15 of operation (Subchapter 17.86.107) and acceptance of scrap value. The full text of these rules are available on the Montana Department of Environmental Quality’s website.5 Montana is seeking to amend these rules to include solar project6, therefore this evidence could be applied to solar projects like Bakeoven Solar. Attachment 7 – Decommissioning US Power Plants Report summarizes the estimation and considerations for decommission costs for various energy sources in the United States. The Applicant references figure 12 of this report that notes the importance of scrap value for decommissioning wind projects. The Applicant believes that EFSC’s decommissioning policy increases the costs of energy because owners of energy facilities pass on these costs to their customers. The carrying cost of a decommission bond typically ranges of between 0.3%and 0.5% of the total bond amount per year. For the full buildout (303MW) of Bakeoven Solar, this equates to $69,108 per year (assuming 0.3%) for the life of the project (not including required inflation adjustments). Over 30 years this is adds up to about $2.1 million. The Applicant is not arguing that a decommissioning bond is not needed but rather that the bond is not imposed early in project life when the facility has a PPA and it is unlikely to be abandoned. Attachment 8 – Bond invoice from Aon Risk Services provide evidence that carrying costs of 0.3% of total decommissioning costs per year is a reasonable assumption. However, these costs can fluctuate depending on market conditions. 3 http://riversideca.granicus.com/MediaPlayer.php?view_id=2&clip_id=3625 4 https://www.portlandgeneral.com/business/power-choices-pricing/renewable-power/install-solar-wind- more/sell-power-to-pge 5 http://mtrules.org/gateway/Subchapterhome.asp?scn=17%2E86%2E1 6 http://deq.mt.gov/Portals/112/Energy/Documents/Solar/Draft_SolarWind_Rules_021420.pdf 2 Attachment 9 – Security Interest in Scrape Value may be granted by certificate holder to the State of Oregon through the Oregon Energy Facility Siting Council (“EFSC”) and ODOE with the use of a security agreement and filing a UCC financing statement with the State of Oregon. Provided is background information about how to file a UCC financing statement with the State of Oregon along with a security agreement template (not specific to scrap). These documents help illustrate the form an agreement and filing that would be under Applicant’s Recommended Retirement and Financial Assurance Condition 4b. Applicant recommends a revision to Applicant’s Recommended Retirement and Financial Assurance Condition 4b and related findings to allow Applicant the option of using a scrap value credit should EFSC allow the consideration of scrap value in calculating the decommissioning security. There may be circumstances where a certificate holder wants the flexibility of deciding prior to construction whether or not it wants to account for scrap value in the decommissioning security. The proposed language allows the use of the scrape value credit Recommended Retirement and Financial Assurance Condition 4b: Before beginning construction of the facility, or any phase of the facility, certificate holder may elect to use a scrap value credit when calculating the total bond or letter of credit amount under Condition 5a or 5b. If certificate holder elects to use a scrap value credit, certificate holder shall provide a form of security agreement to the Department for review, granting the state of Oregon through the Council and the Department, a security interest and priority in the facility scrap value. Upon the Department approving the form of agreement, the Department and certificate holder shall execute the security agreement and the certificate holder shall file the UCC financing statement with the State and provide proof of filing to the Department prior to construction. B. Response to Agency Comments Wasco County Wasco County commented on the lack of emergency services in Maupin. It is the Applicant’s practice to require its contractors to provide on-site site safety managers trained in first aid, CPR, and use of AEDs for the duration of construction. Transportation of injured workers would depend on the severity of injuries and could include transport in worker vehicles with accompaniment with the safety manger, or ambulance transport. Prior to construction, the contractor will complete emergency planning for its workforce specific to Bakeoven Solar that takes into account local medical capabilities to treat life- threatening injuries and illnesses, and the availability of life flight helicopters to ensure the best response for serious cases. Because the nearest emergency medical services are in The Dalles, the contractor will likely partner with the Maupin ASA or make other arrangements for transport. OAR 345-022-0110 enumerates the services that EFSC can consider in evaluating the project’s impact on public services but this list does not include ambulances services. Notwithstanding the scope of EFSC’s review, the Applicant and its contractor will work with local emergency services to clearly understand the resources that are available for emergency response. The Applicant confirms that it can notify the Wasco County 911 Operations Manager of the construction schedule, and recommends this notification be added to Recommended Public Services Condition 4. 3 Oregon Department of Fish and Wildlife The Applicant provides to comments on the Habitat Mitigation Plan in Attachment 10. C. Conclusion Thank you for your consideration of Applicant’s comments and suggested revisions. Applicant appreciates ODOE’s review of the project and looks forward to working with ODOE on making this project successful. Sincerely, Matt Hutchinson Enclosures cc: Brian Walsh - Avangrid Carrie Konkol – Tetra Tech Elaine Albrich - DWT 4 PacifiCorp Pro Forma Draft _Solar_ November 2017 THIS WORKING DRAFT DOES NOT CONSTITUTE A BINDING OFFER, SHALL NOT FORM THE BASIS FOR AN AGREEMENT BY ESTOPPEL OR OTHERWISE, AND IS CONDITIONED UPON EACH PARTY'S RECEIPT OF ALL REQUIRED MANAGEMENT APPROVALS (INCLUDING FINAL CREDIT AND LEGAL APPROVAL) AND ALL OTHER NECESSARY REGULATORY APPROVALS. ANY ACTIONS TAKEN BY A PARTY IN RELIANCE ON THE TERMS, CONDITIONS OR PRICES SET FORTH IN THIS WORKING DRAFT OR ON STATEMENTS MADE DURING NEGOTIATIONS PURSUANT TO THIS WORKING DRAFT SHALL BE AT THAT PARTY'S OWN RISK. UNTIL THIS AGREEMENT IS NEGOTIATED, APPROVED BY MANAGEMENT, SIGNED, DELIVERED AND APPROVED BY ALL REQUIRED REGULATORY BODIES, NO PARTY SHALL HAVE ANY OTHER LEGAL OBLIGATIONS, EXPRESSED OR IMPLIED, OR ARISING IN ANY OTHER MANNER UNDER THIS WORKING DRAFT OR IN THE COURSE OF NEGOTIATIONS.