by Emma Foehringer Merchant
June 30, 2020

Earlier this month 8minute Solar Energy, a leading U.S. developer of big solar and storage projects, announced its first deal with the newest heavyweights in California’s renewables market: community-choice aggregators (CCAs).

The deal, covering 250 megawatts of solar and 150 megawatt-hours of storage to be located in California’s Central Valley, isn’t huge by the standards of 8minute. But it once again highlights the growing influence of California’s expanding roster of CCAs.

The rise of nonprofit CCAs has been one of the most important recent trends in California's rapidly evolving energy landscape. Twenty-one CCAs now serve more than a quarter of the state's 40 million residents. CCAs provide electricity to Californians up and down the state’s coast, from Humboldt County to Los Angeles County, and more counties are likely to establish CCAs of their own.

California’s regulated market structure and renewable portfolio standard require that CCAs sign both long-term renewables contracts and short-term supply deals. The growth of the model has also seen CCAs wresting customers from the grip of the state’s investor-owned utilities.

“CCAs are really taking over and are in some ways pushing the utilities into becoming poles-and-wires companies,” said Colin Smith, senior solar analyst at Wood Mackenzie.

All of this means that more and more of California's new renewables projects are now tied to CCAs. Last year they acquired 1.6 gigawatts of solar, according to Wood Mackenzie, and they have long-term contracts for more than twice that amount across both wind and solar. 

With the deal between 8minute and Northern California CCAs Monterey Bay Community Power (MBCP) and Silicon Valley Clean Energy (SVCE) serving as another example of the sector’s growing buying power, it's worth taking a closer look at how CCAs operate and what they mean for California's energy vision.

What 8minute's deal says

8minute, itself based in California, will build the Aratina Solar Center in Kern County, a part of the Central Valley where the company has already finished a handful of solar projects for offtakers such as Pacific Gas & Electric and the City of Palo Alto. The two CCAs will share the electricity generated, with MBCP receiving 60 percent and SVCE getting the remainder.

MBCP and SVCE have already worked on seven renewables projects together, five of which are solar-plus-storage. Dividing the deals allows the two entities to seek bigger projects and mitigate any risk associated with underperformance or snags in development, said Monica Padilla, director of power resources at SVCE.

“For us, it makes sense to be able to combine our purchasing power to attract more viable projects [and] bigger projects,” said Padilla. “Our approach is to try to do as many sizable [power-purchase agreements] as make sense and share in that risk.”

This spring, the two CCAs published another joint request for proposals (RFP) in search of 2 million more megawatt-hours of energy delivered between 2021 and 2024.

Creditworthiness can act as a stumbling block for new offtakers in the renewables marketplace, with financiers wary of non-rated entities. Northern California’s Peninsula Clean Energy and Marin Clean Energy are the only CCAs to have received investment-grade credit ratings thus far. But that doesn’t appear to have slowed major renewables developers including 8minute, NextEra and First Solar from signing deals with the organizations.

8minute is still working to cement financing for Aratina, but the developer told Greentech Media that the process of finalizing its first contract with CCA buyers was largely similar to its work with investor-owned utilities. However, some CCAs may have more stringent requirements for community benefits than do large utilities, noted Nate Kaiser, 8minute’s director of origination.

“We are noticing that some CCAs prioritize different environmental or social issues,” said Kaiser in an email. “Some RFPs require specific labor agreements or additional levels of environmental review, all depending on what’s important to their communities.”

Padilla said the two CCAs selected the Aratina project based on its size, location and price. While declining to disclose the offtake price, Padilla said the SVCE has only signed solar-plus-storage projects in the “mid-20s” range, referring to dollars per megawatt-hour. (8minute’s record-breaking 2019 contract with the Los Angeles Department of Water and Power rang in just under $20 per megawatt-hour.)

8minute says it plans to participate in the joint RFP that SVCE and MBCP closed this month. Half of 8minute's development pipeline of 18 gigawatts of solar and storage is in California, where it sees CCAs as a “critical part of the state’s power sector.”

Even CCAs face challenges 

Community-choice aggregators generally draw customers in with two selling points: the choice of electricity produced with a higher percentage of renewable or carbon-free power and lower prices than those offered by the monopoly utility.

The new Aratina solar-plus-storage project will serve up to 8 percent of load for MBCP and 6.6 percent of load for SVCE. Both CCAs told GTM they plan to meet or exceed the state’s renewable portfolio standard, which requires all electric providers to reach 60 percent renewables by 2030. Monterey Bay has achieved 34 percent renewables, while Silicon Valley Clean Energy plans to reach 50 percent renewables in 2020.

Thus far, many CCAs have relied on large-scale hydro to make their visions of a carbon-free portfolio a reality. But as more of them sign long-term power-purchase agreements, they’re becoming the dominant driving force behind continued solar development in California.

CCAs themselves have no easy options for meeting California's long-term energy vision, however. As of November 2019, six of the 19 CCAs then operating were still working to meet the long-term contract requirements of California's RPS, according to CalCCA, though those requirements don't kick in until 2021. The group is working to update those figures; two new CCAs have since joined the market.* In 2018, the 19 operating CCAs had renewable generation mixes ranging between 29 percent and 62 percent, with an average of 46 percent, according to an analysis conducted by the California Public Utilities Commission.

As they move to meet California's requirements, CCAs will benefit from the growing cost-competitiveness of solar-plus-storage plants. Wind made up the majority of CCAs' renewable portfolios in 2018, according to a November report from the CPUC, but that mix is changing. Total procurements reported to CalCCA now show member procurements of solar outweighing wind, with the totals coming in at about 2.4 gigawatts and 978 megawatts, respectively.

Padilla said SVCE and MBCP’s recently closed joint RFP received predominantly solar-plus-storage proposals, with some geothermal and wind.  

“We have to procure something, and there’s a lot of solar-plus-storage coming in at great prices,” she said. “Our main struggle right now is just to try to diversify the amount of solar-plus-storage that we intend to bring in so that it’s not all located in one place, which tends to be the Central Valley right now.”

*Correction: This section has been updated to reflect that long-term contract requirements under California's RPS do not begin until 2021. Since 13 of the state's 19 CCAs had met those requirements in 2019, two new CCAs have joined the market, not three.