Even during times of turmoil for the US renewable energy industry, independent power producers (IPPs) are continuing to secure long-term offtake agreements for energy storage projects in California.
The recent uncertainty culminated last week with the passing of the “One, Big, Beautiful Bill” by a single vote in the US House of Representatives, which has the potential for widespread ramifications across the entire US economy for years to come.
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As part of its sweeping changes, tax credits for renewable energy and energy storage developments are set to be phased out even earlier than expected, with new restrictions on “prohibited foreign entities” aka foreign entities of concern (FEOC) also being introduced.
However, as also demonstrated by another offtake arrangement reported earlier this month by Energy-Storage.news, the industry is showing resilience to such huge uncertainty.
320MWh BESS retrofit to operational solar facility
Approved on the same day as the House of Representatives passed the bill, California community choice aggregator (CCA) Peninsula Clean Energy secured a 20-year energy storage services agreement (ESSA) with Stellar Renewable Power.
As a subsidiary of Global Atlantic Financial Group, Stellar is a portfolio company of global investment firm KKR.
The agreement, discussed at a recent PCE Board of Directors (BoD) meeting, relates to offtake from an 80MW/320MWh lithium iron phosphate (LFP) battery energy storage system (BESS), which is being retrofitted to the operational Wright Solar facility, located just outside the City of Los Banos in Merced County.
Although Stellar only recently took control of the project, plans to add a BESS to the project have been in the works since 2017. The project’s California Independent System Operator (CAISO) interconnection agreement and Merced County conditional use permit (CUP) both already include provisions for energy storage.
The two parties have a 25-year power purchase agreement (PPA) in place for the 200MW solar portion of the project, meaning PCE procured the new BESS portion without needing to go through a competitive Request for Proposal (RfP) process.
Price capped at US$332 million
Last week’s PCE BoD meeting, attended by PCE officials and Stellar’s director of origination Talon Doucette, gave an interesting insight into the turmoil caused by recent decisions made by the new US administration.
“The negotiation has been challenging given the tariff situation, it changes almost every other week” stated PCE’s Senior Director of Power Resources, Roy Xu.
Although unable to disclose specific pricing details due to confidentiality, Xu explained PCE will pay Stellar a fixed US$/kW-month rate with no escalation as part of the 20-year ESSA.
The agreement will include a “risk sharing mechanism, contemplating both the import tariff and the uncertainties on the tax credits.” Xu explained that if costs to PCE exceeded US$332 million over the course of the contract, the California CCA would have the option to walk away from the agreement without penalty.
Due to negotiation taking place outside of an RfP, PCE benchmarked pricing for the new ESSA against projects previously procured by the CCA, alongside projects offered into its 2024 Request for Offers (RfO) and other ongoing contract negotiations.
Doucette reiterated the troubles the two parties experienced during the negotiation, describing things as being “upside down” prior to the 90-day pause in US-China tariffs.
Tough questions to answer on ITC and tariffs
Although nothing is guaranteed, Xu stated that due to current language within the “One Big, Beautiful Bill,” and with commercial operations of the Wright BESS scheduled for 1 June 2026, the project should still qualify for the Inflation Reduction Act’s (IRA’s) 30% investment tax credit (ITC).
With the current wording of the bill, to qualify for the 48E ITC, projects must have commenced construction within 60 days of the bill being signed into law, and be operational by 31 December 2028 to remain eligible. The bill passes over to the Senate for potential modifications and approval ahead of the final step before it becomes law, which is for the president to sign it.
“The project’s start of construction date right now is 1 October 2025, which could potentially move up… if any project has a chance of preserving the ITC during this uncertainty, I believe this one has the best shot,” stated Xu.
With the meaning of “construction” currently undefined within the new bill, Doucette seemed unphased over the threat of losing out on any ITCs, but appeared concerned about the threats of future tariffs.
“With our construction team and partners, whatever that definition [of construction] is, we can get there—our constraint really is getting the product into the country,” added Doucette.
“If, to meet the ITC, we need to start construction sooner, we have commitments in place… our construction team is building another battery for a different developer not too far away from this project… we have the ability to move them pretty quickly”.
Question about KKR’s political influence
Towards the end of the meeting, Docuette was asked an interesting question by one of PCE Board of Directors about KKR’s political influence over the current Trump administration.
Although appearing flustered by the question at first, Docuette said that with KKR being a “multi-billion-dollar company, with offices right away from the Hill,” he had a “feeling that there’s a strong connection” between the two.
Douecette added that although Stellar was a “bit more nervous” about the effects of tax credit changes to its long-term development portfolio, KKR seemed to “have a little less fear about what happens with these tax credits.”
Whilst potentially offering an insight into KKR’s more relaxed views on the situation, the Stellar director of origination advised the Board to take his answers with a pinch of salt.
