San Diego Gas & Electric (SDG&E) is seeking regulatory approval to acquire an operational portion of a BESS facility located in Imperial County, California, from the US development arm of German multinational energy company RWE.
This is the second time that SDG&E has sought approval from the state energy regulator to acquire this portion of the project, after the California Public Utilities Commission (CPUC) rejected an initial proposal submitted by the utility last year.
Westside Canal Complex
The renewed acquisition proposal relates to a portion of RWE Clean Energy’s Westside Canal battery storage complex located in Imperial Valley.
Development on this battery storage complex, which has the potential to reach 2GW at full build-out, first began during 2020 under the ownership of Con Edison Clean Energy Businesses.
Enjoy 12 months of exclusive analysis
- Regular insight and analysis of the industry’s biggest developments
- In-depth interviews with the industry’s leading figures
- Annual digital subscription to the PV Tech Power journal
- Discounts on Solar Media’s portfolio of events, in-person and virtual
Or continue reading this article for free
This was before RWE acquired the Con Edison-owned subsidiary along with its 3.1GW portfolio of renewable energy assets, which RWE then combined with its own US activities to form RWE Clean Energy.
Over the past few years, RWE has so far developed and brought online three distinct phases of the Westside Canal project, representing a cumulative capacity of 350MW/1,400MWh.
Under a build, own and transfer (BOT) agreement, SDG&E acquired the first 131MW/524MWh phase of the project in June 2023 when this portion of the project was connected to the grid.
RWE is providing operations and maintenance (O&M) services for this portion of the project as part of a 10-year Long-Term Services Agreement (LTSA).
Second and third phases of development
During March 2024, with SDG&E seeking to expand its ownership of Westside Canal, it negotiated two BOT agreement options with RWE that would see the utility acquire either one or two additional phases of the project.
Under the first purchase option, SDG&E would acquire the second 119MW/476MWh portion of the project, referred to as Westside Canal 2A. For the second option, SDG&E would acquire Westside Canal 2A, along with the third 100MW/400MWh phase of the project, which is known as Westside Canal 2B.
Similar to the first BOT agreement, each option included accompanying LTSAs where RWE would provide O&M services for the first ten years of operation.
However, both of these proposals, along with the utility’s request to recover costs associated with project development, were evaluated and ultimately rejected by CPUC in July 2024.
With revenue requirements of US$307.1 million and US$516.2 million for the first and second options, respectively, CPUC concluded that these options were “not cost competitive.” When calculating these monetary figures, SDG&E lumped together the costs from the BOT and LTSA agreements alongside any potential future augmentation.
The “high level of uncertainty regarding the deliverability status” associated with each additional phase was also a major contributing factor in CPUC‘s rejection decision.
The project is expected to achieve full capacity delivery status (FCDS) during 2034, meaning its ability to provide resource adequacy (RA), along with the associated benefits to ratepayers, remains uncertain.
New acquisition proposal for 2A
As laid out in filings submitted with CPUC on October 20, RWE and SDG&E have once again formulated an agreement for the utility to acquire phase 2A of the project.
“RWE agreed to a price reduction and revised pricing structure to capture the value of deliverability,” explains the recently submitted filing.
SDG&E stated that although the project won’t obtain FCDS until 2034, “interim deliverability is likely through 2034.”
As part of an annual process, the California Independent System Operator (CAISO) issues interim deliverability status (IDS) to a selection of projects that are able to provide full or partial capacity whilst waiting for transmission upgrades to be completed.
With the two parties including the same 10-year LTSA as previously negotiated, SDG&E is requesting to recover costs of up to US$267.9 million for the project, representing a 12.8% reduction (US$39.2 million) from the first proposal. However, with fluctuating market conditions along with key portions of the contract being redacted, this is a rather crude comparison.
The utility said that the cost per megawatt for this project would be lower than any other utility-owned project previously approved by CPUC.
This portion of the project was eligible for investment tax credits (ITCs) available under the Inflation Reduction Act (IRA), which, as the project has been operating since December 2024, have already been claimed by RWE and are “reflected in the purchase price.”
With the “recent dramatic changes” in federal policy, such as the One Big Beautiful Bill (OBBB) Act and changes to the IRA, SDG&E said that the environment for new resource development is particularly challenging.
SDG&E has requested CPUC approve the proposal no later than January 21, 2026.
Phase 2B
The potential acquisition of phase 2A follows CPUC’s approval of a renewed proposal for SDG&E to take ownership of phase 2B during March 2025.
SDG&E published a press release in July this year announcing this 100MW/400MWh portion of the project coming online.
With a combined capacity of 231MW, SDG&E said the Westside Canal project is the largest BESS project in its portfolio, which has the potential to become even larger if CPUC approves the acquisition of phase 2A.
