California community choice aggregator (CCA) Ava Community Energy’s new BESS offtake agreements with EDP Renewables incorporate measures to share policy risks to the projects’ costs.
The two parties commenced negotiations earlier in the year but decided to pause discussion due to uncertainties surrounding import tariffs. Although the highest reciprocal US/China import tariffs have since been paused, future uncertainty over their reintroduction still remains.
This uncertainty, coupled with the threatened phase out of investment tax credit (ITC) incentives, which was expected at points during Congress debates over the recently adopted ‘One, Big, Beautiful Bill Act’ budget reconciliation bill, is leading to a new norm for PPA pricing structures, as highlighted in the most recent agreements between Ava and the North American business unit of Portugal’s EDP Renewables.
Both contracts are set to be discussed at Ava’s 16 July 2025 Board of Directors meeting.
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1,016MWh of new BESS capacity for Ava
The largest of the new agreements between Ava and EDP relates to offtake from a portion of the developer’s Sonrisa Solar and Storage project located approximately 3.5 miles west- southwest of the community of Tranquillity in Fresno County, California.
Under the terms of the 20-year PPA, Ava will receive energy, environmental attributes, ancillary services, and capacity attributes from a 200MW solar and 184MW/736MWh BESS portion of the Sonrisa development.
EDP first offered the project to Ava as part of the CCA’s 2024 Long-Term Resource RFO. Although this didn’t move forward at first, the most recent contract came about after EDP approached Ava earlier during 2025.
The second agreement relates to offtake from a new storage addition to EDP’s Scarlet solar complex, dubbed “Scarlet III,” destined for a location “across the street” from the developer’s Sonrisa project.
Ava and EDP already have a contract in place for capacity from the first portion of the Scarlet project, covering 100MW of solar and 30MW of storage, that was brought online during 2024. The remaining 100MW of solar and 10MW of storage from Scarlet I is contracted with fellow CCA, San Jose Clean Energy (SJCE). Under this newly negotiated agreement, Ava is set to receive an additional 70MW/280MWh of BESS capacity from the EDP’s expansion of its Scarlet complex.
EDP is contractually obligated to commence delivery from both projects by 30 June 2027, however, the developer is targeting commercial operations as early as 31 December 2026.
Shared risk, a new norm
As all members of the renewable energy and energy storage industries will be well aware, it’s been a tumultuous year for project development, with the constant threat of import tariffs on Chinese-made products and potential removal of investment tax credit incentives.
However, instead of the industry grinding to a halt amidst these uncertainties, offtakers and developers have been continuing to negotiate offtake agreements during this time, albeit slightly differently than before.
As stated by Ava within documentation for its July 2025 BoD meeting, when it comes to PPA negotiation nowadays, “developers are unwilling to take on tariff and tax credit price risk alone.” Because of this, a common theme is emerging amongst recently negotiated PPAs.
Instead of developers and offtakers agreeing upon a fixed energy price, the two are increasingly agreeing to share the burden of future tariffs, with the inclusion of adjustment mechanisms as part of contracts.
As explained by Ava within recent meeting documentation, the new Sonrisa and Scarlet agreements contain “terms to manage future tariff rate uncertainty affecting specified material on the projects with a mechanism to adjust the pricing, where Ava shares some of the impacts of the tariff rate changes with EDP Renewables North America, up to a defined price cap.”
As reported by Energy-Storage.news, Ava has already adopted this strategy in another of its offtake agreements, after it renegotiated contractual terms with Intersect Power in order for the project to remain viable.
Energy-Storage.news has also reported on another offtake agreement between DESRI and California utility Sacramento Municipal Utility District (SMUD) which also included these provisions, suggesting they could become the new norm during PPA negotiation.
Energy storage ITCs
Based on the construction timeline of the two projects and final passage details of the Reconciliation Bill, EDP is likely to retain ITC incentives as provided by the Inflation Reduction Act (IRA).
Unlike incentives for other technologies such as wind and solar, the phase out of the energy storage ITC will remain on track as the previous Biden Administration first set out in 2021 and wind down in the mid-2030s. However, new provisions restricting access to ITCs based on Foreign Entity of Concern (FEOC) legislation are expected to include material assistance from Chinese companies, which presents a new challenge for developers.
