Ivanpah Officially in Regulatory Limbo

The CPUC issued Draft Resolution E-5429, which rejects (without prejudice) PG&E's request to terminate its Power Purchase Agreements with Solar Partners II and VIII, the owners of the Ivanpah Solar Electric Generating Station.

PG&E had sought approval to pay the project owners to end the contracts early, arguing this would reduce costs for ratepayers by removing uneconomic renewable contracts from its portfolio under the CPUC's Voluntary Allocation and Market Offer process.

The U.S. Department of Energy supported PG&E's request, noting it would help repay the remaining $1.6 billion federal loan and potentially make way for redevelopment of the Ivanpah site with newer, lower-cost technologies. (The loan in question refers to a federally guaranteed financing package, i.e., private lender money backed by the DOE, which was used to build Ivanpah and has not been fully repaid.)

However, Draft Resolution E-5429 concludes that approving the contract terminations now would pose unacceptable risks. The draft resolution finds the agreements were developed through a fair procurement process and aligned with PG&E's renewable portfolio needs.

The draft resolution argues that recent shifts in federal policy (e.g., the rollback of clean energy tax credits, new tariffs on imported equipment, and changes to land-use rules for solar and wind projects) create substantial uncertainty about whether new renewable resources will be built in time to replace Ivanpah's capacity. This uncertainty, the draft resolution holds, threatens grid reliability at a time when California faces rising electricity demand from electrification, data centers, and hydrogen development.

Additionally, the draft resolution notes that ratepayers have already funded more than $333 million in transmission infrastructure to support Ivanpah, and terminating the contracts now, without a concrete replacement project, risks stranding those investments. In the CPUC's view, this risk potentially outweighs the savings PG&E estimates from the contract buyouts.

By denying PG&E's request without prejudice, the draft resolution leaves the door open for PG&E to resubmit termination agreements in the future if there is a clear replacement plan (or greater certainty about resource development). In the meantime, if Ivanpah defaults on its obligations, PG&E retains the ability to terminate the contracts without paying compensation.

The earliest the CPUC will consider this item is December 4.

INSTANT ANALYSIS

This draft resolution quietly confirms what’s been implied for a long time: Ivanpah isn’t being kept alive because it’s successful, it’s being kept alive because the state is worried about losing megawatts and leaving federally guaranteed debt stranded.

In short, PG&E asked for permission to pay off and terminate its PPAs for two of Ivanpah’s three units (Southern California Edison is said to be in discussions that could lead to the third unit’s closure). This request was backed by the DOE, which still has outstanding loan-guaranteed financing on the project. DOE anticipated that termination would accelerate loan repayment and potentially clear the site for redevelopment with new technologies.

But the CPUC's draft resolution reads as a quasi-confession of the following points.

• Under California’s very own policy conditions, grid reliability has become too fragile to remove any existing/politically-permissible generation (even expensive, underperforming generation).
• California’s dogged adherence to its own policy (and its staunch refusal to harmonize with shifting federal policy, even slightly) makes the prospect of replacement resources uncertain.

Which leaves the following policy contortion: Ivanpah is too uneconomic to keep, but too risky to kill.