PGE Secures Approval for Price Increase Amid Regulatory Changes

Portland General Electric (PGE) has received regulatory approval to implement a price increase affecting its portfolio of three energy storage projects with a cumulative capacity exceeding 1GW. This decision follows significant alterations to federal import tariffs and tax credits, which have had a notable impact on the utility’s operations. The Oregon Public Utilities Commission (OPUC) approved the “price refresh” earlier this month, as PGE moves to align its pricing structure with current economic realities.

The pricing amendments were deemed necessary by PGE’s Vice President and Chief Commercial and Customer Officer John McFarland to reflect changes in tariff risks and evolving tax credit opportunities. He emphasized that these adjustments would ultimately deliver value for customers. The affected projects stem from PGE’s 2023 all-source request for proposals (RFP), initially issued in February 2024, which sought 545MWac of energy alongside 600MW of summer and winter capacity through 2028.

Despite updates to capacity forecasts, PGE continues to face significant shortfalls, with a projected gap of 797MW in summer and 465MW in winter capacity. As contract negotiations commenced with shortlisted projects, the utility filed for an urgent price refresh in October 2023, citing “material and systematic changes” in federal tax and tariff policies. PGE highlighted the importance of securing the investment tax credit (ITC) for solar and storage projects, which has become critical for the viability of its initiatives.

In documents submitted to the OPUC, PGE detailed how the recent regulatory changes not only impact individual project bids but are reshaping the renewable energy sector as a whole. The utility stated, “This meant there would be material price impacts across the board.” Rather than only requesting new prices from shortlisted projects, PGE sought resubmissions from developers of all eligible projects to ensure that every bid accurately reflected the new economic landscape.

As a result, PGE received seven refreshed bids from developers, with four being standalone battery energy storage systems (BESS) and three integrating solar with energy storage. Upon reviewing these bids, PGE observed a striking 64.6% increase in the average cost of capacity, rising from USD 144/kW-year to USD 237/kW-year. This significant rise underscores the impact of recent federal changes.

Ultimately, PGE opted to proceed with one standalone 400MW BESS and two hybrid projects combining solar and storage, with a total capacity of 615MW. Although much of the project information remains confidential, it has been confirmed that PGE will own the standalone BESS, while the hybrid projects will involve a mix of power purchase agreements and a utility-owned structure. All projects are scheduled to be operational by December 31, 2027, to meet the reliability needs of 2028.

During the OPUC’s meeting on December 9, 2023, staff acknowledged PGE’s refreshed shortlist as reasonable and in the public interest. The projects include one in partnership with Eolian under a Build-Transfer Agreement, another wholly owned by PGE, and a third secured under a 20-year capacity agreement with NextEra Energy Resources.

PGE also addressed the adverse effects of the Federal Energy Regulatory Commission’s (FERC) restrictions on its supply chains, noting that these changes disproportionately affect solar and storage developers. While projects sourcing components from Foreign Entities of Concern (FEOC), which includes China, face challenges in securing ITCs, those using components from non-FEOC countries can receive credits well into the next decade. The restrictions pose significant issues for many US-based developers reliant on batteries from Chinese manufacturers, such as CATL and Hithium, which dominate the lithium-ion battery market.

PGE concluded that the economics of renewable energy resources are significantly influenced by federal tax credit availability, stating that ITCs can reduce project costs by as much as 50%. As part of the refreshed bidding process, developers were also required to account for tariff exposure explicitly to minimize surprises during contract execution. “Tariffs are now a fundamental driver of renewable project economics,” PGE noted, highlighting the evolving landscape for energy procurement.

In a related development, the New York Power Authority (NYPA) has also encountered challenges due to similar federal policy shifts, emphasizing the broader implications for utilities across the United States.