PGE Secures Approval for Price Increase on 1GW Energy Storage Projects

Investor-owned utility Portland General Electric (PGE) recently received regulatory approval to adjust pricing for its energy storage portfolio, which exceeds 1 gigawatt (GW). The Oregon Public Utilities Commission (OPUC) sanctioned this “price refresh” following significant changes to federal import tariffs and tax credit policies that have impacted project economics.

John McFarland, PGE’s Vice President and Chief Commercial and Customer Officer, stated that the pricing changes were essential to “reflect current economics, tariff risks, evolving tax credit opportunities and deliver value for customers.” The adjustments affect three energy storage projects that PGE is procuring and are in response to its all-source request for proposals (RFP) issued in February 2024. Initially, PGE sought 545 megawatts alternating current (MWac) of energy, alongside additional capacity to meet summer and winter needs through 2028.

Despite the updated forecasts based on new data, PGE still faces significant capacity shortfalls, with a projected deficit of 797 MW for summer and 465 MW for winter by 2028. In light of these challenges, PGE filed for a “critical and immediate” price refresh in October, citing “material and systematic changes in federal tax and tariff policies.” The utility emphasized the importance of procurement for solar and storage projects to take advantage of the investment tax credit.

PGE’s recent filings with the OPUC highlighted the extensive impact of these changes on the renewable energy landscape. The utility noted that the new economic realities would necessitate updated bids from all eligible projects rather than solely from shortlisted candidates. This resulted in PGE receiving seven refreshed bids, including four standalone battery energy storage systems (BESS) and three hybrid solar and energy storage projects.

The assessment of these bids revealed a staggering 64.6% increase in the average cost of capacity, rising from US$144 per kilowatt-year to US$237 per kilowatt-year. Ultimately, PGE decided to proceed with one standalone 400 MW BESS and two solar-storage hybrid projects totaling 615 MW. While many project details remain confidential, it is confirmed that PGE will own the standalone BESS, with the hybrid projects operating under a mix of power purchase agreements (PPA) and utility ownership. All three initiatives are set to be operational by December 31, 2027, to address the 2028 reliability requirements.

During its meeting on December 9, OPUC staff recognized PGE’s revised shortlist as reasonable and in the public interest. The selected projects include a partnership with Eolian under a Build-Transfer Agreement and a 20-year capacity deal with NextEra Energy Resources.

PGE also drew attention to the adverse effects of the Federal Energy Regulatory Commission’s (FERC) restrictions, which it claims “disproportionately affect solar and storage supply chains.” While developers sourcing components from non-Federal Energy Overcharge countries (FEOC), such as China, can still earn investment tax credits (ITCs) for years to come, those importing from FEOC nations must begin construction of their projects by the end of 2025 to remain eligible for these credits. The restrictions on sourcing from China, a major player in the lithium-ion battery market, pose significant challenges for many U.S.-based developers relying on companies like CATL and Hithium.

PGE underscored the profound influence of federal tax credit availability on project economics, noting that ITCs could reduce project costs by as much as 50%. In its updated bid requests, PGE also instructed developers to account for tariff exposure explicitly, aiming to prevent unexpected costs during contract execution. “Tariffs are now a fundamental driver of renewable project economics,” the utility stated.

As the landscape evolves, PGE’s decisions reflect broader shifts within the renewable energy sector, influenced heavily by recent federal policies.