The following questions and answers were taken from the La Plata Electric Association website, related to LPEA’s current negotiations with Crossover Energy Partners.
Why would LPEA enter a 20-year contract with Crossover Energy Partners fixing energy costs when the big complaint with Tri-State was that LPEA was locked into a long-term contract with them?
To acquire set pricing, we must secure dedicated physical generation assets. With physical assets, the longer we commit, the lower the price. LPEA evaluated a variety of terms ranging from 10 years to 30 years, and it was determined that 20 years provided a nice compromise between low-cost power and flexibility. The key to managing a longer-term contract, such as the 20 years we are considering, is to have a contract that offers the ability to change assets with predefined early termination pricing schedules. This will give us the ability to consider alternatives if the pricing is substantially lower.
What is Crossover’s current generation mix, and what will they be installing for LPEA?
Crossover’s generation mix is still being finalized and is dependent on other opportunities. Crossover is considering with other utilities across the state. However, Crossover has multiple development partners that can deliver sizeable utility-scale wind and solar generation projects in the western region of Colorado. Crossover’s base case uses approximately 85 MW of wind capacity, 130 MW of solar capacity, and various other generation sources to firm the obligations for the LPEA agreement.
Crossover is also in discussions with LPEA about rooftop solar and other additions to the mix. These project capacities are under evaluation and are subject to adjustments. This generation mix will result in almost 75% renewable energy being directly delivered to LPEA’s members. It’s also important to note that Crossover has extensive experience in various other generation technologies, including battery storage. They have contracted and procured close to 3,000 GWh of batteries in the past three years, which will benefit LPEA due to their deep understanding of the costs and benefits this type of solution brings to the generation mix.
Could you talk more about local generation options?
LPEA will have a provision in its new contract to have the ability to own up to 20 MW of generation directly. Additional local generation beyond the 20 MW could be installed if owned by Crossover. Several local projects are under consideration, and there are many factors to consider, such as transmission constraints, pricing, benefits to local economies, and generation technology use.
About what percentage of Crossover’s generation capacity will go to LPEA?
Crossover proposes constructing a portfolio of new regional generation resources that will serve LPEA’s members. The exact percentage of capacity from these resources used to serve LPEA is still being finalized. Crossover and KKR are highly active and experienced investors in the renewable energy infrastructure space globally. The generation portfolio for LPEA would represent less than 1% of total renewable generation investments globally.
I can’t see where Crossover or KKR own or operate any power generation facilities. They appear to be only a financial entity. How can you be assured of what is backing up their power agreements?
Crossover and KKR do own and operate power generation facilities. Crossover proposes to construct a portfolio of new generation resources that will be used to meet its obligations to LPEA’s members. This focus on delivery from physical generation assets owned by Crossover, rather than relying on market purchases, provides increased assurance that they can meet their long-term obligations. Crossover’s team has successfully developed multiple GWs of clean energy and storage projects across the U.S., and KKR currently has significant investments in various renewable energy entities that operate multiple generation facilities across the country.
I know you want to add more renewables to our energy mix, but won’t this have a negative impact on the reliability of our power?
Each year, the majority of LPEA members experience one power outage or less. That means we keep the lights on in your home or business 99.998% of the time. To achieve this, we closely monitor power outage frequency and duration and address problem areas with system upgrades or additional maintenance.
But maintenance on LPEA’s transmission and distribution network is only half of the reliability equation. The other half is power supply because before we can deliver you electricity, it must be generated. As LPEA explores new power supply options to deliver you affordable, low-carbon power into the future, there is one thing we will never sacrifice: reliability.
You depend on electricity every hour of every day, and LPEA’s future power supply must support that. Renewable resources will play a large role in LPEA’s future power supply mix, but in the near-term other dispatchable generation will also be needed. Dispatchable generation typically uses a fuel, like natural gas, that can be turned on and off as needed to meet your electricity needs.
To maximize the use of renewables in LPEA’s future power supply – without sacrificing reliability – we are currently implementing a Distributed Energy Resource Management system. Through this system, devices like electric vehicle chargers, programmable thermostats, and water heaters can be managed to align their energy consumption with times of plentiful renewable generation without inconveniencing you, our members.
In the future, LPEA will receive some of our power from local generation resources connected directly to our system, but LPEA will also receive power from the Bulk Electric System to ensure the diversification and redundancy needed for reliable power delivery. This is necessary to avoid situations, like the one that occurred in California last summer, where demand for electricity exceeded the generation that was available at the time.
In short, through careful planning and resource diversity, you will continue to receive the same reliability LPEA is known for, regardless of future power supply selection.