Contract Talks Launched for Potential 500MW San Vicente Energy Storage Facility

Short Title
Contract Talks Launched for Potential 500MW San Vicente Energy Storage Facility
Project would benefit water ratepayers and increase regional renewable energy capacity
December 07, 2017

The San Diego County Water Authority’s Board of Directors on Thursday authorized negotiations with Tenaska Inc.-Diamond Generating Corp. Joint Venture to assess the potential for developing a major energy storage facility at San Vicente Reservoir near Lakeside. The project would leverage existing water and energy infrastructure to reduce upward pressure on water rates while expanding the potential for renewable energy use across the region.

The Water Authority and its partner, the City of San Diego, are seeking to draft a Project Development Agreement by spring 2018 for consideration by their governing boards. In November, the agencies identified Tenaska-Diamond as the top choice among five groups of companies vying to develop an energy storage project based on its financial modeling, risk analysis, knowledge of the energy market, and revenue-sharing proposal. The Water Authority’s Board on Thursday also authorized negotiations with Brookfield US Generation LLC in the event that negotiations with Tenaska-Diamond are unsuccessful.

A primary goal of the potential energy project is to generate revenue for the agencies in exchange for the use of public land, water and other assets. The negotiations do not commit the Water Authority or the City of San Diego to developing the project, which would require an environmental review and additional approvals by the Water Authority’s Board of Directors and the San Diego City Council.

“This negotiation is an important step toward maximizing the potential of our facilities, while supporting the best interests of water ratepayers,” said Mark Muir, chair of the Water Authority’s Board of Directors. “It represents an exciting opportunity to offset operational costs and manage water rates, while making the most of local renewable energy resources.”

The project has been studied by the Water Authority and the City of San Diego for several years. It would create a closed-loop system connecting San Vicente Reservoir to a smaller new reservoir that would be built at a higher elevation nearby. The region would benefit from the system’s ability to serve as a giant battery, an increasingly important asset given the growing renewable energy market.

The potential San Vicente system would store energy by pumping water to the upper reservoir when energy demand is low and renewable energy – primarily solar and wind – is abundant. By releasing water from the upper reservoir through turbines, that stored energy would be tapped during high-demand periods, such as evenings when families return home from work and school. Moving water between the two reservoirs would not consume water or interfere with the existing water supply, water quality, fisheries, or recreational uses of San Vicente Reservoir.

The project could produce enough stored energy to supply approximately 325,000 homes annually, helping to stabilize energy grid operations and support the integration of large new supplies of solar and wind energy. Another important aspect of the project is that its design would allow energy system operators to quickly increase or decrease power generation in response to demands.

The Water Authority owns an existing 40-megawatt energy storage facility at Lake Hodges, which started operations in 2011. The facility produces enough stored energy to supply approximately 26,000 homes annually.

The agency’s San Vicente Dam Raise Project – completed in 2014 in collaboration with the City of San Diego – provided additional opportunity for energy storage because it created approximately 157,000 acre-feet of new regional water storage capacity. The Water Authority owns the storage capacity created by the dam raise.

The City of San Diego, one of the Water Authority’s 24 member agencies, operates San Vicente Reservoir and owns the dam and the rest of the storage capacity. The City of San Diego’s Public Utilities Department operates one of the world’s largest and most complex water storage, treatment, and delivery systems, which serves more than 1.3 million residents.

For more information about the San Vicente Energy Storage Project study, go to www.sdcwa.org/san-vicente-energy-storage-facility-study.