GHG Emissions, Finance, Sourcing Renewables - December 7, 2021
California CCAs Issue $2 Billion Municipal Clean Energy Bonds
Three Community Choice Aggregators (CCAs) issued California's first ever municipal non-recourse Clean Energy Project Revenue Bonds through the California Community Choice Financing Authority (CCCFA).
The two Clean Energy Project Revenue Bonds prepay for the purchase of over 450 MW of clean electricity, which is enough to power 163,000 homes and reduce 765,000 metric tons of GHG emissions annually. These transactions will reduce renewable power costs by almost $7 million annually for the first 5-10 years. For decades municipal utilities have used the prepayment structure as an industry standard practice to reduce costs for the purchase of natural gas. For the first time, these Revenue Bonds apply this structure to the purchase of clean electricity.
The CCAs are East Bay Community Energy, MCE and Silicon Valley Clean Energy. Two separate bond issuances, valued at over $2 billion for 30-year terms, support the purchase of clean electricity to serve over 2.5 million residents and businesses across the Bay Area and Central Valley.
"CCAs are known for being innovative and nimble in our efforts to provide our community with electricity from cost-effective, clean sources," said Girish Balachandran, CEO of Silicon Valley Clean Energy in a statement. "For SV Clean Energy, we are working to advance innovative decarbonization solutions across sectors and in this case, we have applied a new approach to how we finance our clean power projects, furthering the financial savings enjoyed by our customers."
A Clean Energy Project Revenue Bond is a form of wholesale electricity prepayment that requires three key parties: a tax-exempt public electricity supplier (the CCA), a taxable energy supplier and a municipal bond issuer. The three parties enter into long-term power supply agreements for zero-emission clean electricity sources like solar, wind, geothermal, and hydropower. The municipal bond issuer, the CCCFA, issues tax-exempt bonds to fund a prepayment of energy that is to be delivered over 30 years. The energy supplier utilizes the bond funds and provides a discount to the CCA on the power purchases based on the difference between the taxable and tax-exempt rates. This discount is historically in the range of 8-12%, and minimum discounts are negotiated for each transaction.