Common use of EVALUATION OF VARIOUS TECHNOLOGIES AND PRODUCTS Clause in Contracts

EVALUATION OF VARIOUS TECHNOLOGIES AND PRODUCTS. PG&E’s evaluation approach for net value and project viability are essentially technology-blind. The project-specific inputs to the valuation model are contract price, timing, location, generation profile, and, if relevant, buyout price. These inputs do not specifically reflect the technology of the project. That being said, the cost of a project clearly affects the pricing offered by the developer, so higher-cost technologies tend to lose the competition, all else being equal. The Project Viability Calculator was designed to be technology-blind as well; the scoring criteria do not provide for higher scores for specific technologies. However, the Calculator will return a lower score for a project that relies on a technology that is not well- commercialized, or that the developer (or affiliated members of its team) lacks prior experience developing, owning, operating, or financing, all else being equal. So in a sense the methodology will tend to discount projects based on newer technologies or on those that have not been implemented broadly at utility scale, and will tend to promote projects that rely on technologies that have found widespread market acceptance and have dozens of examples of 100+ MW installations. This means that, using the Calculator, IOU renewable solicitations will not be likely to be the venue for adopting new technologies unless they have some striking advantage in price (which tends not to be the case for hardware that has not yet achieved manufacturing economies of scale). PG&E has attempted to facilitate short-term renewable power contracts (term less than ten years) by such initiatives as modifying its standard Form Agreement to accommodate such contracts, and crafting substitute language for the Form Agreement that more closely resembles industry standard agreements for short-term power transactions. One of the counterintuitive features of PG&E’s valuation methodology, given its specific inputs, is that short-term contracts that are priced at what appears to be today’s competitive market price for Western renewable power sales of one to three-year duration tend to appear worse in discounted net value than long-term contracts of 25 or 30 years duration whose contract prices start higher and escalate. Xxxxxx has concluded that it is generally inappropriate to compare a two-year contract to a thirty-year contract using PG&E’s net value metric, and that it would be more appropriate to compare short-term PPA offers to other short-term PPA offers to make a judgment of their relative competitiveness.