Utilities Advisory Commission backs Palo Alto’s share of 50 MW Trolley battery project

The Utilities Advisory Commission on July 9 unanimously recommended that the city join an NCPA-led purchase of a 50‑megawatt slice of the ‘Trolley’ battery energy storage project, a grid-scale, four‑hour battery resource developed by AIPA Energy. The UAC’s vote was 7–0 in favor of staff’s recommendation to proceed with the contract terms negotiated through the Northern California Power Agency (NCPA).

Senior Resource Planner Jim Stack told the commission the project is roughly a 400‑megawatt battery resource in San Bernardino County; NCPA members have tentatively signed about 320 MW of the project and Palo Alto staff proposed a 50 MW share. “The contract price that is in the that we’ve negotiated is $12.71 per kilowatt month,” Stack said. He added that because of federal tax‑credit changes and supply‑chain uncertainty the seller has a contractual right to seek a limited price adjustment — up to 6% — via an audit-based review if costs rise for allowed reasons.

Why it matters: Staff said the 50 MW slice helps Palo Alto hedge near‑term portfolio risk, provides deliverable resource adequacy capacity and captures day–night price differentials that batteries can monetize. At the contract price, staff estimated the city’s annual payment would be about $7.6 million and that, under their market assumptions, the resource’s net value to Palo Alto could be about $2.8 million per year (an energy/RA arbitrage and capacity value estimate staff described as an expected-case projection and subject to significant market and policy uncertainty).

Project and fiscal details: The contract term is 20 years with commercial operation projected in mid‑2029. The project is expected to deliver one-cycle-per-day on average (with up to 1.5 cycles on some days). Staff said the NCPA-wide deposit and security terms protect members: if a project developer defaults NCPA would retain security deposits and use them to procure replacement resources; staff cited an NCPA-wide security deposit in the order of tens of millions of dollars as financial protection for members.

Discussion and risk: Commissioners asked about transmission and congestion effects, the treatment of energy that charges the battery, and the risk that tariffs or tax-policy changes could raise project costs. Stack said transmission access charges apply to Palo Alto’s city‑gate load but the project’s location in a solar-saturated area could make arbitrage economics favorable by charging at very low midday prices and discharging into higher evening prices. He also said if sellers conclude that policy and supply changes require a price increase beyond the negotiated cap, NCPA members could renegotiate or walk away.

Vote and next steps: The commission moved to recommend the negotiated contract to the finance committee and city council; the motion passed 7–0. Staff will take the draft contract to the Finance Committee and then to the City Council for final approval. If Council approves, the city would begin monthly payments upon commercial operation. Staff will continue monitoring market and policy risk and maintain regular updates to the UAC during contract execution.