Common use of Viability Clause in Contracts

Viability. With the introduction of the Project Viability Calculator as a tool to assess the likelihood of projects achieving successful operation come some opportunities for the Energy Division and the IOUs to evaluate its use and possibly implement improvements for the future. • There is an opportunity to refine the scoring guidelines for the Calculator. It became evident that reasonable people scoring offers could arrive at different interpretations of the guidelines, and that there are gray areas that require judgment. For example, one scorer might regard a developer’s prior experience constructing and operating small photovoltaic installations that reside on a customer’s premises beyond the meter as the basis for a high score on Project Development Experience, while 17 For the actual Offer in question, the valuation of the straight PPA with no buyout option exercise was much lower but still above the value cutoff so the concern ▇▇▇▇▇▇ expresses is relevant for future solicitations but not for the current situation. another scorer might view these projects as not representing “wholesale generation” and therefore assign a zero score.18 Similarly, one scorer might view a photovoltaic project for which the developer estimates direct net irradiance based on publicly available government-published data for a nearby weather station as deserving a score of 10 for Resource Quality, while another scorer might assign a 5 to the same Offer because it does not cite a third-party resource assessment or measured irradiance at a comparable photovoltaic facility in the region. • Even if the text of the scoring guidelines is not revised, there is an opportunity for the PG&E team to move towards a more uniform interpretation of the guidelines among scorers. This might be as simple as a pre-RFO internal workshop to discuss gray areas in the guidelines and come to some common understanding of how best to deal with ambiguities. Or it might be a chapter in PG&E’s internal protocol for Project Viability that outlines additional guidance to clarify how the team might best deal with ambiguities or gray areas in the Calculator scoring guidelines. In the 2009 RFO, the PG&E team made substantial efforts to achieve consistency in scoring, and some of these ambiguities became evident only after internal review of preliminary scores led the team to revise them to improve the consistency of scoring; it is clearly a challenge for any team of scorers to approach perfect uniformity. • The Calculator as currently constructed assigns a score for Permitting based on whether the developer has applied for permits, has achieved data adequacy for permit applications, or has obtained its permits. The score does not reflect the expected difficulty of obtaining permits. ▇▇▇▇▇▇ suggests that the Energy Division consider including some judgment about the degree of difficulty of successful permitting. Some Offers were evaluated to be at risk for project failure due to serious environmental concerns that could lead to permitting failure, despite achieving moderately high viability scores using the Calculator.

Viability. With the introduction of the Project Viability Calculator as a tool to assess for use in assessing the likelihood of projects achieving successful operation come some opportunities for the Energy Division and the IOUs to evaluate its use and possibly implement improvements for the future. • There is an opportunity to refine the scoring guidelines for the Calculator. It became evident that reasonable people scoring offers could arrive at different interpretations of the guidelines, and that there are gray areas that require judgment. For example, one scorer might regard a developer’s prior experience constructing and operating small photovoltaic installations that reside on a customer’s premises beyond the meter as the basis for a high score on Project Development Experience, while 17 For the actual Offer in question, the valuation of the straight PPA with no buyout option exercise was much lower but still above the value cutoff so the concern ▇▇▇▇▇▇ expresses is relevant for future solicitations but not for the current situation. another scorer might view these projects as not representing “wholesale generation” and therefore assign a zero score.18 score.20 Similarly, one scorer might view a photovoltaic project Offer for which the developer estimates direct net irradiance based on publicly available government-published data for a nearby weather station as deserving a score of 10 for Resource Quality, while another scorer might assign a 5 to the same Offer because it does not cite a third-party resource assessment or measured irradiance at a comparable photovoltaic facility in the region. • Even if the text of the scoring guidelines is not revised, there is an opportunity for the PG&E team to move take additional action towards a more uniform interpretation of the guidelines among scorers. This might be as simple as a pre-RFO internal workshop to discuss the gray areas in the guidelines and come to some common understanding of how best to deal with ambiguities. Or it might be a chapter in PG&E’s nonpublic internal protocol for Project Viability that outlines additional guidance to clarify how the team might best deal with ambiguities or gray areas in the Calculator scoring guidelines. In the 2009 RFO, the PG&E team made substantial efforts to achieve consistency in scoring, and some of these ambiguities became evident only after internal review of preliminary scores led the team to revise them to improve the consistency of scoring; it is clearly a challenge for any team of scorers to approach perfect uniformity. • The Calculator as currently constructed assigns a score It would be helpful for Permitting based on the CPUC or its staff to clarify for IOUs whether the developer has applied required use of the Calculator applies to Offers for permits, has achieved data adequacy for permit applications, or has obtained its permitsexisting facilities. The score does not reflect Energy Division had prepared a Staff Proposal regarding the expected difficulty method for evaluating project viability, in which it proposed that “IOUs are required to apply standardized PV 19 For the actual Offer in question, the valuation of obtaining permits. the straight PPA with no buyout option exercise was much lower but still above the value cutoff so the concern ▇▇▇▇▇▇ suggests that expresses is relevant for future solicitations but not for the Energy Division consider including some judgment about the degree of difficulty of successful permitting. Some Offers were evaluated to be at risk for project failure due to serious environmental concerns that could lead to permitting failure, despite achieving moderately high viability scores using the Calculatorcurrent situation.