SACRAMENTO, CA (MPG) - Despite Sacramento Municipal Utility District’s decision to walk away from a power purchase agreement, the developer of the controversial Coyote Creek Agrivoltaic Ranch says it intends to press ahead, leaving the 200-megawatt solar project facing an uncertain and potentially more complex path forward.

The proposed 1,412-acre solar facility would be located on the Barton Ranch along Scott Road north of Rancho Murieta.

SMUD announced on Jan. 5 that it was canceling the power purchase agreement with D.E. Shaw Renewable Investments, citing project uncertainties, including supply chain constraints, rising prices, tariffs, schedule delays, environmental impacts and pending litigation.

New York-based DESRI said it plans to move forward with the project, stating in an emailed response cited in a Jan. 7 Sacramento Business Journal report that “we are moving forward with the development.” DESRI representatives did not respond to requests for comment from the River Valley Times.

“We commend the Sacramento County Board of Supervisors for their bold leadership in unanimously approving the Coyote Creek Agrivoltaic Rancho last November,” Hy Martin, chief development officer of DESRI, told the Business Journal.

Martin was referring to the Nov. 18 decision by the supervisors to approve the project over the objections of environmental groups, off-roaders and tribal representatives. The six-hour hearing drew an overflow crowd, with most of the 130 speakers opposed to the project. (See "Supervisors Approve Solar Facility Despite Protests".) 

Supporters cited the benefit of keeping the land in agriculture, increased tax revenue and union-wage jobs. They also said that utility-scale solar was necessary to meet SMUD and county climate goals.

Ken Casparis, a county public information officer, said the county was aware that SMUD had canceled its power purchase agreement to serve as an off-taker for solar power generated by Coyote Creek.

“The project applicant may continue to explore additional off-take agreements consistent with existing approvals, so the county is still assessing the impact of SMUD’s decision,” he said in a Jan. 10 email.

SMUD’s withdrawal does not automatically eliminate the project’s ability to connect to the electrical grid. However, selling power to another buyer or into the wholesale market operated by the California Independent System Operator would likely require new or amended agreements with SMUD to use its transmission or distribution facilities, adding time, cost and complexity.

The project also faces legal challenges. Two lawsuits filed after the county supervisors approved the solar project on Nov. 18 challenge the county’s decision under the California Environmental Quality Act, arguing that the environmental review was flawed and failed to adequately address impacts to oak woodlands, streams and sensitive species; and to tribal cultural resources.

Project Background

The applicant for the Coyote Creek solar project was Sacramento Valley Energy Center, a subsidiary of DESRI, a New York-based renewable energy developer and operator that develops, acquires, owns and operates long-term contracted solar and wind projects nationwide.

DESRI has a portfolio of utility-scale solar and battery storage facilities, including projects serving the Sacramento Municipal Utility District in Sacramento County at the Rancho Seco Solar II facility and the Sloughhouse Agrivoltaic Solar Project.

The project would be constructed on the Barton Ranch, which would remain under the same ownership. Located south of Rancho Murieta, the ranch encompasses about 2,700 acres of grassy and wooded hillsides on both sides of Scott Road.

The proposal called for developing approximately 1,412 acres for a 200-megawatt solar array capable of powering up to 44,000 homes, along with a 100-megawatt battery storage system designed to deliver electricity for up to four hours. All electricity generated under the original plan was to be supplied to SMUD.

Project plans also included seasonal sheep grazing around the solar arrays, strategic landscaping to reduce visual impacts, and the permanent preservation of 1,150 acres adjacent to the solar facility.

The site is also located near California State Parks’ Prairie City State Vehicular Recreation Area off White Rock Road. DESRI pledged over $2.5 million for improvements to the park.

SMUD Cancellation

A power purchase agreement (PPA) is a long-term contract in which a utility agrees to buy electricity at a set price from a developer that finances, builds, owns and operates a solar facility, providing revenue certainty while supplying renewable power. Lenders and investors rely on PPAs because the guaranteed revenue over 15 to 30 years allows developers to secure construction loans, attract equity investors and obtain lower-cost financing.

Without a PPA, projects typically face higher financing costs and increased exposure to market volatility, and many cannot move forward unless they secure another long-term buyer or rely on wholesale power sales.

At the request of the River Valley Times, SMUD spokesperson Gama Ortiz provided a copy of SMUD’s Jan. 5 notice terminating the PPA with Sacramento Valley Energy Center, LLC, an affiliate of DESRI. The notice cited reasons for the decision.

First, the PPA required the project to begin operating by Sept. 30, 2024. The developer claimed force majeure events delayed construction, but SMUD disputed those claims and terminated the contract, citing delays that extended well beyond one year.

Second, the seller informed SMUD that, due to delays, global events and other factors, it could no longer deliver power at the agreed contract prices and sought higher rates for both the solar and battery components. SMUD responded by declaring an event of default, citing the developer’s inability to meet its pricing obligations.

Third, the notice stated that SMUD appreciated the effort to provide affordable, clean, renewable energy, but that “the original project and the original economics of the same no longer exist.” The notice added that the seller had represented that the project had stakeholder support, including from the Wilton Rancheria, but noted the tribe had since filed one of multiple lawsuits challenging the project, “so that does not appear to be the case.”

SMUD Board Meeting

Before SMUD canceled the power purchase agreement, its involvement in the project drew strong opposition during public comments at the utility’s Dec. 11 board meeting.

Nineteen speakers raised concerns about the irreversible loss of heritage blue oaks, destruction of wildlife habitat and biodiversity, inadequate or implausible mitigation measures, including one-acorn-for-one-old-tree replacement and short monitoring periods. Speakers also cited cultural and tribal impacts, as well as long-term ecological harm.

Several speakers warned that addressing the concerns promptly could help preserve SMUD’s standing in the community, while failing to do so risked long-term reputational damage.

The board took no formal action, but Vice President Dave Tamayo requested a staff briefing on SMUD’s contractual and legal options for reconsidering the Coyote Creek project and asked that the options be discussed publicly, if feasible.

The River Valley Times asked the SMUD spokesperson whether the briefing or public discussion had occurred after that meeting, but Ortiz did not respond.

Lawsuits

The California Four Wheel Drive Association and two other off-road recreation nonprofits filed the first writ of mandate lawsuit on Dec. 16 against Sacramento County and its Board of Supervisors. The suit names SMUD, Sacramento Valley Energy Center, DESRI and Barton Ranch as real parties in interest: entities that did not make the governmental decision but have a direct legal or financial stake in the outcome.

That lawsuit alleges the county violated the California Environmental Quality Act and the Off-Highway Motor Vehicle Recreation Act by approving the Coyote Creek project based on a flawed environmental impact report. The plaintiffs argue the report failed to adequately analyze or mitigate impacts to wildlife, oak woodlands, water resources and the nearby Prairie City State Vehicular Recreation Area, and failed to consult with state parks officials. The plaintiffs are asking the court to set aside the approvals and halt construction.

A second lawsuit, filed Dec. 18 by the Environmental Council of Sacramento and the California Native Plant Society against the county and board, named Sacramento Valley Energy Center LLC as the real party in interest. It also alleges CEQA violations, arguing the environmental review inadequately addressed impacts to oak woodlands, rare plants, wildlife, groundwater and Prairie City SVRA, and improperly deferred key mitigation measures.

Wilton Rancheria filed the third lawsuit on Dec. 19, alleging CEQA violations related to impacts on tribal cultural resources. The tribe contends the county approved the project despite acknowledging significant and unavoidable harm to culturally significant lands and unlawfully terminating government-to-government consultation required under Assembly Bill 52.

Asked for comment, Casparis said the county doesn’t comment on active litigation.

With SMUD out, three lawsuits pending, and no replacement buyer announced, the future of Sacramento County’s largest proposed solar project remains unresolved.

Related: Development Moratorium Debate Began in July 2024