The BESS’ Long and Winding Road

Written by Neil Farrell

Neil has been a journalist covering the Estero Bay Area for over 27 years. He’s won numerous journalism awards in several different categories over his career.

October 18, 2024

Rendering shows the layout of a proposed Battery Energy Storage System (BESS) and how it would look in the 3-building model. Photo courtesy Vistra 

City officials have updated their process and issued a fresh timeline for reviewing the spider web of red tape that must be navigated in processing the world’s largest battery plant project.

Vistra Energy’s “Battery Energy Storage System” or BESS Project proposes building a 600-megawatt BESS plant on some 24-acres of the power plant property. 

The selected site was once an oil tank farm that held fuel oil, diesel, and/or kerosene to burn in the boilers of the steam generating plant. Those tanks were rendered obsolete in the mid-1990s when the plant switched over full time to burning natural gas, delivered to the plant via a pipeline from Central Valley oil and gas fields.

The BESS has been under review and analysis since 2020, when Vistra applied for a Coastal Development Permit (CDP). Under the City General Plan, known as “Plan Morro Bay,” such a project required writing a Master Plan for the overall power plant property that would guide redevelopment of the over 100-acre site, including the BESS project. 

For the BESS to fly, however, it needs a change in zoning, from Visitor-Serving Commercial to Industrial, which triggers several more steps under the various planning documents and laws, including changing the City’s Local Coastal Program or LCP.

That’s the document that deals specifically with the issues in the California Coastal Act, and also loops into the fray the Coastal Commission, which has ultimate jurisdiction over all LCP amendments. 

Under the California Environmental Quality Act or CEQA, the application also triggered a full Environmental Impact Report or EIR. The City hired environmental consultants, Rincon, to do this EIR in 2021, and the Draft EIR was released for public comments this past March.

The document drew over 200 comments from public agencies and critiques from residents, so many that Rincon’s contract had to be increased to handle the extra workload. This review is the first string of the spider web as the EIR is needed before work on a CDP and the LCP Amendment can move forward. 

If and when the City Council approves the Final EIR, that would signal the go-ahead to work on all the other requirements.

A Final EIR is expected to be released for a possible vote in December or early next year. Once that is done, work will start in earnest on “Phase 1” — the LCP Amendment — potentially going to the Planning Commission in February, with hearings in March/April.

The City Council would get the LCP Amendment next May, after which it would go to the Coastal Commission for final approval, potentially next August.

But if you think that’s the end of the line, you’d be wrong because having done all that, the project itself would then begin to be reviewed for a CDP.

It’s possible the EIR and LCP Amendment could be approved by the City Council, but the CDP denied. Either way, all of this is subject to appeal to the Coastal Commission and if past political fights in Morro Bay are an indication, an appeal is all but guaranteed to happen.

Once the LCP Amendment is completed, Phase 2 — processing the CDP — starts. And that CDP application, which has already been submitted by Vistra, would then be judged for consistency with the new, Power Plant Master Plan (which also must be approved by the Coastal Commission).

The City expects to start the CDP review process next September and could go to the Planning Commission in October 2025. That decision is likely to be appealed to the City Council and then the Coastal Commission, which only looks at CDPs on appeal, unless it’s in the Commission’s area of original jurisdiction, which in Morro Bay means all the State Tidelands leases that front the Harbor and Bay.

At the Commission the first order of business would be a “substantial issue” hearing, wherein the Commissioners must decide if there is enough concern over a project to justify accepting the appeal and taking over permitting of the project. If all that shakes out Vistra’s way, it could then move over to the “Building” side of the process and submit actual construction specs and plans.

That’s likely when one major question about the project will be fleshed out — will these batteries be housed in three, 91,000 square foot, 2-story buildings; or 174, smaller, cargo containers?

The three buildings model would have a total of 60,000 “battery modules” each divided into 2,400 “battery racks” in each building.

With the container option, each would have 46 battery racks and 736 battery modules. The containers would be grouped into sets of eight, spaced 10-feet apart; and the groups of eight would be 25 feet apart.

So, while the EIR is in process, the City is also working on a recommendation to the Planning Commission on the LCP Amendment. Even here there is a catch.

“A major factor in this decision is staff’s analysis of the project’s consistency with the City’s LCP,” said Airlin Singewald, the City Community Development Director. All roads seem to lead to the Coastal Commission with this project, so the City naturally plans to work closely with them. “City staff,” Singewald continued, “will look to CCC staff for guidance on questions of LCP and Coastal Act consistency.” They’ve already been given a huge hint as to where the Commission’s coastal planners stand.

“CCC staff’s Aug. 2, 2024 letter concluded that the project faces “development constraints” that ‘…at the current time appear to preclude such a use/development altogether under the Coastal Act and the LCP.’ City staff will be meeting with CCC staff, including CCC’s attorneys, and the BESS project applicant to discuss how these development constraints may affect the project.”

Those constraints are the same concerns that led the City to ask the Commission in 2013, to deny its own sewer plant project and move it well inland away mainly from tsunami run-up zones, flood zones and future sea level rise, which the Commission collectively calls “coastal hazards.”

Singewald said they have four potential recommendations to make to the Planning Commission:

• Recommend denial of the project.

•  Recommend approval of the project as proposed. To pursue this path, City staff would need to show that the project, as currently proposed, is consistent with the LCP.

• Recommend approval of one of the EIR alternatives. City staff would need to show that the selected alternative is consistent with the LCP.

• Recommend approval of a modified project (not an EIR alternative). Under this option, Vistra would need to modify its proposal as necessary to be consistent with the City’s LCP. The modified project would need to be analyzed in the Final EIR.

And if all this results in scaring Vistra off, there’s an out. 

“Depending on City staff’s analysis and how discussion go with CCC staff,” Singewald’s report said, “Vistra would always have the option to withdraw their application at any time.”

As if California’s web of planning laws weren’t confusing enough, the State in 2022 approved Assembly Bill 205, an energy bill that sets up a work-around path that renewable energy projects — like the BESS — can take to get past local opposition.

The Legislative Analysts’ Office in reviewing AB 205, said it establishes, “a new certification process for… an energy storage system capable of storing 200 megawatt hours or more of electricity… The bill would authorize a person proposing to construct those facilities, no later than June 30, 2029, to file an application for certification with the [California] Energy Commission.”

In essence, Vistra has the legal ability to ask the CEC to take over permitting of the project and the CEC would have jurisdiction over all permitting on the local level, essentially negating the City’s work on the project, which taxpayers would be glad to hear is all being paid for by Vistra through a reimbursement agreement with the City.

“The issuance of a certificate by the [CEC] for a site and related facility pursuant to this [AB 205] chapter shall be in lieu of any permit, certificate, or similar document required by any… local… agency… for the use of the site and related facilities, and shall supersede any applicable statute, ordinance, or regulation of any… local… agency…”

There are of course exceptions to that as well. The CEC’s authority doesn’t override the State Lands Commission, which has authority over leasing of State-owned lands; nor the Coastal Commission, the State Water Resources Control Board, or “applicable regional water quality control boards.”

While AB 205 would clearly appear to be a way around the City’s authority, the law doesn’t cut State agencies out of the process. It also has some conditions involved that limit its use.

To draw in the CEC under AB 205, the report said, “the CEC must make findings ‘that the construction or operation of the facility will have an overall net positive economic benefit to the local government.’”

Benefits in this case means “economic benefits may include, but are not limited to, any of the following: (a) Employment growth; (b) Housing development; (c) Infrastructure and environmental improvements; (d) Assistance to public schools and education; (e) Assistance to public safety agencies and departments; and (f) Property taxes and sales and use tax revenues.”

Vistra commissioned an economic benefits analysis, the so-called Brattle Report, named after the firm that conducted the study. It listed the benefits as $11.7 million in tax revenues from the construction of the project (estimated at $900 million) a large portion of which would come through the purchase of the batteries and the City’s 1.5% local sales tax; and $12.8 million over 10 years of operations. 

The new use would also mean an additional $1.3 million a year in property taxes to the City, according to the Brattle Report. 

It also lists numerous construction jobs and a massive $187 million payroll during construction, and it could be expected that more taxes would then come to the City with this importation of workers.

Such big power plant jobs draw union workers from all over the state, who often bring travel trailers and motorhomes and stay in campgrounds or motels during the week and go home on weekends.

In this scenario, those out-of-town workers would generate bed taxes at the RV parks and motels, and sales taxes through what they buy, plus meals and more purchased from local businesses.

The BESS Project now stands at a crossroads. “The project,” Singewald’s report said, “is currently at a critical point in the process where staff will consider all the information in the record [EIR analysis, technical study results, public and agency comment letters, etc.] to decide on a recommendation to the Planning Commission.”

So, while the road ahead is about as murky as Yoo-Hoo Soda, by law, the City has to process Vistra’s application.

“Ultimately,” Singewald said, “unless Vistra withdraws its application or does not remain consistent with its cost reimbursement obligations, staff is required under law to continue processing the application.

“Staff will follow CCC staff direction to segment the CDP and LCP amendment, by first processing the LCP amendment and then the CDP once/if CCC approves the LCP amendment.”

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