The California Public Utilities Commission (CPUC) approved a contract that would make San Diego Gas & Electric (SDG&E) the first US utility to import wind energy from Mexico.

In a 4-1 vote Thursday, the CPUC approved a power purchase agreement between SDG&E, the regulated utility unit of Sempra Energy, and Sempra’s power generation business for the output of the first phase of the 156MW Energía Sierra Juárez wind project in Baja California, Mexico.

SDG&E would pay $106.50/MWh, or about $41m a year for the 422GWh of electricity the project is expected to generate annually. The power purchases would be worth $820m over the contract’s 20-year term. The contract’s terms are public because of the relationship between the two parties.

Sempra anticipates having all permits, including presidential clearance for construction of a cross-border transmission line from the US Department of Energy, by mid-2012, as Recharge reported in a series of articles on renewable energy development in Mexico last week.

Construction of Energía Sierra Juárez (ESJ) is expected to begin in 2013, with some turbines operational later in the year. However, the construction timeline will be driven by completion of a substation that will connect the wind farm to the California grid.

By having its first point of interconnection to the California Independent System Operator grid, electricity from the project would be counted as “in state” for purposes of California’s Renewable Portfolio Standard (RPS), which requires utilities to source 33% of their generation from renewables by 2020, 75% of which must be in state.

The ESJ project is expected to satisfy most of SDG&E’s remaining RPS needs in the 2014-2016 compliance period.

Six projects with more than 2.2GW of proposed capacity have requested interconnections with the East County substation, which is being proposed by SDG&E and is going through a separate CPUC regulatory review process. Three of these projects, including ESJ, are in Baja. The substation has not been well-received by the community of Jacumba, California, which has a population of about 560.

Development of Energía Sierra Juárez began in 2007, when Sempra bought the rights from Cannon Power Group, a San Diego-based developer. Sempra has secured enough land leases to support up to 1.2GW of capacity. The group has received strong support from local communities, which receive revenues from the leases, as well as from the state government and the administration in Mexico City.

“The Mexican government has been fantastic to work with,” Sempra Generation spokesman Scott Crider told Recharge recently. “They really view this resource as being of value to Baja.”

The wind-resource capacity in the mountainous area is high, although Sempra declines to provide details on its particular location or disclose the value of the investment. The ESJ contract suggests a capacity factor of nearly 31%.

Source: rechargenews, March 22 2012