California to Launch Next-Generation Feed-in Tariff
for Solar Energy
SAN FRANCISCO, Aug 25, 2010 -- BUSINESS WIRE
Yesterday, the California Public Utilities Commission (CPUC) issued a
proposed decision to launch a new renewable incentive program designed
to drive mid-sized renewable energy development. This next-generation
feed-in tariff program will require investor-owned California utilities
to purchase electricity from renewable energy systems between 1 and 20
MW in size. Advocates at the Vote Solar Initiative and the Interstate
Renewable Energy Counsel (IREC) applauded the CPUC for its innovative
approach to helping California meet its renewable goals and build a
strong new energy economy.
"California has robust policies for developing large, utility-scale
solar power plants and for putting smaller systems on homes and
businesses, but there is a clear gap in the middle. Yesterday's CPUC
proposal is designed to unlock that missing piece, providing an
additional opportunity for solar market and job growth and for quickly
bringing massive new amounts of clean energy to the state," said Adam
Browning, Executive Director of Vote Solar. "Although there are a few
mechanics of the program still in need of clarification, this proposal
largely draws on proven best practices for mid-sized renewable
procurement. We look forward to working with the CPUC to finalize those
details and get the program up and running."
"Solar policy should provide the foundations for long-term market growth
by providing a transparent process, a level playing field, and a
reliable market opportunity," said Kevin Fox, of the law firm Keyes &
Fox LLP, which represents IREC. "This program achieves those larger
policy goals through an innovative pricing mechanism that also protects
California ratepayers and overcomes the legal challenges that have
hindered widespread feed-in tariff development in the U.S."
The CPUC proposal establishes a 1-gigawatt (GW) pilot program for
power from eligible mid-sized renewable energy systems. The program
requires California's three largest investor owned utilities to hold
biannual competitive auctions into which renewable developers can bid.
Utilities must award contracts starting with the lowest cost viable
project and moving up in price until the MW requirement is reached for
that round. The program will use standard terms and conditions to lower
transactional costs and provide the contractual transparency needed for
effective financing. Development security and relatively short project
development timelines ensure project viability. The Commission can act
to finalize and adopt the program in as soon as thirty days.
This Renewable Auction Mechanism (RAM) feed-in tariff model addresses
many of the challenges facing wholesale renewable energy policy in
California and around the world:
Mid-Sized Project Size Expedites Solar Development
CPUC analysis identifies transmission as the single most significant
barrier to development of large-scale renewable projects that have been
the focus of much utility solar activity to date. While the state works
out its transmission solutions, this proposed program stimulates
immediate activity by establishing a market for smaller (up to 20 MW)
renewable projects that can be incorporated into existing utility
distribution infrastructure. These smaller projects will also likely be
easier to finance, another critical hurdle in the current economic
climate.
Market-Based Pricing Delivers Long-Term Value in a Dynamic Market
Some governments have used fixed-price feed-in tariffs to incentivize
renewable energy development. One point of difficulty has been getting
the fixed pricing right. If the price is set too low, it does not
stimulate the desired level of market activity. If the price is set too
high, ratepayers pay unnecessary costs, suppliers throughout the value
chain are not encouraged to reduce prices, and the program can lose
political support. In contrast, the CPUC program uses competition to
establish a price that is both sufficient for project development and
protective of ratepayers. By continuing to deliver maximum ratepayer
value by driving down installed solar costs and capturing changes in
market conditions, the bidding mechanism is also more likely to provide
a long-term market for the growing solar industry.
Market-Based Pricing Overcomes Legal Hurdles
Last month, the Federal Energy Regulatory Commission (FERC) ruled that
states do not have the authority to establish wholesale electricity
rates that exceed utility "avoided costs." The CPUC program overcomes
this jurisdictional challenge by instead requiring utilities to purchase
a certain type of energy (e.g. from renewable energy systems under 20 MW
in size with particular power characteristics) and letting market
mechanisms determine the price.
About the Vote Solar Initiative:
Vote Solar is a non-profit grassroots organization working to fight
climate change and foster economic opportunity by bringing solar energy
into the mainstream. Since 2002 Vote Solar has engaged in state, local
and federal advocacy campaigns to remove regulatory barriers and
implement the key policies needed to bring solar to scale.
www.votesolar.org
About IREC:
The Interstate Renewable Energy Council (IREC) is a premier resource for
current information, education, credentialing and best practices
regarding renewable energy. www.irecusa.org
SOURCE: Vote Solar Initiative
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