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August 27, 2010

California to reward mid-size renewable energy projects

Renewable energy projects above 20MW in size will be able to take part in the incentives scheme for 20MW of their output

California is introducing a new renewable energy incentive program designed to support medium-sized projects.

The state’s three large investor-owned utilities will be required to buy up to 1,000 megawatts of clean electricity from eligible renewable energy projects of between 1.5MW and 20MW in output.

This could include anything from large commercial or utility solar photovoltaic arrays to biogas power projects on farms, and community-scale wind farms to geothermal power projects developed by independent power producers.

Projects larger than 20MW will be able to take part, but only up to the 20MW limit.

The California Public Utilities Commission issued a proposed decision this week, which stated its intended support for the program. Full approval could come in 30 days, with the program to start within 90 days of approval.

Originally, it was intended to expand the state’s existing Feed-in Tariff initiative, which provides incentive payments for projects up to 1.5MW in size, up to a 750MW limit.

However, the Federal Energy Regulatory Commission has ruled that the expanded program cannot take the form of a feed-in tariff, since it would conflict with FERC’s jurisdiction over the setting of electricity rates.

Auctions

Instead, California’s new program will take the form of a renewable auction mechanism (RAM) in which power generators would sell their power to the three utilities in two auctions per year.

Each generator would offer up their power for a certain non-negotiable price, with the lowest-priced bids snapped up by the utilities until they have met their quota.

The CPUC said it still has a few details to iron out – including a mechanism to ensure that utility ratepayers are not held to ransom in the event of a shortage of eligible renewable energy projects.

Under the program, Renewable Energy Certificates will be included within the price offered in the auction, then transferred to the utility buying the power.

The full 1,000MW program looks likely to be spread through auctions held over two years, with Southern California Edison facing a 498.4MW quota, the Pacific Gas & Electric (PG&E) Company a 420.9MW quota and the San Diego Gas and Electric (SDG&E) Company with a smaller 80.7MW quota.

Faster development

Although there are a few mechanics of the program still in need of clarification, this proposal largely draws on proven best practices” - Adam Browning, Vote Solar

Renewable energy supporters applauded the Commission’s decision on the program, pointing out that a focus on mid-sized renewable energy projects could mean a faster development of generating capacity, since there would be fewer problems with transmission capacity.

Kevin Fox, from the law firm Keyes & Fox LLP, which represents the Interstate Renewable Energy Council, said the policy should lay the foundations for long-term market growth.

Mr Fox said: “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.”

“Missing piece”

The Vote Solar advocacy group said the new incentive scheme would fit into the gap between California’s policies supporting utility-scale renewable energy developments and household-scale installations.

Adam Browning, Executive Director of Vote Solar, said: “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.

Mr Browning added: “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.”