California issues Feed-in Tariff proposal

California state regulators have spent the last few years trying to revise a program that was meant to boost small-scale renewable energy generation but wasn’t popular because it wasn’t lucrative enough to attract many takers. Now, a new proposal has emerged that would up the project sizes allowed and rely on auctions to pick winners and losers.

On August 24, an administrative judge with the California Public Utilities Commission issued a proposal to expand what was once called the feed-in tariff program. It might still be called feed-in tariff by some, but it’s quite different from the kind of polices that have made Germany and other European countries hot solar markets.

Instead of setting solar electricity rates that utilities must use to buy power from independent project developers (European style), California’s proposal would require investor-owned utilities to hold two auctions per year and sign power purchase deals from developers with the lowest and most plausible bids.

While the 1-gigawatt proposal aims to lure more project developers, it also comes with complex pricing control mechanisms, said Adam Browning, executive director of Vote Solar Initiative, an advocacy group in San Francisco.

“This program is an elegant solution and provides a very compelling and workable model for generating whole sale distributed generation,” Browning said.

The new procurement process would apply to projects from 1-megawatt to 20-megawatt in size. It also would circumvent a sticky issue that showed up last month when the Federal Energy Regulatory Commission said states don’t have the authority to set wholesale electricity rates that would exceed “avoided costs.”

Utilities can buy power in order to avoid the expenses of building and operating their own plants. So the term “avoided costs” is often used to describe the prices utilities would spend to buy power, which in most cases comes from fossil fuel power plants that make up a big chunk of the electricity generation facilities in the country. In California, avoided costs refer to the prices for power from combined-cycle natural gas power plants.

The proposal would replace a feed-in tariff program that began in 2007 as a way to encourage water and wastewater treatment plant owners to install renewable energy projects and help utilities to meet a state mandate requiring them to have 20 percent of the electricity from renewable sources by 2010. Each project, which could use solar, wind, geothermal, among others, couldn’t be larger than 1.5 megawatts.

Enlarging the size of eligible projects to 20 megawatts each could make them cheaper to design and build them than the smaller projects. At the same time, proponents have reasoned, the project is not so big as to make it difficult to line up financing.

Source: Ucilia Wang, Gigaom


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