FERC may have recently put the kibosh on states implementing European-style Feed-in Tariffs for the moment, but that doesn’t mean the U.S. is left high and dry without ways to drive wholesale solar markets. We’re seeing daily action from utility PV programs that play by FERC’s rules.
Just today, Southern California Edison announced 60 MW worth of contracts under its new wholesale distributed generation (WDG) program. These winning bids will be installed on 31 rooftops and five ground-mounted sites across SCE’s service territory and deliver clean, reliable, wholesale power to the grid (as opposed to meeting on-site load).This is the first traunch of contracts for the utility’s 500 MW distributed solar program – half of which the utility will own and half of which must be contracted like this through independent producers.
As you may recall, SCE proposed the program as a mechanism for meeting its RPS requirements. The RPS may have set the end-goal of 20% by 2010 (with efforts still underway to increase to 33% by 2020), but it was the utility that opted to develop distributed solar to meet part of that requirement – a departure from the previously exclusive focus on large-scale projects in the 10 – 500 MW range. SCE’s move into WDG is significant for a few reasons:
- It was a clear example of utilities recognizing the value of power being generated within the distribution network – a solid case for developing more rooftop solar.
- It opened up a new type of solar development – adding to a nice robust wholesale policy framework that supports diverse market participation (large-scale and distributed systems, utility-ownership and independent industry alike). That’s in addition to the state’s retail program that encourages customers meet their own electricity needs with solar (CSI plus net metering). We think all that diversity of opportunity’s a good thing for building a resilient solar market and lowering solar costs for everyone.
- The program used a competitive solicitation process rather than a fixed standard contract offer – a policy approach designed to ensure projects get built at the best cost to ratepayers. Today’s announcement validates the competitive auction mechanism that we’re also seeing arise in the utility’s RPS procurement more broadly and in the CPUC’s to-be-launched twist on the Feed-in Tariff (because the incentive model doesn’t set a wholesale price, it’s another innovative way states can support wholesale solar development without stepping on FERC’s jurisdictional toes).
Northern California’s PG&E has a similar program in the works, so expect to see more WDG on the way.
Let’s see what actually gets built before we declare this program a success. I attended the bid conference, studied the materials and asked many questions and our firm really couldn’t justify going forward given all the uncertainties.
A far better solution (as shown in Europe) is a straight feed in tariff with known interconnection fees. This certainty allows developers to know whether or not a project is profitable before spending tens or hundreds of thousands of dollars on pre-construction activities without knowing whether the bid rate of a winning bid will justify their development costs.
My sense is one year from now, we will start to hear about how many of the 60MW’s contracted for will never be built.