Vote Solar Applauds Market-based Feed-in Tariff as Effective, Efficient Path to a Sustainable Clean Energy Economy
August 27, 2009 – Today the California Public Utilities Commission (CPUC) proposed a bold new program designed to significantly increase the amount of solar energy installed in the state. An innovative new interpretation of the policy mechanism commonly referred to as a “Feed-in Tariff,” the proposed program would require utilities to purchase 1-gigawatt (GW) of electricity from mid-size solar and other renewable energy technologies. The Vote Solar Initiative, a national grassroots organization focused on bringing solar energy into the mainstream, supports the proposed program as a cost-effective and efficient means for meeting California’s aggressive renewable energy goals.
“This program ensures that renewable energy projects will be built quickly and at the lowest cost to ratepayers,” said Adam Browning, executive director of the Vote Solar Initiative. “It throws the doors wide open on an entirely new renewable energy market in the state: mid-sized solar projects that generate clean electricity for all Californians. Coupled with highly successful CSI program for customer-owned solar and existing channels for large utility-scale projects, California will be able to lay claim to one of the most comprehensive and dynamic solar markets in the world.”
As proposed, renewable energy systems between 1 MW and 10 MW in size that deliver electricity directly to the utility grid can qualify for the new program. Contract prices will be set through a competitive auction in order to accurately reflect current solar market conditions. Read the CPUC’s full proposal online at: http://docs.cpuc.ca.gov/efile/RULINGS/106274.htm
The CPUC’s proposal presents an elegant solution to many of the challenges that have bedeviled efforts to grow sustainable renewable energy markets in California and around the world:
Puts steel in the ground
California’s strong renewable energy target (Renewables Portfolio Standard or RPS) has resulted in signed and approved contracts for more than eight gigawatts of large-scale renewable energy projects across the state (with another six GW of contracts of signed contracts under review by regulators); however, many of the planned projects have yet to be brought online. CPUC analysis identifies transmission as the single most significant barrier to large-scale renewable project development. The CPUC’s proposed program stimulates immediate activity by establishing a market for smaller renewable projects that can be incorporated into the existing utility infrastructure without the construction of new transmission. The smaller projects will also likely be easier to finance, another critical hurdle in the current economic climate.
Gets the price right
Some governments have used standard-offer, fixed price feed-in tariffs to incentivize renewable energy development. The difficulty with this approach is finding the right price. If the price is set too low, it does not stimulate the desired 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. By using a market mechanism to determine the contract price, the CPUC’s program uses competition to establish a price that is both sufficient for project development and protective of ratepayers. With the price of solar modules coming down 40% over the past 6 months, we expect dramatic market activity at price levels that will attract the interest of policymakers around the country.
Can be implemented quickly
As a practical matter, the proposed auction mechanism can also be implemented much more quickly than some alternative approaches. There is real urgency in the matter, as the US Treasury Grant Program, established as part of the stimulus package, is only available to projects that have begun construction by 2010. If approved, this program could be delivering results within the grant eligibility window.
Overcomes legal hurdles
In an earlier phase of the proceeding, one of the state’s largest utilities, Southern California Edison, challenged the CPUC’s authority to establish a feed-in tariff, claiming that the Federal Power Act only gives the Federal Energy Regulatory Commission the authority to require purchases above ‘avoided costs.’ Under this federal law, California regulators are restricted in their ability to set specific prices. This proposal elegantly avoids SCE’s legal challenge by establishing a specific requirement for electricity of a certain type, and letting market mechanisms establish price levels.
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