California has reinforced its commitment to advance renewable energy after the state’s utility regulator proposed a next-generation feed-in tariff program that will open a new market opportunity for medium-scale photovoltaic projects.
The California Public Utilities Commission has recommended a renewable auction mechanism feed-in tariff model that will establish a 1-gigawatt pilot program requiring utilities in the state to purchase power from renewable energy systems with capacity ranging from 1 megawatt to 20 MW.
Three of California’s largest investor-owned utilities must hold competitive auctions for renewable companies every two years. These auctions will offer project contracts to renewable developers until the total generation capacity of the projects reaches 1,000 MW.
The auctions will apply standard bidding terms and conditions to lower transactional costs and provide necessary contractual transparency for effective financing.
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Vote Solar, a nonprofit organization lobbying for the large-scale use of solar energy, noted that the new feed-in tariff scheme will answer some of the challenges hampering the wholesale renewable energy policy in California and around the world.
“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,” said Adam Browning, executive director of Vote Solar.
The new program creates a market for midsized solar energy projects that can be immediately integrated into existing utility power grids. These smaller projects will also be easier to finance, a major concern given the current economic situation.
The fixed-price feed-in tariff scheme is often used to incentivize renewable energy development, although there has been difficulty in getting the fixed pricing right.
If the price is set too low, the scheme would fail to stimulate the desired level of market activity. On the other hand, if the price is set too high, ratepayers would shoulder unnecessary costs, power producers would not reduce prices and the overall program would lose political support.
To overcome this barrier, the new scheme uses market competition to establish a price that is sufficient for project development and, at the same time, protective of power consumers. This will most likely pave the way for a long-term market for the solar industry.
“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 L.L.P., which represents the Interstate Renewable Energy Counsel.
