California presents an answer to FiT hurdles

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The California Public Utilities Commission has published new documentation designed to significantly increase the amount of solar energy installed in the state. This incentive structure is based around the idea of a FiT, yet there are distinct differences.

The proposed program requires utilities to purchase electricity from solar energy technologies of 1-10MW in size. Utilities would then issue a request for proposals for qualifying renewable projects approximately every six months. It is then up to the regulatory body to set a revenue requirement for each solicitation. Next, the utilities would rank bids by price, then be required to take the cheapest ones first until the money runs out. Losing bids are free to bid into the next solicitation.

The CPUC’s proposal seems fairly promising as it presents a logical solution to many of the challenges that have hindered efforts to grow sustainable renewable energy markets around the world.

Benefits of CPUC’s proposed scheme:

–        Caters for the oft forgotten small-scale projects

–        Doesn’t deal with the price issue of FiTs (too low not enough uptake, too high ratepayers pay unnecessary costs, suppliers throughout the value chain are not encouraged to reduce prices, and the program can lose political support.)

–        Can be implemented quickly (if granted could win grant eligibility as part of the U.S. Treasury Grant Program)

–        Overcomes legal hurdles (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 for FiTs.)

Further to this, since the price of solar modules has come down 40% over the past six months and predictions set this percentage to only get higher, this kind of scheme seems as though one of the only sensible options – at least until FiTs are more mature. This method harnesses and accelerates cost reductions by encouraging the whole value chain to work together to be competitive.

The program seems set to be quite popular in California, as it ensures that renewable energy projects will be built quickly and at the lowest cost to ratepayers. It also opens opportunities on an entirely new renewable energy market in the state: mid-sized solar projects that generate clean electricity for all Californians. Coupled with the highly successful California Solar Initiative program for customer-owned solar, the GW of utility-owned/IPP distributed generation program, and existing channels for large utility-scale projects, California will be able to make advances in its solar market to keep up with the success of Europe.

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