CPUC Proposes New Feed-in Tariff Program

This week, the California Public Utilities Commission (CPUC) proposed a new program to significantly the amount of solar energy installed in the state. An interpretation of the Feed-in Tariff (FIT). The program would require utilities to purchase 1-gigawatt (GW) of electricity from mid-size solar and other renewable energy technologies.

As proposed, renewable energy systems between 1 megawatt (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.

The Vote Solar Initiative came out in support of 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.”

California’s Renewables Portfolio Standard (RPS) has already resulted in contracts for more than eight gigawatts (GW) of large-scale renewable energy projects across the state, with another six GW of contracts of signed contracts under review by regulators.

CPUC analysis identified transmission as the single most significant barrier to large-scale renewable project development. This new CPUC program could stimulate 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.

By using a market mechanism to determine the contract price, the CPUC’s program will use 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.

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 avoids SCE’s legal challenge by establishing a specific requirement for electricity of a certain type, and letting market mechanisms establish price levels.

Read the CPUC’s full proposal, click here.

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