Southern California Edison has had a voluntary Renewable Standard Offer Program for the past several years–a fixed-price offer to buy renewable energy from systems under 20 MW in size, with the price set at the Market Price Referent (MPR). It’s not a FIT per se, as it is not ‘must take’, but a standard fixed-price offer nonetheless.
In 2009, SCE contracted for 140 MW of PV. These contracts used the 2008 MPR price (pdf) (Note that pricing also uses a time-of-delivery adder (TOD). In SCE territory, if you model the TOD factor on expected PV performance, you get a levelized boost of about 1.35. So, take the applicable MPR, and multiply accordingly). The MPR is calculated annually by the CPUC; it’s the 20 year levelized cost of energy of a combined-cycle natural gas plant, meant to represent the next marginal unit of generation. It’s a great story–here’s significant amounts of solar purchased below the cost of fossil fuels.
However, how will this work in the future? Natural gas prices have plummeted since 2008, and the MPR went down about 20% this year. The question is: is the new price enough to deploy solar? Big problem.
Today, SCE announced a change to the program that will solve this problem. Here’s the email I received (nothing on the web yet):
Southern California Edison (“SCE”) will officially launch the 2010 Renewables Standard Contract Request for Offers (“RSC-RFO”) on Monday, August 2, 2010. This program is open to all RPS eligible technologies 20MW or less and interconnected within the CAISO control area. You are welcome to download and review the materials when we make them available on August 2 at SCE’s website.
You will notice two key changes from the 2009 RSC Program. First, the 2010 RSC program will pay as bid for those selected in the program versus a predetermined price in previous years. [emphasis added] Second, projects must have forecasted commercial operating dates within three years of CPUC approval of the power purchase agreements. Most other details of the program will remain similar to previous years, but please review all program materials for important details and requirements.
Currently on the schedule for August 10, 2010 is the RSC-RFO Web Conference. The Conference will start at 9:00 a.m., and will focus on the RFO process and timing. There will be time apportioned to Q&A during the conference. The RSC website will be updated once the registration and login detail is determined.
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Renewable Standard Contracts
Southern California Edison
2244 Walnut Grove Avenue
Rosemead, California 91770
So, instead of pricing solar based on the cost of natural gas, they will price solar based on…the cost of solar as bid. In order to make sure that the bids are viable and not aspirational phantom projects, the program requires development security of $20/kW (by requiring skin in the game, developers will only bid numbers that they are confident in delivering), and project development timelines. In order to reduce parasitic transactional costs and help developers line-up financing ahead of time, the program uses standard, non-negotiable contracts. In order to get projects that can come on-line quickly and don’t need new transmission, it is only eligible for projects under 20 MW. (Note that SCE also has a similar program for rooftop PV systems, 1-2 MW in size.)
It’s FPA/FERC compliant, it captures the latest in solar’s cost reductions and delivers that value to ratepayers, and it helps drive down solar’s costs by sending helpful market signals throughout the solar value chain (polysilicon manufacturers still have gross margins between 40%-50%; competitive markets can help with that).
While any program can be improved, this is a pretty good example of a promising approach to procuring sizeable amounts of wholesale distributed generation at politically palatable price-points. Arizona Public Service has a similar program. We expect to see many more in the days ahead.
Vote Solar is a non-profit grassroots organization working to fight climate change and foster economic opportunity by bringing solar energy into the mainstream.
photo: e pants