Yesterday, First Solar announced it had reduced its manufacturing cost for solar modules in the fourth quarter to 98 cents per watt – that is big news because the company won the race to produce under the $1 per watt price barrier. This news didn’t come as a surprise to many, and perhaps we can get Brad to write a note about the true significance of the announcement.
Other big news was PG&E’s proposal for 500 MW of solar PV – half of which PG&E would develop on its own. This is worth noting because traditionally Investor Owned Utilities (IOUs) in California, like PG&E, have had to rely on Independent Power Producers (IPPs) since the deregulation of the State’s energy market in the 1990’s.
This deregulation set the stage for the manipulation and shenanigans that led to the California energy crisis of 2000 and 2001. By colluding, IPPs and energy traders (like Enron) gamed the system announcing they were pulling their plants off line for “maintenance” and charging the IOUs exorbitant rates that could not be passed along to the end consumers (because of price caps set by the Public Utility Commission to protect us) – in that fiasco’s wake PG&E declared bankruptcy and others were bailed out by the government.
Sorry for the history lesson, but it serves as good background for understanding why PG&E is making this move. In an effort to meet Renewable Portfolio Standards (RPS), the company has some huge outstanding contracts with SunPower, Optisolar and BrightSource, among others. Unfortunately, with the credit crisis delaying some of these projects, it is anybody’s guess when the projects behind these Power Purchase Agreements (PPAs) are actually going to come on line.
PG&E’s proposal could be seen as encroaching on IPP’s territory, and it will surely receive some resistance – but PG&E cleverly tossed IPPs a bone with the second 250 MWs. PG&E’s proposal asks for a streamlined regulatory process for independently owned (as in non-PG&E owned) projects under agreement with PG&E.
The proposal allows for PG&E to have their cake, eat it and provide Northern Californians with a healthy dose of renewables mixed in with their natural gas. With it, PG&E will be able to take advantage of:
1) a huge balance sheet to finance its own deals
2) the chance to invest capital (it charges rate payers on a complicated schedule based on invested capital)
2) depressed module prices (more solar power for your buck)
3) the new ITC rules (allowing utilities to benefit from the tax credits)
All of this means PG&E stands to make some bucks, but the proposal will also allow IPPs to develop projects more quickly, meaning that PG&E might be able to actually reach its RPS mandates – and that would be a truly big win for renewables in California.