CEC Tackles Renewable Development Expense

By Published On: May 25, 2012

There are many steps that can be taken to reduce costs associated with renewable energy project development in California. They include helping developers choose sites with minimal environmental impact, having local governments pre-designate priority sites, and supporting investment and research and development. These potential measures were vetted at a California Energy Commission meeting on retail rate and cost issues associated with renewable development May 22. The key drivers of renewable energy costs in the state are technology development, commodity pricing, site availability, and the availability of incentives, according to Jon Pietruszkiewicz, Black & Veach renewable energy senior project manager for global engineering. “Site availability and technology development will drive the long-term market (and) incentives the short-term market,” he said. Pietruszkiewicz also said that research and development efforts could help reduce the balance of system costs, with efforts for distributed systems, net zero buildings, and micro grids potentially having the most impact. Suzanne Korosec, Energy Commission assistant executive director for policy development, said the agency and state can employ numerous measures to reduce environmental, permitting, interconnection, and integration costs associated with renewable projects, including: -Identifying cost-effective areas for renewable development; -Helping developers choose sites with minimal environmental impact; -Having local governments pre-designate priority sites; -Fast tracking the process for distributed generation projects; -Improving interconnection processes; and -Better supporting infrastructure to integrate renewables. Still, the state expects costs to rise. If true, how do policy makers assign those rate impacts in rate design? “How do you recover increasing costs due to greater renewables penetration? There is the approach of basic flat volumetric charge that would equate to average cost in order to recover those costs,” Severin Borenstein, UC Energy Institute director said. “The problem that we see is it’s likely that it sets price above marginal costs in many periods.” He said that when it comes to rate design to mitigate the cost impacts of renewables development, charging basic flat rates isn’t necessarily the answer. Fixed charges to cover non-volumetric costs is an approach used widely in the U.S. but not much in California, Borenstein said, even though it more accurately reflects the nature of fixed costs, including transmission, distribution, and billing. The workshop was part of the data gathering process for the commission’s 2012 update of its Integrated Energy Policy Report. “We’ve had a good discussion about costs, and how they’re not necessarily the same as prices, and we know that neither of those are the same as rates,” commissioner Carla Peterman said. “We’re looking forward to better understanding how those costs might be better reflected in rates and whether there are policies that the state can pursue that will ease the transition.”

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