Feed-In Tariffs May Bolster New Transmission, Say Consultants

By Published On: May 29, 2009

Debate this week focused on whether and how to make way for setting long-term prices and open contract terms for renewable projects over 20 MW given that the state’s private utilities are not expected to reach the state’s 20 percent renewable energy mandate by 2010. “We are a long way from our renewable portfolio standards goal and need to look at all the tools in our tool box,” said California Energy Commission member Julia Levin during a May 28 CEC workshop. The meeting focused on the role of what are known as “feed-in tariffs” for large solar, wind, and other alternative energy projects impacted by the credit crisis. Feed-in tariffs include public, standard contract terms that avoid closed-door negotiations between utilities and renewable energy developers. Payments, which include a “reasonable rate” of return, are based on production. A possible place for feed-in tariffs for large solar, wind, and other non-fossil projects is within competitive renewable energy zones identified by the collaborative Renewable Energy Transmission Initiative. The RETI group ranked regions in the state according to their renewable energy potential. The tariff is “a way to get in enough generation to effectively use a new transmission line,” said Bob Grace, a KEMA consultant. California Public Utilities Commission member John Bohn raised concerns about the payment structure’s potential cost impacts on ratepayers because some renewable power is pricey, such as photovoltaic systems. Toby Couture, an energy consultant, agreed that some alternative power resources are expensive but noted some are also below the state’s renewable reasonableness price benchmark. The power also can cost less than projects powered by volatile natural gas, he said. “Feed in tariffs can offer a price hedge. They will become a much more important factor in stabilizing energy prices in the future,” said Couture, formerly with the National Renewable Energy Laboratory. Last year the Energy Commission’s Integrated Energy Policy Report recommended allowing feed-in tariffs for projects below and above 20 MW. According to Couture, caps on feed-in tariffs can hamper their effectiveness. He distinguished them from standard contracts under the federal Public Utility Regulatory Policies Act. PURPA deals between utilities and independent generators were priced according to estimates of avoided cost of additional natural gas power plants, which were problematic. Some of the speakers insisted that feed-in tariffs are more important during the economic downturn. This year, firms investing in renewable projects in order to reap the federal tax incentives dramatically shrank. “Feed-ins could diversify the resource pool and not limit it to tax equity investors,” Couture said.

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