Juice: LA’s Forthcoming Feed-In

By Published On: April 29, 2011

An upcoming Los Angeles drama promises to be an early box office test for Gov. Jerry Brown’s 12,000 MW solar DreamWorks set. The plot line revolves around the political question in Los Angeles of whether solar energy should be privately or publicly held. The city’s Los Angeles Department of Water & Power has a long tradition of owning and operating its major sources of generation. The first draft of the script for this coming attraction would propel a shift to private ownership. The all-star cast is full of ambitious characters: dueling union bosses, real estate tycoons bragging they’ll bring solar power to welfare mothers, movie star environmentalists, and politicians who love their campaign contributions. It should be the first big job for the new LADWP ratepayer advocate, but only if the office is established in time to meet the production schedule. Los Angeles is the first place to look at a potentially sizable solar feed-in tariff. LADWP is, after all, the third largest electric utility in the state. The city holds 11 percent of the state’s population. Under a feed-in tariff--which is backed by Brown as a new way to help finance renewable energy--anybody who can manage to put photovoltaic panels on their roof would get a guaranteed payment for 10 or 20 years from their local utility for the power they produce, in this case LADWP. The feed-in tariff strategy comes as solar rebates--long the incentive of choice for promoting solar energy--dwindle, falling short of delivering the state’s 3,000 MW solar rooftop goal. A new direction is needed, particularly to meet Brown’s expanded goal for distributed generation. That’s why the governor and other state energy policymakers are looking to the feed-in tariff to pick up where rebates have left off. They cite the success of feed-in tariffs in bringing solar power to cloudy Germany. To that end, this summer the Los Angeles City Council is likely to entertain a substantial solar feed-in tariff program for LADWP. The main screenwriter is the Los Angeles Business Council--a Westside group with heavy real estate and financial industry influence, with members like the giant real estate management company Trammell Crow and the regional office of JPMorgan Chase. It calls for LADWP to pay well for solar power and cites up to 1.4 GW of rooftop generating potential in the sun-drenched city. The group suggests payments of about 20 cents/kWh--up to 26 cents/kWh for power produced at low-income and senior housing complexes. The plan would create a bonanza for warehouse, industrial, apartment, and commercial building owners to monetize their rooftops. The upside is ditto for contractors and construction unions. It would boost their business amid what, at best, is a sluggish construction market. To win over community groups, the early concept for the plan eyes a quota for installations on low-income and senior housing, putting pressure on city council members to support the business-backed version of the feed-in tariff. It’s conceivable the payments for energy could reduce rent or be used to improve the housing complexes. These groups--from pastors to community organizers and non-profit housing corporations--are likely to stand with real estate moguls, banks, contractors, solar companies, and unions behind the LA Business Council plan. Here’s where the plot thickens. The International Brotherhood of Electrical Workers Union Local 18--which represents LADWP workers--is not expected to roll over. It would prefer to install panels that are owned and operated by LADWP. As solar power grows and fossil fuel power diminishes, public ownership of solar panels would keep its members employed. It might even expand the union’s membership. Brown claims his plan could help create half a million new jobs. Many of them could be in Local 18. On the other hand, proliferation of privately-owned and operated solar systems under a feed-in tariff will create jobs outside Local 18. More importantly, it would diminish the union’s role in running the city’s power system in the future. Somewhere amid the braggadocio of the real estate tycoons and the militant voice of the union local are LADWP ratepayers. They already face rising power bills under stepped-up mandates to meet a variety of environmental goals--be it phasing out use of ocean water to cool power plants or reducing greenhouse gases--not to mention the need to rebuild the muni’s aging power grid. It’s up to the city council to protect their interests as a feed-in tariff is set. As the struggle before the council takes shape, here’s what to look for in the coming long, hot, and contentious LA summer. Rates: What price should LADWP pay for solar power? Currently, the average cost of power for residential customers ranges between about 7 to 12 cents/kWh, depending upon total usage. While the LA Business Council is suggesting up to 26 cents/kWh, the Sacramento Municipal Utility District in 2009 offered a feed-in tariff for up to 100 MW of power without exceeding 11 cents/kWh. SMUD’s program is already fully subscribed. Cap: A key issue is the solar capacity cap for payments. The LA Business Council seems to suggest that 600 MW would be a good initial goal. On the other hand, at least one council member is suggesting a 75 MW cap to start with, lower than Sacramento’s in a utility service area about three times as big. LADWP’s peak load runs north of 5,000 MW. This means that on a sunny afternoon a program with a 75 MW cap would make just 1.5 percent of the city’s power. Restrictions: A complicated, tedious, and lengthy review process could undercut program success. Unless interconnections are approved quickly, a lot of installations will be abandoned as applicants see paperwork costs mount and financing fade. If the city council can set a reasonable payment that incentivizes installations without distorting rates and can preserve LADWP jobs by having utility staff carry out the parts of a transition to renewable energy a feed-in tariff can’t accomplish, it could just be that Brown is onto something. If the final scene ends in stalemate or a half-baked resolution, it could amount to a box office flop for Brown’s ambitious 12,000 MW dream.

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