Solar Industry Sees Promise in Easier Terms

By Published On: October 30, 2009

Solar companies and utility customers stand ready to benefit from a recent Southern California Edison tariff revision and a statewide standard contract aimed at cutting the cost of photovoltaic systems for many medium and large utility customers. Edison--which ironically lags behind Pacific Gas & Electric when it comes to solar installations despite its sunnier territory--quietly rolled out the tariff change October 1. It’s known as Option R for “renewable” energy and is available for up to 150 MW of rooftop solar capacity and other distributed renewable energy systems installed on customer premises. On the heels of the new plan, an industry trade group announced a new standard offer contract for power purchase agreements in California. The SolarTech trade group unveiled the contract at the Solar Power International Conference in Anaheim October 28. “The use of an industry accepted form should reduce negotiating time by 50 to 75 percent,” said Ed Feo, Milbank, Tweed, Hadley & McCoy senior partner. Until now, most of the power purchase agreements for solar systems have been individually negotiated even though the terms generally wind up being similar. Coupled with Edison’s Option R and equivalent tariffs already in place at other state investor-owned utilities these developments mark a move toward simplifying solar deals in California for the larger systems often installed under power purchase agreements, industry sources say. Streamlining the contract process should help meet the state’s goals under the California Solar Initiative of seeing 1,940 MW of installed solar capacity within investor-owned utility distribution systems by 2016, according to Doug Payne, SolarTech executive director. Current installed capacity in investor-owned territory stands at 509 MW, according to the California Public Utilities Commission. The cost of developing individual contracts hindered many solar power purchase agreements and slowed the penetration of solar energy in the California market, said Dustin Keele, executive vice president of Photon Energy, a firm that makes such deals. He added that Edison’s tariff should further hasten solar power purchase contracts by lowering the cost of utility bills for many. “Because of the release of the Option R tariff, [Edison] will probably be the most active in the state” when it comes to solar installations, added Keele. State data show that Pacific Gas & Electric is burning through California Solar Initiative program incentive payments--which decline as more solar systems are installed--much faster than Edison. Because of the larger number of systems installed in PG&E territory the utility pays incentives of only 15 cents/kWh. Since fewer systems have been installed in its territory, Edison still can pay 22 cents/kWh. The utility can subsidize almost 60 MW of solar capacity at that rate under the California Solar Initiative program, state data show. CPUC data show that PG&E has 33,848 solar systems in its territory compared with Edison’s 11,462 systems. San Diego Gas & Electric, which is much smaller than the other two utilities, has 7,404 systems in its territory. The new tariff, according to Edison, is available to a variety of time of use rate business and institutional customers that install solar and other on-site renewable generation systems, including schools, businesses, and municipalities. To qualify for the option, they must have a peak demand greater than 20 kW, but no greater than 4 MW. Availability of the tariff is capped at a “cumulative” installed capacity of 150 MW. Under Option R, eligible customers that install renewable energy systems on their premises, mostly solar, no longer will pay “on-peak or mid-peak demand charges,” according to Edison. They will see reduced facilities-related demand charges too. This will eliminate situations in which customers install rooftop solar systems and wind up paying more--rather than less or the same amount--for energy when including the cost of the photovoltaic system power. For instance, according to Keele, a typical public elementary school in Edison territory that installed a solar system under a power purchase agreement prior to Option R wound up paying around $2,600 a month for electricity because the system would not necessarily cover peak demand needs. Under Option R, the monthly bill would fall to $700, making the solar system economical.

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