California's key strategy for advancing renewable power should be feed-in tariffs, not utility procurement, energy industry executives told the California Energy Commission August 22. The change would enable wind, solar, geothermal, and other renewables project developers to act like merchant generators and increase their production of alternative power, they said. Frustrations with the slow pace of renewable energy development in California led others to call for penalizing utilities for their lagging compliance with the state's standard during a workshop reviewing California's renewables portfolio standard program in the context of the CEC's 2007 Integrated Energy Policy Report proceeding. "Let's just let the hammer come down and impose penalties when they're deserved," said Nancy Rader, California Wind Energy Association executive director. The California Public Utilities Commission should hold utilities responsible for meeting the renewables portfolio standard on time, said Rader. "We're not convinced this has been done." According to Kevin Porter, Exeter Associates consultant, feed-in tariffs "are most known for jump-starting new technologies." They are the best way to achieve the state's goal of 33 percent renewable power by 2020, he maintained. That is because the strategy requires utilities to buy renewable power offered at or below the market price referent. For example, Germany is the country with the most installed wind capacity because of its feed-in tariff, explained Porter. The nation's tariff pays wind producers who opened plants in 2005 8.7 eurocents/kWh for their first 5 years of operation. The payment drops to 5.5 eurocents/kWh in years 6 through 20 of project operation. The tariffs have been widely adopted in other European nations too, bolstering wind and solar power in Denmark and Spain, as well as Germany. Ireland adopted the tariff strategy last year. The level of feed-in tariffs can vary with differing technologies. For instance, Germany pays more for offshore wind than for geothermal power. A drawback to the tariffs, according to Porter, is that they can result in overpayment for power when it is produced below the market price referent. FPL Energy endorsed changing the regulatory structure of California's renewables portfolio standard program. The company is the biggest producer of renewable energy in the nation, but it has not submitted bids to California utilities for long-term power-purchase agreements. The company would like to enter such agreements but ideally would like to see a market model where it can build "merchant plants," said Diane Fellman, FPL Energy director of regulatory affairs. The driving force behind the shift from long-term agreements to merchant plants in Texas is a requirement that utilities buy renewable energy credits from renewable power producers and retire those credits. California's renewables portfolio standard requires utilities to make sure that 20 percent of the power they supply is made with renewable energy by 2017. Since its enactment in 2002, state energy regulators have set even more ambitious goals of meeting the 20 percent target by 2010 and reaching a level of 33 percent renewable energy by 2020. California lawmakers won plaudits for their leadership on renewable energy when they enacted the standard, but earlier this year Texas surpassed California to become the number-one wind power producer in the nation (Circuit, July 28, 2006). In striving to reach the goals, California has relied on rules that require utilities to request bids from developers of renewable energy plants to enter long-term power-purchase agreements. Utilities are to issue the requests and keep entering agreements each year until they meet the final goals.
