Environmental Law

California Regulators Approve Renewable Energy Pricing

By Dennis Pfaff and Kevin Livingston, Editors

For some time, countries such as Germany have adopted "feed-in tariffs" as a way of providing an incentive to develop new renewable generation. Renewable energy advocates have pushed for a similar boost in the United States for some time. Now, the California Public Utilities Commission has granted the wish, at least in a small way.

The CPUC recently gave the green light to the tariffs, a long-term pricing structure for renewable power that utilities purchase from their customers. In an action Feb. 14, the rate-setting agency approved a tiered program involving seven utilities. For two of them, Southern California Edison and Pacific Gas and Electric Company, the tariffs apply to power purchased from any customer. For the others, however, the tariffs are limited to water and wastewater customers. The tariffs apply to renewable generators sized up to 1.5 megawatts.

As described in a CPUC statement, the tariffs offer a simple mechanism for small generators to sell power at predefined terms and conditions, without contract negotiations.

The feed-in tariff for renewable generation owned and operated by water and wastewater facilities was capped at 250 megawatts. The expansion of the program available to customers of Edison and PG&E adds another nearly 230 megawatts to the total, about 124 megawatts for Edison and nearly 104 megawatts for PG&E. 

According to the CPUC, the power that is sold to the utilities under the new tariffs will count toward the state's renewables portfolio standard, which requires the companies to reach a 20 percent renewable goal by 2010. The tariffs apply to multi-year contracts and are based on a so-called Market Price Referent, which is intended to reflect current market prices for long-term contracts.

The CPUC touted the pricing mechanism as a way of supporting the development of up to 480 megawatts of power from small facilities. The latest action also follows on a decision rendered by the panel in 2007 that broadened the program beyond water and wastewater for entities supplying Edison and PG&E. In the statement accompanying the latest action, CPUC President Michael R. Peevey (pictured) in lauded the impact of the new structure for smaller generators: 

"Up until now, only large renewable projects were able to effectively participate in the Renewables Portfolio Standard program. Now small facilities can easily contribute to this program and be compensated for their renewable generation by signing up for these tariffs."

Peevey said the tariff could prove particularly attractive to facilities that have access to significant amounts of biogas, such as livestock operations and water and wastewater treatment facilities.

Feed-in tariffs have been used in other countries, including Germany, to encourage quick growth in such renewable energy systems, according to a brief report on the California program prepared by the U.S. Department of Energy. The DOE report noted that the prices available under the contracts is adjustable by the time of day the power is generated. According to the DOE, the tariffs range from 8 to 31 cents per kilowatt-hour.  

Full post as published by Climate Law Update on February 21, 2008 (boomark / email).