About a year ago, Pacific Gas and Electric asked regulators to approve a 500 MW distributed generation photovoltaic program. In their proposal, the utility would build 250 MW of solar installations over the next 5 years, with each individual project sized between 1-20 MW. In addition, the utility proposed to buy a further 250 MW from independent power producers, in the form of a standard offer contract–to be priced at the utility’s cost of development. PG&E estimated that their costs in the first year to be $295/MWh, levelized over 20 years, with time-of-delivery factors included.
On Tuesday, the CPUC released two proposed decisions in the matter, one from the Administrative Law Judge (here), and the other from CPUC President Peevey (here), the assigned commissioner in the matter. Both proposed decisions would approve the program, with modifications. One of the most important change is to essentially turn the PG&E pricing process on its head. Instead of receiving a fixed-price standard contract offer, power producers wishing to sell solar electricity to the utility must compete for contracts. And the utility doesn’t get a blank check to build projects either—it is only allowed guaranteed rate recovery up to the average cost of IPP projects. The proposed decisions argue that this is the best way of ensuring that projects get built at the best price to ratepayers.
The two proposed decisions differ on one significant point. ALJ Ebke’s proposed decision would limit allowable projects to between 3 and 20 MW. Her rationale is that SB 32, passed by the legislature last year, establishes a fixed-price standard-offer feed-in tariff for renewable projects 3 MW and under, and gaming on price would result if similar sized projects were allowed to forum-shop. Unfortunately, SB 32 is not immediately available—it requires the CPUC to conduct a ratesetting process that we expect will be long and contentious, and which may or may not end up at a price sufficient to deploy renewables. It is our belief that projects under 3 MW are somewhat of a sweet spot for solar development: large enough to achieve sufficient economies of scale to reach competitive price-points, but small enough to have a significant advantage in siting and permitting. President Peevey’s alternate proposed decision allows projects from 1-20 MW to participate, hinting that the decision may be revisited when SB 32 is implemented.
Next step: parties have opportunity to comment, then it goes before the Commission for a vote. With many of the details on the mechanics of implementation already negotiated or resolved through the process of considering a similar proposal by Southern California Edison earlier, once approved the program could be implemented relatively quickly.
In sum, we are looking at least 1 GW of utility-sponsored PV programs hitting the ground (and roofs) in the next 5 years. Still to be determined is LADWP’s program—the utility announced plans for a 1.2 GW program, but details remain murky. But make no mistake–wholesale distributed generation is the hottest thing moving in solar these days.