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California offers fixed power purchase price with limits
1 March 2008
A much-rumoured change to the structure of California's renewable energy market to base it on standard offer purchase prices has not come to pass. But as a concession to supporters of the fixed purchase price model -- mostly solar industry advocates -- a limited program offering standard offer payment for on-site renewable energy generation has been approved by the California Public Utilities Commission. It is not expected to play much of a role, if any, in California's wind market. The program is restricted to a per customer cap of 1.5 MW. The applicant for the prices must also be the same entity installing the project on site. This means it is highly unlikely that an enterprising project developer could build a multi-turbine wind project and bypass the 1.5 MW cap by applying for each turbine separately, says Nancy Rader with the California Wind Energy Association. "So I don't see how it could be gamed." Although a popular wind market structure in Europe, government decreed prices have not been much used in North America, with the exception of a program run by the Canadian province of Ontario. Developers have by-passed its cap of 10 MW per project by splitting projects into separate 10 MW sections. The prices paid in California's fixed price plan are not very enticing, says Radar. They are the market price referent, or MPR, which represents the cost of a long term contract with a combined cycle gas turbine facility, averaged into a cent per kilowatt value. It is not a high price premium that would have developers rushing in. The program is also capped at 480 MW and intended partly to support on-site deployment of renewables projects at municipal water and wastewater utilities. Only 228 MW of the total can be located at non-water/wastewater customer projects. Rader says fixed prices make sense for small projects but not at large projects that satisfy the bulk of California's green energy mandate law.
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