2010 outlook for solar in California
Felix Kramer of Calcars thinks 2010 will be the year of the plug-in car. He’s got a good case: after years of advocacy and technology development, 2010 is the year that major manufacturers will finally make plug-ins broadly available, and rapidly decreasing battery costs are helping the conversion industry reach new customers and help retrofit the existing fleet at scale. After years of work and promise, 2010 is the payoff year.
I see a similar trend in solar in California, where years of policy and business development are all coming together to make 2010 an extraordinary year for solar development.
There are four major market drivers:
The California RPS
California’s renewable portfolio statute requires the state’s utilities to include 20% renewables in their portfolio by 2010, and last year Governor Schwarzenegger issued an Executive Order increasing the requirement to 33%. To date, California investor-owned utilities have signed over 7 GW of contracts with solar companies, of which 4.9 GW are at prices below the Market Price Referent (that’s the 20-year levelized cost of energy for a combined cycle gas turbine, a proxy for the fossil fuel alternative). An Excel spreadsheet of the contracts, modified from the one found on the CPUC’s website, here. This list will be expanding rapidly; by all accounts, the 2009 RPS solicitation garnered a tremendous response from solar (especially photovoltaic) developers, and as the utilities send contracts to the CPUC for approval, we are likely to see contracts for gigawatts more of mid-sized wholesale PV projects in the coming months. That’s what happens when solar gets cheap.
Utility Wholesale Distributed Generation Programs
California’s investor-owned utilities have all applied for significant investments in utility-owned solar projects, and 2010 is when these programs hit the street (or rooftop). Southern California Edison (SCE) wants to develop 250 MW of primarily rooftop solar projects; as a condition for approval, the California Public Utilities Commission is requiring SCE to buy an equivalent amount of solar, in 1-2 MW increments (90% of which have to be rooftop) from independent power producers through competitively-bid power purchase agreements. The details of how the auction mechanism is to work (including standard terms and conditions of the contract) were the subject of a workshop process last fall, and are to come before the CPUC for approval on Jan 21. Assuming approval, the first auction for PPAs could take place the following month or so. Details of the proceeding here and here.
Pacific Gas and Electric (PG&E) has applied for a similar program: 250 MW of utility-owned generation (systems sized from 1-20 MW), and an equivalent amount to be purchased from independent power producers. For the IPP portion, PG&E’s initial application proposed to offer standard contracts at PG&E’s cost of development (initially estimated to be 29.5 cents/kWh, but would reset based on actual costs); this issue is being litigated before the CPUC, with resolution expected around February. As the CPUC forced SCE to competitively bid their IPP portion, it would be a good bet to speculate that they will decide on a similar requirement for PG&E, but who knows?
Combined, these utility programs represent a gigawatt of wholesale distributed generation solar over the next 5 years.
Feed-in Tariff Programs
California has two feed-in tariff programs under development. The first is a proposed 1 GW market-based feed-in tariff, which would require the state’s investor-owned utilities to conduct multiple annual solicitations for 1-10 MW renewable projects. It’s different from a traditional feed-in tariff in that instead of guaranteeing a price, it guarantees a market and lets project developers set their own price. The proceeding to establish this program is inches from the goal-line–after over a year of work, we we are currently waiting on the Administrative Law Judge to issue a proposed resolution. We expect the process to be concluded in the next few months (knock wood), and the first auctions to begin before summer. The pilot program totals 1 GW over 4 years, though once the process gets moving and proves successful, it could easily be expanded. I believe that this program hits a sweet spot on several levels: 1) the 1-10 MW size targets projects that don’t need new transmission, and can thusly come on line quickly, and 2) the competitive pricing element, combined with solar’s dramatically lower costs, will finally bring on massive amounts of solar at politically palatable price-points.
The second is SB 32, passed by the legislature last year. SB 32 requires the CPUC to develop a must-take standard-offer price for renewable contracts–essentially based on avoided cost. More details here, but as rulemaking will take awhile, it is unlikely that this program will be available in 2010.
Customer-side of the meter
The California Solar Initiative is the program that provides incentives for behind-the-meter generation–the owner of the system uses the production to offset purchases from the utility and reduce electric bills. Over 135 MW of photovoltaics, both residential and non-residential, were installed in 2009. We still have to raise the 2.5 % net metering cap, but if that’s accomplished, Jigar Shah (founder of SunEdison) told me he has a standing bet that the remaining incentives (all 1303 MW) will be reserved in 2010. Here’s hoping he’s right. Also of note, just about every property owner in California will have access to a PACE financing program by the end of the year. As financing the high up-front costs of solar and energy efficiency is a long-standing hurdle to greater adoption, these new programs should help drive demand considerably.
All told, we are looking at tremendous amounts of new solar development in the state. Here’s to more solar gen in two-thousand and ten …