California moves to set up auction market for green energy
Photo courtesy Ryan Jesena via FlickrIt’s been a big week for Big Solar.
On Wednesday, the California Energy Commission approved a license for the nation’s first new large-scale solar thermal power plant in two decades. Over the next month, the energy commission is expected to green-light three more big solar farms to be built in the Mojave Desert. The projects would collectively generate nearly 2,000 megawatts of electricity. At peak output, that’s the equivalent of a couple of large nuclear power plants.
Less noticed but equally momentous were developments this week on the small-scale solar front.
On Tuesday, an administrative law judge with the California Public Utilities Commission (CPUC) issued a proposed decision that would establish a world-first reverse auction system for renewable energy projects. The idea is to build 1,000 megawatts of decentralized energy generation by allowing developers to bid on projects that would each produce between one and 20 megawatts of electricity. Projects could include small solar farms built on vacant suburban land, or photovoltaic arrays placed on top of wastewater treatment plants or on any other large structures with unused rooftop space.
Think of it as eBay for green energy.
The goal is to accelerate the market for small-scale photovoltaic systems by requiring California’s three big investor-owned utilities to hold auctions twice a year where developers bid on projects that can be built quickly — within 18 months — and plugged into the existing power grid.
By letting the market essentially determine electricity prices rather than the government setting a premium rate to be paid for renewable energy, California hopes to avoid the boom-and-bust cycles that have whipsawed the European solar industry when subsidies have been cut.
“This mechanism would also allow the state to pay developers a price that is sufficient to bring projects online but that does not provide surplus profits at ratepayers’ expense,” utilities commission staff wrote in proposing the so-called reverse auction mechanism last year. “Providing a clear and steady long-term investment signal rather than providing a pre-determined price can create a competitive market.”
While the program would initially set up an auction for 1,000 megawatts, administrative law judge Burton W. Mattson wrote in his decision that that cap could be raised in the future if the auction system is successful.
The proposed decision now needs the approval of the CPUC, which seems a foregone conclusion.
In a sign that there will be no shortage of bidders for solar projects, utility Southern California Edison this week submitted for regulatory approval contracts for eight distributed photovoltaic farms that would generate a total of 140 megawatts.
Most of the mini-power plants will generate 20 megawatts and can be located near utility substations, avoiding the need for expensive new transmission projects.
Southern California Edison also requested approval of contracts for two small biomass power plants and three wind energy projects, one of which will generate 4 megawatts while the other two would each produce 20 megawatts at peak output. Altogether the power purchase agreements are worth $556 million.
The utility said that while it was soliciting contracts for a total of 250 megawatts, it received applications to build projects that would generate nearly twice that amount of electricity.