A Good FiT for California

By Rory Cox and Andrea Barnetche, Pacific Environment, San Francisco, CA, USA.

California, the 10th largest energy market in the world and the largest in the United States, has become a hotbed of clean-energy innovations. It is also home to some of the United States’ most progressive clean-energy laws, including the Renewable Portfolio Standard (RPS), which requires California’s utilities to derive 20% of their energy from renewables, rising to 33% by 2020.

Despite this mandate, California’s utilities are falling behind on their renewable energy targets. Pacific Gas & Electric, for instance, was only procuring about 13% of its power from renewable sources in 2008, a lower proportion than when the law took effect in 2003. It has become clear that, without proper financial incentives to ensure renewables are on an equal or better footing with fossil fuels, an RPS alone will not be enough to ramp up the clean-energy development that Californians want to see.

To help work out how California can get on the right track with clean energy, on July 12, 2010, Pacific Environment co-hosted a conference called “Feed-in Tariffs: A Time for Real Action on Renewable Energy”. A Feed-in Tariff (FiT) is an incentive programme that guarantees a price to be paid by a utility for electricity generated by renewable energy. A well designed FiT can jumpstart rapid development of renewable projects, as it takes away much of the financial uncertainty that renewable-power developers face. FiTs have been credited with a recent explosion of renewable projects in Germany, France, and Ontario, Canada, among other places.

The conference focused on how to design “the perfect FiT for California”.  Several panelists claimed that one reason California may be failing to meet its RPS is because, to date, there has been a focus on central station distribution – meaning large, remote facilities – for renewable-power plants, as opposed to distributed generation, meaning small facilities located in or near the location where the electricity will be used, often referred to as Wholesale Distributed Generation (WDG) projects. A distributed generation system does not require additional transmission lines, and tends to have a lower environmental impact than remote centralised plants.

One of the panelists, Bill Powers of Powers Engineering, explained how centralised generation has had record project failures due to a lengthy approval process and large costs associated with transmission lines from remote facilities.

According to Powers, California would get more renewable energy by putting the proposed US$20 billion that is planned to be spent on new transmission lines into new distributed solar projects instead. Powers estimated in his presentation that if this is done, the money would translate to anywhere between 14,000 and 18,000 megawatts of new solar, which is nearly enough to meet California’s 33% target.

Another panelist, Craig Lewis from the FiT Coalition, called WDG “the big opportunity” for California, stating that all successful FiT schemes to date have been used to spark development of WDG projects. Pacific Environment has taken a position that at least half of new renewable development in California should come from WDG projects.

Although some of the speakers differed in their ideas of how to move forward with Feed-in Tariffs, the consensus was clear on the need to implement new policies to drive renewables forward, with well-designed FiTs being the preferred method. Suggested details such as pricing structures, federal and/or state government involvement, sizing limits for new projects, and potential impacts on consumers generally differed between speakers and regions, and it seems that much more dialogue needs to happen between decision-makers before a consensus will be reached on what is best for California.