Catching the Wind: California Approves One of Nation's Biggest Contracts

Posted on May 15, 2008 by Dennis Pfaff

California utility regulators Thursday approved what ranks as perhaps the biggest wind energy contract in the nation's history, a 1,500-megawatt deal involving Southern California Edison Company.

The California Public Utilities Commission voted unanimously to approve the agreement between Edison and Australia's Alta Windpower Development LLC that will sprout new capacity in the already active generating region in the Tehachapi area of Southern California (see PUC press release here; formal approval document here).

"It is, to the best of our knowledge, the largest wind contract in the United States and possibly the world," Mike Marelli, who manages renewable power contracts for Edison, told Climate Law Update. "It's a very significant project."

Marelli said the contract differed from usual agreements that involved a certain facility from which the utility buys electricity. Instead, it is structured "as a development obligation" under which Alta seeks to put projects together and dedicates the first 1,500 megawatts to Edison. In turn, it assures Alta of a customer for the power. A separate power purchase agreement will be created for each project brought on line, according to the document approved by regulators Thursday.

      

"These megawatts will not be delivered by one giant wind project but by several smaller generating facilities that execute individual power purchase agreements" in phases extending through 2020, said Michael R. Peevey, president of the California utility commission, during Thursday's session.

In its action Thursday, the commission approved both a master agreement between Edison and Alta and the form of the power purchase agreements. The first wave of the project is expected to come on-line around 2010.   

"This is a major milestone in the development of this project and it will hopefully put in place the ability to put the other pieces in alignment," Marelli said. He said Edison is also working to build new transmission facilities to get power from the Tehachapi area, located in Kern County. 

Peevey suggested that the contract may represent only the second-largest such project in the country, after one in Texas, the nation's leading wind power state. By any measure, however, the scope of the California venture would be vast.

According to Edison's web site, the agreement envisions more than 50 square miles of wind parks, triple the size of any existing wind farm in the United States (see Edison backgrounders here and here). Commissioner Rachelle B. Chong noted that the project, once fully up and running, would generate power equivalent to about three traditional power plants.

Marelli said some larger contracts might be contemplated elsewhere but it was unlikely they had contracts in place.

Although some terms of the deal were confidential, Marelli said it would not cost ratepayers more than what the utilities commission has calculated the cost of a new conventional plant, such as a gas-fired plant. 

Edison, like other utilities in California, is under an obligation to meet state requirements that 20 percent of the electricity it sells come from renewable resources by 2010 (access state renewable portfolio standards here). Although there is some flexibility in complying with the mandate, Edison spokeswoman Vanessa McGrady said the utility would have contracts in place to meet the goal.

Edison, she added, has the largest renewable portfolio of any utility in the United States, accounting for about 17 percent of the company's juice.

In his remarks Wednesday, Peevey noted that the project was "not without risk," principally because of uncertainty over the future of federal tax credits (see recent Climate Law Update story on this issue here).

"All wind developers remain dependent on the extension of federal production tax credits which are set to expire at the end of this year," he said.

(Photo of wind turbines in Tehachapi area, courtesy Department of Energy/National Renewable Energy Laboratory, credit -- Warren Gretz) 

 

    
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California Regulators Approve Renewable Energy Pricing

Posted on February 21, 2008 by Dennis Pfaff

For some time, countries such as Germany have adopted "feed-in tariffs" as a way of providing an incentive to develop new renewable generation. Renewable energy advocates have pushed for a similar boost in the United States for some time. Now, the California Public Utilities Commission has granted the wish, at least in a small way.

The CPUC recently gave the green light to the tariffs, a long-term pricing structure for renewable power that utilities purchase from their customers. In an action Feb. 14, the rate-setting agency approved a tiered program involving seven utilities. For two of them, Southern California Edison and Pacific Gas and Electric Company, the tariffs apply to power purchased from any customer. For the others, however, the tariffs are limited to water and wastewater customers. The tariffs apply to renewable generators sized up to 1.5 megawatts.

As described in a CPUC statement, the tariffs offer a simple mechanism for small generators to sell power at predefined terms and conditions, without contract negotiations.

The feed-in tariff for renewable generation owned and operated by water and wastewater facilities was capped at 250 megawatts. The expansion of the program available to customers of Edison and PG&E adds another nearly 230 megawatts to the total, about 124 megawatts for Edison and nearly 104 megawatts for PG&E. 

According to the CPUC, the power that is sold to the utilities under the new tariffs will count toward the state's renewables portfolio standard, which requires the companies to reach a 20 percent renewable goal by 2010. The tariffs apply to multi-year contracts and are based on a so-called Market Price Referent, which is intended to reflect current market prices for long-term contracts.

The CPUC touted the pricing mechanism as a way of supporting the development of up to 480 megawatts of power from small facilities. The latest action also follows on a decision rendered by the panel in 2007 that broadened the program beyond water and wastewater for entities supplying Edison and PG&E. In the statement accompanying the latest action, CPUC President Michael R. Peevey (pictured) in lauded the impact of the new structure for smaller generators: 

"Up until now, only large renewable projects were able to effectively participate in the Renewables Portfolio Standard program. Now small facilities can easily contribute to this program and be compensated for their renewable generation by signing up for these tariffs."

Peevey said the tariff could prove particularly attractive to facilities that have access to significant amounts of biogas, such as livestock operations and water and wastewater treatment facilities.

Feed-in tariffs have been used in other countries, including Germany, to encourage quick growth in such renewable energy systems, according to a brief report on the California program prepared by the U.S. Department of Energy. The DOE report noted that the prices available under the contracts is adjustable by the time of day the power is generated. According to the DOE, the tariffs range from 8 to 31 cents per kilowatt-hour.  

         
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