California’s feed-in tariff program: economic boon or bane?

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Smaller scale solar energy development just got a significant leg-up in California.

The California Public Utilities Commission (CPUC) voted unanimously to approve a new program designed to drive small to mid-sized renewable energy development.

“This program is a great step forward in facilitating the expansion of distributed solar power generation,” said Marc Van Gerven, CEO of Q-Cells North America, a global leader in developing solar power systems, in a statement. “We are committed to partnering with utilities and the CPUC in continuing to grow solar adoption and California's leadership in the renewable energy market.”

The Renewable Auction Mechanism, or RAM, is a next generation feed-in tariff program that will require investor-owned California utilities to purchase electricity from solar and other renewable sources with an output of 20 megawatts or less. Proponents of the plan and of solar energy in general are applauding the CPUC for this innovative tariff approach to building a strong renewable energy economy in the state of California, while at least one industry researcher is cautioning against moving too quickly.

The vote establishes a 1-gigawatt (GW) pilot program from mid-sized renewable energy systems and requires the state’s three largest investor owned utility companies to allow renewable developers to bid in biannual competitive auctions. The utility companies are directed to award contracts starting with lowest viable cost and moving up in price until the power threshold is reached.

“While solar energy is certainly part of the answer, a rapid expansion of an immature technology based on an artificial market could lead to problems in the future,” said Merrill James Ferguson, a grad student and researcher in University of Colorado’s Global Energy Management program.

“If you look at California’s new feed-in-tariff system, the parallels to Spain’s experience are striking. Progressive policies, generous incentives, and rapid expansion almost collapsed the Spanish market because of the incentive to develop capacity rapidly,” he said. “California seems to have taken thoughtful measures in capping capacity and creating a market-driven price, but the expedited nature of development under the program and risk of under bidding remain a concern.”

But, for now, many experts are looking upon the commission’s decision as a boost for the industry.

“In combination with California’s 80,000 behind-the-meter solar systems and the Renewable Portfolio Standard that is driving large-scale projects, this program pioneers a new approach to wholesale distributed generation,” said Adam Browning, executive director of Vote Solar, a non-profit organization working to make solar a mainstream American energy resource, in a statement. “At scale, solar is more cost effective than the fossil fuel alternatives.”

Image courtesy of Wikipedia.