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California Feed Law

April 5, 2012
Paul Gipe

Los Angeles City Council Passes 10 MW "Demonstration" Solar Bidding Program


The Los Angeles City Council approved a proposal 3 April 2012 by the Los Angeles Department of Water & Power (LADWP) for a 10 MW program demonstrating the use of what LADWP calls a "feed-in tariff" for solar photovoltaics (solar PV).

The program may be expanded to 75 MW in 2013 and could be expanded a further 75 MW subsequently.

LADWP is the largest municipal utility in the US. Not known as a green leader, LADWP's program is extremely limited even by US standards.

While the size of the program approved by the city council is widely being reported in the trade press as 150 MW, current approval by the LADWP's board is only for 10 MW and a probable additional 65 MW.

According to the utility's briefing documents, the additional 65 MW beyond the demonstration program is in itself subject to approval by LADWP's board of directors later this year.

Further details remain sketchy. The utility is calling the program a "dynamic renewable feed-in tariff" but the program is not a feed-in tariff by international standards. It is not uncommon in California for various parties to call a program a "feed-in tariff" because of the term's popularity with the public, when the program is not a feed-in tariff as seen in, say, Germany, France, or Ontario, Canada.

The briefing documents refer to "offerings, solicitations, and awards"--terminology often used to describe tendering or bidding systems and not feed-in tariff programs.

The distinction is between using auctions or bidding to determine the price or using auctions to allocate contracts as is used in typical tendering programs in North America.

Some of the briefing documents clearly describe an auction or bidding program to allocate contracts in the 10 MW program. For example, contracts will be awarded to the "lowest bidder". This is the antithesis of a feed-in tariff which offers a publicly posted price to participants in an open and transparent manner.

LADWP may use the prices "discovered" in the initial program to set the tariffs for the remaining 65 MW. However, this is subject to board approval as part of the 65 MW program extension.

Thus, the current program is not a feed-in tariff, but the subsequent program may or may not be a feed-in tariff.

In some US states such a promise of one good with the delivery of another, inferior good is defined as "bait and switch". This is often illegal. However, state and local governments are not held to the same standard of truthfulness in advertising as merchants.

What little is known is summarized below.

 

  • Program cap: 10 MW initial, and with probably 65 MW 2013-2016
  • Possible expansion: 75 MW
  • Project size cap: 3 MW
  • Technology tranches: solar PV only
  • Size tranches:
    • 30 kW-150 kW
    • 150 kW-1000 kW
  • Location tranches:
    • Los Angeles basin:
      • Large: 8 MW
      • Small: 1.7 MW
    • Owens Valley:
  • Small: 300 kW
  • Tariff cap: $0.30/kWh

There is no explanation why there is a discrepancy between the two size tranches up to 1 MW and a project-size limit of 3 MW.

Europeans, such as the designer of the French wind tariffs, Bernard Chabot, were quick to note that Los Angeles' proposal was comparatively less than what the city of Aachen (Germany) instituted in 1993--nearly two decades ago.

 

On a per capita basis, the LADWP program is significantly less than other US jurisdictions. For comparison, Gainesville, Florida installs 4 MW of solar PV per year in a 32 MW program.

Vermont is installing comparatively less than Gainesville but relatively more than what would be installed under LADWP's program.

LADWP's 10 MW demonstration program represents half that of Vermont's actual installation rate on a per capita basis, and only one-tenth of what Gainesville accomplishes each year.

The annual installation rate for the full 75 MW build out of the LADWP program represents less than one-quarter of Vermont's program and one-eight of that in Gainesville.

 

At typical yields found in southern California, the 75 MW program will generate less than one-half of one percent of LADWP's annual generation.

Los Angeles' action took place three years and three months after the Gainesville, Florida city council voted to implement a true solar PV feed-in tariff. Since then Gainesville's program has been unrivaled in the US for its effective administration.

In an unusual twist, LADWP's program apportions some capacity geographically. The utility assigned 300 kW of program capacity to the Owens Valley, a scenic region more than 200 miles (330 km) from Los Angeles that was made famous by the "water wars" of the early 20th century. The Owens Valley was the setting for the true-life drama that became the basis for the 1974 Roman Polanski film Chinatown.

LADWP is omnipresent in the Owens Valley and through the 1980s and 1990s was in a protracted legal dispute over water diversions and over air pollution resulting from the water diversions.

The municipal utility is also the owner of a controversial wind farm in the Tehachapi Mountains, well outside its service territory. There are no wind power plants in Los Angeles proper.

In the currently bleak policy landscape in the US, renewable advocates are celebrating Los Angeles' decision. "After several years of efforts, it's encouraging to see something emerge from LA," says Toby Couture, one of North America's authorities on feed-in tariffs. "After such a long battle, however, it's surprising that the program isn't larger, and that other renewables aren't included, like wind power and biogas."

"It's unfortunate," Couture adds, "that the policy hasn't established a clear signal beyond 2016. To truly yield durable economic dividends, experience from other markets around the world suggest that policy needs to be built upon a longer-term vision. Investors always look for long-term signals: to that extent, the race for renewables is not to the swift or to the strong, but to those who adopt a long-term vision."

 


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