California Approves Feed-In Tariffs for Renewable Energy Systems

February 20, 2008

The California Public Utilities Commission (CPUC) has approved long-term prices for the state's utilities to buy renewable energy from their customers. For seven of the state's utilities, the so-called "feed-in tariff," approved on February 14, applies to renewable energy systems located at public water and wastewater facilities, but for Pacific Gas and Electric Company (PG&E) and Southern California Edison (SCE), a separate feed-in tariff applies to any customer-located renewable energy system up to 1.5 megawatts in capacity. The tariff requires signing a long-term contract for 5, 10, or 15 years, but the price is adjusted based on the time of day of the power generation. For instance, for a system producing power throughout the day, a 15-year contract signed with SCE in 2008 would earn about 15 cents per kilowatt-hour on a summer weekday, while a system generating power from 8 a.m. to 6 p.m. (such as a solar power system), would earn about 22 cents per kilowatt-hour under the same circumstances. Overall, the tariffs range from 8 to 31 cents per kilowatt-hour. Facilities earning the tariff cannot participate in other state incentive programs.

Feed-in tariffs have been used in other countries, such as Germany, to encourage a rapid growth in customer-located renewable energy systems, but the CPUC has set limits on the current tariffs. For systems at public water and wastewater facilities, the statewide capacity limit is set at 250 megawatts and is distributed among the seven utilities according to their size. For other customer-located facilities, the capacity limit is about 104.6 megawatts for PG&E and for SCE, about 123.8 megawatts. PG&E, SCE, and some of the other utilities offer their tariffs through two options: the customer can sell the utility only their excess power, or they can arrange to sell all the power from their facility to the utility. The new tariffs are effective immediately. See the CPUC press release and the accompanying order.