In our first two posts this week recapping the state of solar feed-in tariffs in the Run on Sun service area, we focused on what is happening with the biggest FiT around, that run by LADWP. But that isn’t, nominally at least, the only game in town so this post will summarize the progress, or lack of same, at the other FiT programs around: Glendale, Anaheim and Riverside.
We have written at great length about the problems with the FiT program that Glendale Water & Power designed to meet their state mandate. We noted that the prices being offerred—which were actually even 10% lower than what was presented to the Glendale City Council when they approved the program—were way too low to pencil out for a project, and that other uncertainties made it highly unlikely that anyone would participate. In other words, as we told the Glendale City Council, they were approving a program that was designed to fail.
Nine months into the experiment, where do things stand today? Let’s take a quick look at the FiT queue as of today:
All that empty space is just hard on the eyes.
In nine months, GWP has not received a single application for their FiT program—and contrary to how GWP officials refer to their defunct commercial solar incentive program as a “victim of its own success,” this program is a victim of GWP’s design.
Given the failure to attract a single project application, you might think that GWP would take steps to address their failure by increasing the offer price for energy, but you would be wrong. This table summarizes the progression on GWP’s FiT offer price for energy:
The “City Council” price is what GWP suggested to the City Council the offer price might be when the program went live and that is the price the Council had before it when they approved the program. The “Program Start” price is what was actually offered to potential project developers when the program went live last July.
The “Q214″ price is what is being offered today—a reduction of 5.5% for Peak and 4.8% for Off-Peak deliveries. That’s right, in response to offering a price that was already so low that no one was willing to put forward an application, GWP has responded by cutting its offer price by 5%. Genius.
GWP will no doubt say that they have no choice, that the formula approved by the City Council for setting the offer price mandates this result, but that’s merely self-referential nonsense. GWP designed the formula and the City Council confessed that they had no way to assess the technical merit of what was before them. The formula is supposed to be based, in part, on avoided costs—but guess what? So is the offer price for the LADWP FiT and yet it is twice what GWP is offering. Are we to believe, therefore, that GWP’s costs are half of those incurred by LADWP? If so, we suspect the customers of GWP would be surprised then that there rates are as high as they are.
It is high time that the Glendale City Council call GWP to task and insist that they re-create this FiT program so as to achieve what the state law intended—the actual installation of solar power in the City of Glendale.
The representative from Anaheim Water & Power had told us last year that their program to date, despite being started in 2010, had yet to attract a single application. Checking in on Anaheim’s FiT website confirms that unbroken string of failure continues to this day with no projects in the queue.
Anaheim’s offer price tells us why: it ranges from 3.883¢/kWh for Off-Peak to 6.472¢/kWh for Mid-Peak to a summer On-Peak price of 9.708¢/kWh.
Last year Riverside’s representative told us that they knew that their price was so low no one would bite and that was fine because they didn’t want solar installed in Riverside anyway. Today, Riverside’s “we don’t want anybody to participate” price for energy is 6.2¢/kWh—exactly the same as GWP’s off-peak price. Looks like GWP is playing follow the (non)leader.
Which brings us to our friends at Pasadena Water & Power. At a meeting yesterday we learned that PWP is considering a Feed-in Tariff program of its own. Now we are fans of PWP, indeed, we think they are the easiest and best utility around to work with (and for, for that matter). So that begs the question: What sort of FiT will PWP create? They could base their program on what has been done at LADWP (with necessary tweaks to make small projects viable) and thereby insure a successful program that reduces pollution, creates local jobs and helps to green PWP’s energy mix. Or they could follow the misguided path of GWP and its ilk, creating a program in name only, that guarantees that not a single kWh of clean energy will ever be generated.
Needless to say, we will follow FiT development at PWP closely. Watch this space.
There are multiple Feed-in Tariff (FiT) programs in the Run on Sun service area, although only one is actually doing anything. We decided it was time to check back in on these programs and to see if any of them are living up to their mandate to actually get solar installed in the L.A. Basin.
As of this writing, there are FiT programs hosted by four cities: Anaheim, Glendale, Los Angeles and Riverside. In this post we will check-in with Los Angeles and revisit the status of the other three later in the week.
Los Angeles brags that it has the largest FiT program in the country and that assertion is true, as far as it goes. We have written extensively about the LA FiT in the past, documenting how it came about and how it has recently survived challenges from the Rate Payer Advocate who insisted upon comparing energy costs from utility-scale projects with the “in-city” projects called for by the legislation that mandated the program.
LA’s program has a 100 MW capacity goal and it divides that total into five, 20 MW allocations, or tranches, each to be offered roughly six months apart. The first tranche was to be offered at a base price for energy (BPE) of 17¢/kWh, with each subsequent tranche offered for a penny less than its predecessor. So far, three tranches have been made available, the latest just last month. As we have reported on both of the earlier two tranches (first tranche here and second tranche here), we will focus this post on the third tranche and overall program status.
The third tranche, after some delays due to City Council concerns, opened on March 17. The LADWP FiT website provides a PDF file of their spreadsheet showing the results of the tranche lottery, but unfortunately the underlying spreadsheet is not provided. This means that the PDF has to be converted back to a spreadsheet before any real work can commence, an unnecessary waste of effort.
Hey, LADWP listen up: if you are going to publish data, publish the spreadsheet, not just a PDF. (Thanks, I feel better now.)
Up until now the sense was that in order to have a shot you needed to submit your application as early in the five-day window as possible but these results belie that notion. While the window went up on March 17, none of the 45 applications submitted came in on the first day! The earliest application came in on the 18th at 11:53 (and, despite landing lottery number 21, missed the allocation cut-off) whereas the last application came in on the 21st at 3:46. Interestingly, the last twelve applications received all got that same time stamp, which means that despite their best efforts to the contrary, one quarter of all applications received were received at the last possible minute—and four of those twelve made the cut. More on this in a minute.
The 20 MW of capacity in the tranche are not just one big pool. Rather, 4 MW are set aside for “small” projects (i.e., capacity between 30 and 150 kW) and the remaining 16 MW to “large” projects (150 kW to 3 MW). So does size matter in terms of the likelihood of success? It certainly does—all four small projects made the cut, whereas only 19 out of 41 large projects did. Of the small category projects, two were right up against the size limit (145 and 149 kW, respectively), while the other two were much smaller: 79 and 37 kW. Frankly, in light of the relatively low payment in this tranche—a situation that will only get worse as the BPE declines in subsequent tranches—it will become harder and harder for small projects to pencil out. Given how badly the small category underperformed in this tranche—barely reaching 10% of the 4 MW capacity set aside—LADWP should re-think its approach here. If it is serious about maintaining a small projects category, it needs to increase the BPE for such projects. Otherwise it needs to revise its rules so that the excess allocation in the small category can be used by large projects that otherwise would not make the cut.
The large category is particularly interesting from the sense of who is playing. The 41 projects in the large category came from only 19 different sources, and the biggest player of all is none other than the City of Los Angeles itself! Here’s the list:
Twelve of the nineteen large project applicants submitted only one project, three submitted two projects, one submitted three, two submitted four—and then there’s LA’s Harbor Department which submitted 12 with an average size over 1 MW each!
So how did these players fare in terms of making the cut? Well, the City only got four of its twelve projects in under the wire so one might think that their success was no more likely than anyone else. But here’s an interesting thing—remember those twelve applications that all received the same timestamp of 3:46 p.m.on the last day to apply? You guessed it, all twelve of them came from the City of LA’s Harbor Department! How curious.
The other successful players were Pasha Stevedoring (2 out of 3), OM Solar LLC (2 for 2), PLH LLC (2 of 4) and SunRay Power LLC (2 of 2).
Finally, we wanted to see where all of this solar is going and, given the success of the LA Harbor Department, not surprisingly the big winner is San Pedro, home to the Port of LA. Five projects will be located in San Pedro’s 90731 zip code for a total capacity of 4.6 MW, and one more nearby in Wilmington. The Port is about to become something of a solar center in Los Angeles—a welcome departure from its past reputation as a toxic hot spot. Here’s the map:
There’s more to say about the state of LA’s FiT, so we will save that for tomorrow, including a look at their new dashboard that seeks to provide greater transparency into how the overall program is doing.
We wrote last month about how Glendale was late getting to its required Feed-in Tariff program and that the design that they were advancing was seriously flawed. Well the window on the FiT has finally opened and guess what - it is worse than we thought!
When we first looked at the details of GWP’s FiT we were concerned that there had been no public input into the program’s design. Moreover, the amounts that were going to be offered - based on the staff’s report to the City Council - revealed energy prices so low that no intelligent developer would go anywhere near the program.
The published proposed price for FiT energy - 9.292¢/kWh for peak time delivery and 7.251¢/kWh for off-peak - were well below what a program needed to be subscribed. In fact, those prices were very close to what was being offered in Anaheim and Riverside - two program which had not seen a single FiT application in two years!
Well as bad as we thought all of that to be, we just learned that the reality is far worse. GWP just kicked off their FiT website (which curiously has the title: Revenue for Demand Response) which includes a link to the current Offer Price. As of July 1 (though really not available until today) here is GWP’s actual offer price for FiT energy:
These new prices are 15% lower for peak deliveries and 10% lower for off-peak from the prices described to the City Council just last month! (Interestingly, their fees have not reflected a similar price reduction.) We previously calculated the FiT payment in Year 1 for a 100 kW project to be $13,599 based on the allocation of energy by peak versus off-peak times. Under the new rate structure that payment in Year 1 declines to just $11,688, a 14% hit.
The website is typically devoid of any data explaining how the new price was calculated, but does it really stand to reason that GWP’s “avoided costs” for energy declined by 15% in the past month for peak time deliveries? While the materials submitted to the City Council contained a sample calculation showing how staff reached the originally proposed values, no such calculation is visible on the GWP website. Were the numbers used last month simply fictitious? Or has there been some amazing change in fortunes for GWP’s ability to purchase energy - mind you this at a time when energy prices throughout Southern California are spiking up 59% due to the loss of the San Onofre Nuclear Generating Station. Amazing.
Looks like I won’t have to be making good on my bet come September. Pity.
As expected, the Glendale City Council yesterday voted to approve a Feed-in Tariff program patterned after programs that have failed. Here’s our final report, for now.
One clear tell that the FiT proposed by GWP was a non-issue: no other solar company bothered to comment on it before the City Council. As for the City Council itself, another tell - two of the five Councilmembers were participating via Skype and phone - but they both bailed after voting on the City’s budget but before the FiT came up for a vote.
Which left only me.
For the second week in a row, I was the only speaker to address the FiT. I pointed out to the Council the failure of the programs in Anaheim and Riverside - the models for the GWP program - to yield a single solar installation in more than two years. I reminded them of what we were told by the woman in Anaheim - that there is a difference between designing a program to meet the letter of the law and designing a program that works. I acknowledged that they were going to pass the ordinance, because they had been told that they had no choice - they were stuck with buying a pig in a poke. I encouraged them to revisit the issue in three months. If GWP was correct, and their program was destined for greatness, we would certainly know by then - but if I was right, perhaps it would be proper to revisit this program and try to design one that would actually work.
That argument received some traction with the Council - and I have already set the reminder for three months from now to revisit this with the Council. (Ironically, if you are speaking about something that is not on the agenda, they give you 5 minutes to speak, but for actual business before the Council, they only give you two. So when I return in September I will actually be able to layout my case in some detail!)
Once again, Councilmember Ontero picked up on what I said and asked Staff whether they had, indeed, designed a program that could only meet the letter of the law but not actually accomplish anything. And again, GWP’s Chief Assistant General Manager, Steve Lins responded but did not actually answer the question. Instead he brought up LADWP’s Ratepayer Advocate as complaining that LADWP was overpaying (an old argument that was rejected twice - by the LADWP Board and by the LA City Council).
Beyond that, Mr. Lins insisted that my complaints were that “my project” didn’t pencil out and that was why I was complaining. Of course Mr. Lins knows nothing about my motivations so his speculation was unjustified. For the record (since Council rules did not afford me an opportunity to respond), Run on Sun did not have a client that we were representing here - we were simply advocating for sound public policy in support of solar.
So the program is now adopted and we will wait and see how this plays out.
We attended Tuesday night’s Glendale City Council meeting to share our thoughts with Councilmembers regarding GWP’s proposed Feed-in Tariff. As might be expected, it was not an encouraging experience - here’s our report.
In our previous post analyzing the proposed FiT, we noted that essentially small players could not produce projects that would pencil out and only the very largest projects - 1.4 MW under the proposed guideline - would be economically viable. Given the limited size of the overall program - just 4.2MW - three of those largest possible projects would completely subscribe the program.
At the outset of discussion on this item, Glendale Mayor Dave Weaver commented that this was one of the most complicated staff reports he had ever seen and he implored staff to make their presentation something that lay people could understand. You can watch the full discussion in the clip below - my comments begin around the 11:00 mark.
However we heard something new during the staff presentation - by Senior Assistant City Attorney Christine Godinez - that surprised us: the contracts being offered under the FiT would not be for a set price for the duration of the contract, nor were they even contracts with an established initial rate that would be subject to an escalation provision going forward. Instead, we were told that the price would be adjusted every quarter with the new price applied to existing contracts!
We decided to follow-up on that point and spoke today with Ms. Godinez. She confirmed that payments under 20-year FiT contracts would change every quarter and cited the programs in Anaheim and Riverside (but not LA) as examples of that approach. Frankly, we do not see how any developer would agree to such an approach when, as Ms. Godinez conceded, the price to be paid could go up or down with no way to predict what it would do in advance. Think about it, what developer is going to spend hundreds of thousands of dollar to sell renewable energy based on a reimbursement rate that is solely and unilaterally under the discretion of the buyer? Indeed, does this even meet the definition of a long-term contract when the most important term - price - is undefined?
That got us to wondering what was really going on in Anaheim and Riverside and whether those programs had been successful. We were able to confirm that both cities have FiT programs that change their rates annually (as opposed to quarterly under GWP’s proposal) but we could not see any evidence of actual FiT installations in either City. We managed to speak to representatives of both utilities.
Ms. Carrie Thompson, an Integrated Resource Planner for Anaheim, explained that they do adjust their offered price each year but, contrary to what GWP is proposing, that price is then held fixed for the lifetime of the contract. (The price is presently 4.587¢/kWh - which is roughly where it has been since the program began in 2011. It is due to increase by 8/10’s of a cent on July 1 - but please, curb your enthusiasm.) But this is largely a theoretical difference since not a single project application has been submitted to the City since the program went live more than two years ago. Ms. Thompson, who was extremely helpful - calling us back twice to return our call - noted somewhat wistfully that there is a difference between “designing a program that meets the letter of the law and designing a program that works.”
“Jerry” from Riverside told us that their FiT price of 5.8¢/kWh is the same price they have offered since the program went live in 2011 and that it was tied to the City’s price for energy under long-term utility-scale renewable energy contracts with remote suppliers. He said that the City understood that at that price, there would be no developers building projects under the FiT because “it cannot make economical sense." Indeed, the City, “doesn’t want solar here” and in that sense their FiT “program” has been a success - there are no FiT projects in Riverside.
In other words, GWP is patterning its FiT program on two programs that were designed to fail and which have resulted in the installation of no solar whatsoever within their respective City boundaries!
Two other points - Councilmember Quintero (at 14:18 into the video) pointed out his concern that entrepreneurial individuals who might want to install solar along San Fernando road would be shut out of this program because the rate was too low. Of course, he is exactly correct - no commercial building owner is going to be able to participate in this program because of the low rate being paid and the tremendous lack of clarity about where payment rates will go in the future.
The second point concerns the comments from GWP’s Chief Assistant General Manager, Steve Lins. He sought to contradict my statement that there was no net-metered rebate program for commercial customers in Glendale. No, he said, there was a program - its just that it was over-subscribed last year (i.e., it ran out of funds without notice) and that there would be no funds for it this year because it has been over-subscribed in the past - “a victim of its own success." Of course, that is not a rebuttal of my assertion that no such program is presently available in Glendale.
In response to Councilmember Quintero’s concern, he responded that under the statute (SB 1332) they could only pay based on their avoided costs. But that, of course, is a misreading of the statute which makes avoided costs only one component to be considered. Here is the relevant text of the law:
The governing board of the local publicly owned electric utility shall ensure that the tariff adopted pursuant to subdivision © reflects the value of every kilowatthour of electricity generated on a time-of-delivery basis, and shall consider avoided costs for distribution and transmission system upgrades, whether the facility generates electricity in a manner that offsets peak demand on the distribution circuit, and all current and anticipated environmental and greenhouse gases reduction compliance costs. The governing board may adjust this value based on the other attributes of renewable generation. The governing board shall ensure, with respect to rates and charges, that ratepayers that do not receive service pursuant to the tariff are indifferent to whether a ratepayer with an electric generation facility receives service pursuant to the tariff.
SB 1332 - Public Utilities Code §399.32(d)
Moreover, because GWP released no information - nor held any public hearings - about how it calculated avoided costs, even that assertion is subject to question. Given that the stated purpose of SB 1332 is to “encourage electrical generation from eligible renewable energy resources… located within the service territory of, and developed to sell electricity to, a local publicly owned electric utility,” comparing avoided costs from large, utility-scale resources located far away is not an appropriate comparison.
Bottom line: GWP is proposing, and next week the Glendale City Council is almost certain to approve, a program that ignores the intent of the law and may well be in violation of it. One thing is for certain, very little, if any, renewable energy will be generated as a result of this program. And apparently - like in Riverside - that is the whole point.
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