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LA Feed-in Tariff Update: First Tranche is Fully Subscribed


  07:04:00 pm, by Jim Jenal - Founder & CEO   , 1096 words  
Categories: LADWP, Feed-in Tariff

LA Feed-in Tariff Update: First Tranche is Fully Subscribed

Two weeks into the reservation period, the latest data from LADWP’s Feed-in Tariff program reveals that the first 20 MW tranche has been fully subscribed.  Indeed, the “large” system category (150 kW to 3 MW) was fully subscribed in the first few projects drawn from the lottery whereas the “small” category (30-150 kW) took the full two weeks to be subscribed.  Here’s our analysis of what we can glean so far.

Owens Valley Proposals

Under the FiT Guidelines, projects sited in the remote Owens Valley (oddly enough, part of LADWP’s service area) were capped at an aggregate 4 MW.  Given that land is relatively cheap out there, at least compared to real estate prices within the City proper, it was expected that only larger projects would be proposed.  Moreover, the Base Price for Energy to be paid was set at 3¢/kWh less than that to be paid for all other projects to account for the transmission losses in getting Owens Valley energy to the City.

Despite all of that, Owens Valley was very popular, with a total of 29 projects proposed to date totaling 65.7 MW, substantially more capacity than that designated for LA.  No fewer than 18 of the proposed 29 projects were for the maximum size allowed under the program, 3 MW.  (Somewhat surprisingly, there were three projects submitted at the limit of the small range in the Owens Valley.  Apart from those, the smallest project proposed was 1.014 MW - which, curiously, was proposed twice.)

One company dominated the proposals, Ecos Energy, LLC, with 14 projects proposed for 31.95 MW.  They got lucky in the lottery, drawing the first two lottery numbers for Owens Valley projects. with a combined total of 6 MW.

Los Angeles Proposals

In the City proper, the numbers look quite different.  A total of 57 projects were proposed in the large category for a total of 44.3 MW, but in contrast with the Owens Valley, only one project was proposed at the maximum possible size of 3 MW.  Instead, the majority of large projects in the City were much smaller - averaging 778 kW with 500 kW being the most popular size (4 such projects proposed).

In the small project category, 38 projects were proposed to reach the 4 MW limit.  The average system size proposed was 106 kW; however the most common size was the maximum for the category, 150 kW which was proposed 5 times.

Coming to a Zip Code Near You?

So where are these systems going?  The data does not provide street addresses, but it does provide zip codes for the proposed projects.  Here are the top ten zip codes by number of proposed projects:

Zip code table of FiT potential projects


Nine of the top ten zip codes are in the northern end of the City, with only one zip code, 90502, in the City core (Carson).


And here is a map of the zip codes with two or more potential projects (click image to access interactive map):

Map of FiT potential projects by Zip

Who Are Those Guys?

Part of the goal of the FiT was to provide economic opportunity for local companies and local workers.  However, there were no carve-outs or preferences for local companies in the FiT Guidelines.  So how did the “locals” do?

Let’s focus on companies proposing projects in the City proper (thereby ignoring the dominant player in the Owens Valley - Minnesota-based Ecos Energy, LLC.)

Eleven companies proposed two or more projects in the large category for a total of 34 out of the 57: SEC ESSD Solar One, LLC (5 proposals / 3.5 MW), Sun Energy Partners III, LLC (4 / 1.86 MW), SunStarter Solar XC LLC (4 / 2.7 MW), CA Solar One LLC (3 / 1.4 MW), SunStarter Solar XXII LLC (3 / 1.12 MW), CEGALLIANCE (3 / 3.5 MW), Fallbrook Center Solar, LLC (3 / 1 MW), MRB Solar, LLC (3 / 2.165 MW), Extra Space Management Inc. (2 / 501 kW), Century Quality Management (2 / 570 kW), and OM Solar LLC (2 / 4.5 MW).

Eight companies proposed two or more projects in the small category for a total of 25 out of the 38: Extra Space Management Inc. (6 / 824 kW), OM Solar LLC (5 / 674 kW), SEC ESSD Solar One, LLC (3 / 400 kW), Broadstreet Energy Corp. (3 / 112 kW), The Ryzmn Family Trust Dated 8/20/89 (2 / 151 kW), SunStarter Solar XXII LLC (2 / 250 kW), SunStarter Solar XC LLC (2 / 300 kW), and OYA Energy Partners LLC (2 / 100 kW).

Collectively, here are the top ten companies proposing projects in the City:

Top 10 FiT players

Three of the top ten companies are LLC’s whose headquarters cannot be readily identified, although one of them, SunStarter XC LLC is most likely related to SunStarter XXII LLC out of Fort Lauderdale, Florida.

The other two - MRB Solar and CA Solar One come up empty in both Google searches and with the California Secretary of State’s office - raising the likelihood that they are actually out-of-state corporations.  Of the seven that can be identified with some confidence, three are from California but four are not.

Of course, the company that is the applicant is by not necessarily the company that will be the installer so there is still a decent chance that these projects will boost local employment.  But it appears that for as many as 70% of the top applicants, we have no such assurances.

Lessons So Far

So what can we learn from this?  Three points seem to come out of this data:

  • The FiT rate is probably too high for the large and Owens Valley segments.  Both of these subsets of the overall tranche were massively over-subscribed.  (Proving once again that it is more economically feasible to build 3 MW projects in the hinterlands than it is 150 kW projects in the City core.)  Perhaps, as one of our readers has suggested, LADWP should lower the BPE in the next tranche by more than the scheduled 1¢/kWh for large and Owen’s Valley projects.
  • The FiT rate for small projects should stay where it is.  There was significant reluctance for small projects to enter the program given the large uncertainty around interconnection costs and the economy of scale disadvantage that small projects face.  Given all of that, the next tranche is too soon to lower the price paid for small projects.  LADWP should roll the savings from scaling down large and Owen’s Valley projects - perhaps by 1.5¢/kWh next tranche - into preserving the price paid for small systems.
  • The Guidelines should be revised to provide preferences to local companies.  LADWP is spending local ratepayer’s money on the FiT program - it should not go to enriching out-of-state corporations at the expense of local enterprises that would plow their profits back into the local community.  A lottery may be impartial, but blind luck is a poor substitute for enlightened civic self-interest as a policy choice.

Overall, the program seems to be off to a promising start.  With some minor adjustments - and assuming that the proposed projects can actually be built - LA could really have a program that could serve as a model for the rest of the nation.



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Comment from:
You have to push the envelope with the small projects - if you don’t you’re standing still. These are specifically the projects that should become most cost effective as the FiT falls thanks to the self-consumption offsets that start to play in once the FiT passes the retail rate. With the smaller projects I’d raise the Carve out by a MW and lower the FiT rate by .5 cent/kWh rather than the full 1 cent/kWh… See how that works. If it works raise the carve out again and again. If it’s not fully subscribed give the carve out to the bigger projects at the end of the submission period. You need to play with the program. You can’t put rules in place that can be gamed. I’ve watched FiTs being gamed for years. I think there are relatively easy ways to stop this. We have to try. Also… Here’s an idea. Once you differentiate the rates you don’t need to set up the rates based on size… You set them up based on production. Assume the 150 kW tranche will export up to 225 MWh per year. Make the FiT rules so that the first 225 MWh of annual production gets the first rate and all remaining production gets the second rate. This sort of rule allows roofs that could accommodate 200 kW to go ahead and install the full 200 kW and not get punished with the lower FiT for all of their production. The rule meets the spirit of rule we currently have. It also prevents, to some degree, gaming on the installer side of the biz.
02/18/13 @ 05:25
Comment from: Jim Jenal - Founder & CEO
Hi Mitch - I like the idea of paying based on output rather than size but it may make it harder for them to explain how it will work and how much it will cost the their decision makers. Presently there is a cap of 15% above the “predicted” output - but that invites a certain amount of gaming itself. I am all for experimenting with the system so as to produce a program that provides a sustainable solar market while preventing the “gaming” you are concerned about. But from an installer’s perspective, it is more important to have a stable market to which you can advertise a potential investment. Jim
02/18/13 @ 06:29
Comment from:
Put a meter on the system. The first 225 MWh per year get 16.5 cents/kwh. Everything above that gets 16 cents/kWh. The Budget is set for 30 GWh per offering at an average price that’s prorated between the price steps. Put a provision in the rules that allows the customer to move to a NET-FIT payment structure if they desire. In a NET-FiT structure you subtract out production that is simultaneously self-consumed on-site. You want a net-FiT if retail is higher than the FiT rate. This is likely by the end of the FiT contract. There are no taxes on savings which is a bonus for the customer. If you are aggressive enough with the FiT cuts you’ll be close to a Value of Solar Tariff at the end of the process. That will help installers tremendously because the city will likely continue with a modified program once this transition phase is over. If you pussyfoot with the FiT cuts you never get to a competitive position. Once the ITC drops business will stop. If the Germans can make do with a 16 cent/kWh FiT in a 900 kWh/kWp solarity regime we should be able to make a 16 cent/kWh FiT work in a 1500 kWh/kwp solarity regime. Two weeks and 4 MWs of subscriptions tells me installers are in a nice position. I misquoted Jigar by the way. He said he sees $2/Watt systems before subsidies - not after subsidied! Size range is 150 kW and up. He characterized these systems $2/Watt systems as ideal but stated they weren’t rare. I know I’ve heard you say this price isn’t possible in CA. That’s what they said in Germany a few years back. It’s possible.
02/18/13 @ 16:53
Comment from: Jim Jenal - Founder & CEO
Sorry, Mitch, but no one is anywhere near $2/Watt, even at system sizes above 150 kW. Since 2008, prices have fallen in half - from $8/Watt to $4/Watt (on the simplest installs). That was driven by the price of modules falling through the floor. Meanwhile, little else has dropped - and until this year, permitting costs have increased. When you factor in what it takes to get a permit in the first place - LADWP has a 10-page form for microinverter systems, for crying out loud, and they still run you through plan check - to say nothing of acquisition costs, trust me, $2/Watt systems are nowhere near reality, at least not in the CA market. I do not agree that installers, generally, are in anything like a “nice position” vis-a-vis the FiT. Very few of those systems are being built by local installation companies who marketed for and won business in this first tranche. (Perhaps only one such company from what I can tell from this data.) That wasn’t the point of the exercise. Keep in mind as well that there has been no commercial program in LA since last July so there was substantial pent-up demand for something - and it still took two weeks to subscribe the small program. Jim
02/18/13 @ 21:24
Comment from:
4 stars
I would agree with the local part to implement the projects. It is essential because no one in the world, literally, knows how much we as EPC’s have been through with LADWP, LA B&S, and LA Fire. Come on people! They wrote the harshest rules that haven’t even gotten to most other markets yet. No not MA, MS, NJ, FL, HI, CO, IA, OH, PA, OR. I speak from first hand experience from Design/Build in each of these states. And, I am prepared to make it a “patiently easy process” when the new age of developers are ready to bring these projects back on track with LCOE. Send me an email when you are ready.
03/18/13 @ 18:13
Comment from: Jim Jenal - Founder & CEO
Ah, yes, in the words of the old spiritual, “Nobody knows the trouble I’ve seen…” Sing it, brother, sing it!
03/18/13 @ 18:24

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Jim Jenal is the Founder & CEO of Run on Sun, Pasadena's premier installer and integrator of top-of-the-line solar power installations.
Run on Sun also offers solar consulting services, working with consumers, utilities, and municipalities to help them make solar power affordable and reliable.

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