3. PG&E's Proposed PV Program
PG&E proposes a five-year PV Program to develop up to 500 MW of PV facilities between 1 and 20 MW in its service territory in northern and central California. PG&E's proposed PV Program would consist of two separate parts:
_ The UOG portion of the PV Program would allow PG&E to develop up to 250 MWs of UOG at an estimated cost of $1.45 billion.
_ The PPA portion of the PV Program would allow for PG&E to enter in up to 250 MW of contracts with third party developers for long-term PPAs at a pre-time of delivery (TOD) price of $246/MWh.
In addition, PG&E proposes to build a PV Pilot project of up to 2 MW in 2009, at an estimated capital cost of $11.9 million.
PG&E states that the proposed PV Program supports a number of California and Federal environmental goals including the expanded renewables goal, identified by the Air Resources Board in its scoping plan, of 33% renewables by 2020, thus supporting the greenhouse gas emission reduction goals identified in AB 32. It also supports the federal energy and environmental policy objectives outlined in President Obama's energy plan.1 PG&E emphasizes that the PV Program is designed "to expedite and simplify the regulatory approval process and to facilitate the annual, systematic development of PV resources,"2 thereby helping to meet the 2010 renewables portfolio standards (RPS) target, under flexible compliance. In addition, PG&E asserts that utility ownership of PV, coupled with a PPA program, is beneficial for customers.3
The following sections provide more detailed description of the two components of the proposed PV Program.
3.1. UOG Portion of the Proposed PV Program (PV UOG)
The UOG portion of the proposed PV Program would allow PG&E to develop UOG PV projects at a rate of 25 MW in 2010, 50 MW each in 2011, 2012 and 2013, and 75 MW in 2014. PG&E anticipates UOG PV projects to be between 1-20 MW, with a possibility that some projects below 1 MW may also be developed. PG&E offers no details on the total MWs for projects below 1 MW, but states that it does not anticipate these projects to constitute a significant portion of the UOG portion of the PV Program.
The UOG projects would primarily be ground mounted on land PG&E already owns at or near PG&E's existing substations, although PG&E anticipates that additional land may need to be purchased and some roof-top mounted projects may also be developed. PG&E plans to make deposits to secure control of some land in advance of Commission approval of the PV Program and proposes to include these deposits in Plant Held for Future Use (PHFU) account for recovery prior to the operation of the PV facilities.
PG&E proposes to use a competitive procurement process to solicit both bundled turnkey projects and unbundled engineering, procurement and construction (EPC) bids for the UOG PV development.4
The proposed cost recovery of the UOG portion of the PV Program would be based on Commission approved capacity price targets for the PV Program. If at the end of the PV Program, the actual total capital costs are at or below the average target plus a contingency, PG&E proposes that it will be allowed to recover the actual capital costs of the PV Program without any further reasonableness review, and customers will be refunded the difference with interest at the memorandum account/commercial paper rate. If, however, PG&E's average installed cost at the end of the UOG portion of the PV Program exceeds the average target, PG&E would be authorized to recover the actual capital costs up to the average target and file an application for recovery of amounts in excess of the average target. PG&E proposes to establish a memorandum account to record the difference between the revenue requirement for the UOG portion of the PV Program booked to PG&E's Utility Generation Balancing Account (UGBA) and the revenue requirement based on the actual capital costs of the UOG portion of the PV Program.
PG&E seeks Commission approval to suspend or scale back the PV UOG Program if it determines that it cannot meet the established capacity price targets or if it finds other factors impacting the use of capital.
PG&E proposes to recover the stranded cost for the UOG portion of the PV Program through a non-bypassable charge for each facility installed for a
ten-year period following the commercial operation of the facility.
3.2. PPA Portion of the Proposed PV Program
The PPA portion of the proposed PV Program includes an annual solicitation for projects of 1 to 20 MWs, located in PG&E's service territory. PG&E anticipates selecting projects based on viability and energy delivery criteria. Selected projects will be required to achieve commercial operation within 18 months after the PPA is executed.
PG&E requests that the Commission adopt a standard contract form, including a non-negotiable standard price for these projects. The price for the PPAs would be based on PG&E's estimated levelized cost of energy (LCOE) for the UOG portion of the PV Program. PG&E requests that it be allowed to update both the PPA forms and the price through an advice letter filing.
PG&E seeks approval to recover the costs of the PV PPAs through PG&E's Energy Resource Recovery Account (ERRA), which was established to record, among other things, costs of PG&E's procured power. Stranded costs associated with the PPAs would be recovered over the entire term of the agreement through a non-bypassable charge.
3.3. PV Pilot Project
In addition to the 250 MW of UOG projects, PG&E proposes a 2 MW Pilot Project to "expedite the deployment of the PV Program, demonstrate PG&E's commitment to the Program, and to allow PG&E to develop and refine internal and external processes needed to develop, permit, and operate a PV facility prior to deployment of the larger PV Program."5 PG&E proposes to book the
$11.9 million revenue requirement for this project to the UGBA after the project achieves commercial operation.
3.4. Parties' Positions
CUE supports PG&E's application and urges the Commission to approve the PV Program. CUE believes the PV Program is a unique project with the potential for distribution system benefits but no transmission connection concerns and could add value in developing an additional potential path toward meeting the RPS goals.
CUE suggests that the PV Program will help the RPS goal because many of the current RPS contracts signed by IOUs have been cancelled, suspended or delayed. As a result, CUE advocates that "more projects than ultimately needed must be pursued in order to have sufficient number of projects succeed."6 CUE also advocates that in meeting the 33% RPS goal,7 multiple approaches and strategies must be considered to ensure sufficient amount of renewable resources are available.
CUE believes that by facilitating the development of up to 500 MWs of mid- size PV projects, the PV Program will also help fill the gap that CUE believes exists for these types of PV projects as a result of RPS solicitation. In CUE's view, this gap suggests that viable mid-size projects that could make an incremental contribution to meeting the state's RPS goals will be foregone.8 CUE believes the Commission should fill this gap by approving the PV Program and facilitating the delivery of renewable energy from these types of projects.
DRA supports UOG as an alternative to the competitive market, but recommends denying the PV Program, because it believes the PV Program introduces heightened risk for ratepayers.9 To begin, DRA argues that PG&E has already signed enough RPS-eligible contracts to meet its 2010 RPS obligations. Thus, it does not need the PV Program to achieve the RPS goals.10 DRA disagrees with PG&E's claim that the RPS process is unreliable when it comes to executing contracts. Further, DRA argues that even if some of PG&E's RPS contracts fail to come on line, the PV Program would be "an ad hoc, over-priced solution."11 DRA notes that the PV Program would be over twice the market price referent (MPR).12 DRA believes PG&E can meet its renewable energy goals with much cheaper alternatives, consistent with the Commission's least cost best fit (LCBF) procurement directives.13 DRA suggests several modifications to the PV Program as ratepayer protection measures in the event the Commission decides to adopt the PV Program.
CLECA also recommends that the Commission reject this application, asserting that the proposal is too expensive and cannot be justified. In particular, CLECA is concerned that if approved, ratepayers will be burdened with the cost of the PV Program at three times more than the existing portfolio while other less expensive renewable alternatives exist. CLECA disagrees with PG&E's claim that the PV Program will help PG&E meets its RPS goal for 2010. In CLECA's view, the contribution of the PV Program is insubstantial, because it would only add "0.5 percent to renewable energy sales by 2013, and 0.7 percent by 2014 when the UOG portion of the PV Program is fully deployed."14 Further, CLECA argues that to focus on small PV projects in the 1 to 20 MW range is not a very efficient way to obtain additional renewable power in a short time frame as these types of projects may face siting and permitting problems due to the need for multiple locations.15 CLECA also contends that on an annual basis, because of their capacity factor, smaller PV projects produce less per KW installed than other solar and other types of renewable projects. Therefore, CLECA argues more individual PV projects will be needed to meet the RPS goals.16
The Farm Bureau recommends rejecting the application, echoing the concern about the cost of the PV Program and the lack of benefit to ratepayers. In the Farm Bureau's view, the PV Program is too expensive and fails to consider other alternatives with better value and benefits.17 The Farm Bureau is concerned about land acquisition and the threat of eminent domain for land owners. In addition, the Farm Bureau is concerned about the environmental impacts related to the project sites, and the impacts PV projects might have on neighboring agricultural lands. This concern is also echoed by CARE.
TURN only supports the PV Program with modifications. While TURN states that it is supportive of utility procurement mechanisms for small and
mid-size PV facilities, it believes ratepayers will not realize the full benefits of such an approach under the PV Program unless the program is based on a competitive process to lead to the selection of the least-cost and highest value projects. TURN recommends several modifications to the proposed PV Program to allow competition, and provide performance measures.
Although initially opposed to the application, IEP now supports PG&E's application, stating the modest progress in the RPS and the opportunity for additional 250 MW of independent power as the reasons for its support.
The Solar Alliance supports the application, stating that the PV Program "will make a positive contribution to the expanded development of renewable energy sources,"18 but recommends the use of a competitive auction for the PPAs greater than 3 MW. The Solar Alliance agrees with PG&E that projects between 1 and 3 MWs should be afforded a fixed price.19 The Solar Alliance also proposes a slightly different schedule for the deployment of PV capacity under the PPA portion of the PV Program.
Greenlining urges the Commission to reject the application for a number of reasons. First, Greenlining states that PV is one of the least cost effective forms of renewable energy and believes there are less expensive technologies that could deliver renewable energy to meet the RPS goals. Second, the fixed price PPA does not allow competitive pricing. Thus Greenlining argues it prevents savings that can arise from a fully competitive market.
CARE states that the PV Program would allow additional electric generation during peak demands eliminating the need to operate fossil-fueled plants that are often cited in lower-income residential neighborhoods. For that reason, CARE supports the application.
CFC urges the Commission to reject the application. CFC lists a number of issues where it believes PG&E's application lacks detail or specificity needed to determine the reasonableness of the PV Program's capital cost estimate.20 For example, CFC points out that PG&E has not chosen the sites for the PV facilities and does not know how much land the PV Program will ultimately require. Therefore, CFC asserts PG&E's estimate for the cost of land is unknown. Further, CFC states a number of unknown assumptions such as the technology used, the efficiency of the panels, and whether a tracking system will be installed, could affect the cost estimate. In short, it is CFC's position that there are too many unknowns to find the UOG cost estimates reasonable.
CFC also opposes the fixed price PPA, arguing that it may result in higher costs than a competitive procurement process.
1 Exhibit1 at 1-6.
2 PG&E Application at 3.
3 Exhibit 1 at 1-6.
4 PG&E describes unbundled EPC bids as projects where PG&E could supply
owner-furnished major equipment to a construction/installation contractor. Id.
5 PG&E's Application at 7.
6 Exhibit 401 at 5.
7 The 33% goal was established in Executive Order S-21-09, which directed the California Air Resources Board (CARB) to adopt regulations increasing California's Renewable Portfolio Standard (RPS) to 33 percent by 2020.
8 CUE's Opening Brief at 5.
9 Exhibit 100 at 1.
10 DRA Opening Brief at 5.
11 DRA's Opening Brief at 5.
12 MPR is the benchmark price for competitive renewable solicitation.
13 Exhibit 100 at 2.
14 CLECA Opening Brief at 7.
15 Id.
16 Exhibit 500 at 5.
17 Farm Bureau Opening Brief at 4.
18 The Solar Alliance Opening Brief at 3.
19 CFC's Opening Brief at 12.
20 CFC Opening Brief at 5 through 12.
