3. The Need for a Simplified Procurement
Process for Small Generators

The inquiry initiated by the June 2008 Amended Scoping Memo and Ruling began with the question of whether or not to expand the Existing FIT program from 1.5 MW to 20 MW. The desirability and need for a procurement mechanism to address the 1.5 MW to 20 MW market segment - which are still considered smaller generators - depends upon whether the current RPS bid solicitation and contract negotiation process is adequate for procuring smaller projects. If the annual procurement process is not adequate for smaller RPS projects, the Commission should consider whether these projects provide a particular value to the market, utilities, ratepayers and regulators, and whether these projects should be pursued through a more targeted procurement process.

Parties present differing views on the efficacy of the current RPS program for small projects. For example, Environmental Council, CEERT, DRA, First Solar, GPI, IEP and others assert that the RPS program is currently not working successfully for small projects, while TURN initially argued that it is successful and no change is necessary. ¹⁰ Nonetheless, there is considerable agreement that it is feasible and desirable to streamline the process for smaller projects.

Many parties¹¹ also argue that renewable system-side distributed generation (DG) projects that interconnect on the utility side of the meter¹² present unique value to California ratepayers that is not captured in the annual RPS solicitations. According to CalSEIA, these benefits include: rapid development timeline, electricity production close to demand, reduced congestion on distribution feeder line circuits, reduced demand for peak power, job creation in a local community, and compliance with the state's renewable energy targets.¹³ CEERT similarly states, "These [system-side DG] projects are critical to rapid deployment of renewables because of their shorter development timelines, minimal site control and permitting constraints, and proximity to load."¹⁴ CESA also notes that DG located near load centers should play an increasing role in the California RPS because they face fewer permitting and siting problems than central station RPS facilities.¹⁵ Solar Alliance's comments, consistent with Energy Division staff's findings in its 33% RPS Implementation Report¹⁶, say that smaller RPS projects can "act as an important hedge or safety valve for the RPS to meet the 20% and 33% goals, should the larger RPS projects not come on-line at the pace that is expected."¹⁷

We agree that it is desirable to simplify the procurement process for relatively smaller RPS projects and that these projects provide unique value to the RPS program because of their potential to be deployed quickly with a relatively smaller environmental footprint and minimal transmission need. Such streamlining should also facilitate development of projects up to 20 MW by mitigating costs and administrative burdens on projects, developers, utilities, and regulators. Further, the majority of parties support a simplified procurement process if there is the right balance of terms, conditions, and prices. We agree. All elements of the procurement process must be considered, and we do so in adopting the right balance of terms, conditions, and prices here in the form of the RAM.

¹⁰ TURN initially argued in its Terms and Conditions Comments that an expanded FIT was unnecessary, but in its comments on the Staff Pricing Proposal, TURN stated its support for a more streamlined and expedited process for small projects since they can not effectively participate in RPS solicitations.

¹¹ CEERT, CESA, FIT, Solar Alliance/Vote Solar, First Solar, CalSEIA, and the Community Environmental Council.

¹² Referred to as "system-side DG" in this decision

¹³ CalSEIA Terms and Conditions Comments at 2.

¹⁴ Terms and Conditions Comments at 2.

¹⁵ Pricing Comments at 2.

¹⁶ For the complete report, see http://www.cpuc.ca.gov/PUC/energy/Renewables/hot/33implementation.htm

¹⁷ Pricing Comments at 3.