3. Project Description and Objective

3.1. Project Description

The proposed SPVP is a five-year program to install up to 250 MW of one to two MW solar PV facilities within SCE's service territory.⁴ SCE proposes to lease commercial rooftops for this program and to install, own, operate, and maintain these facilities.

The proposed program cost includes capital costs of initial installation and operations and maintenance (O&M) costs, including roof lease payments, SCE staffing costs, and other O&M costs associated with the solar PV facilities. SCE estimates the capital cost to be $875 million with the average cost of the solar PV facilities at about $3.50/W. SCE also requests a 10% contingency, which would allow it to spend up to $962.5 million in direct capital costs before being subject to reasonableness review.

SCE provides an estimate for roof lease payments of $18,000/MW/year, and contends that "the maximum price paid for the roof leases will be a small percentage of the value of the electricity produced."⁵ SCE estimates the total O&M costs, including roof lease, for a 1 MW solar PV facility to be $28,000 per year and would roughly double for a 2 MW system. The annual staffing costs are estimated at about $1.4 million.

SCE proposes a balancing account (SPVPBA) for rate recovery of the SPVP costs. The proposed SPVPBA would operate between 2009 and 2013 and would end with the inclusion of SPVP O&M and capital revenue requirements in SCE's Test Year 2015 general rate case (GRC) revenue requirement or sooner.⁶

SCE requests that no reasonableness review of the SPVP be conducted if its capital expenditures are below an established range. SCE offers to provide testimony supporting the reasonableness of the SPVP O&M costs during the prior calendar year in its annual Energy Resource Recovery Account (ERRA) reasonableness proceeding if its direct capital expenditure on a $/W average basis exceeds the proposed amount.

SCE also requests an additional 1% over its currently authorized rate of return (ROR) for the SPVP, claiming that according to Decision (D.) 06-05-039, the increased ROR is warranted for utility-owned renewable generation.

Finally, SCE requests that if the CSI goals become mandatory for SCE customers, the capacity under SPVP be credited towards its customers' targets and seeks authority to expand the program to 500 MW if the program is successful.

3.2. Need for Project and
Project Objective

SCE states that the SPVP complements the existing CSI and the RPS and will contribute to both program goals.⁷ In SCE's view "while the primary purpose of the program is to help meet the State's ambitious Million Solar Rooftops goal, the Solar PV program will also add to SCE's renewable portfolio."⁸ With respect to CSI, SCE states that the SPVP has the potential to add over 80,000 rooftop equivalents in five years or 10% to the overall CSI goal of one million solar rooftops.

SCE also notes that while both the CSI and RPS programs target renewable resources, "neither program is well suited to develop medium-scale PV solar installations in the one to two MW range in the near term due to size and transmission limitations."⁹ SCE argues that SPVP fills this gap that the CSI and the RPS programs have left untapped.¹⁰

Most parties agree that there is a gap in the market for one to two MW distributed solar, but disagree on whether that gap needs to be filled. In particular, they also disagree on whether the proposed SPVP is the best option to fill the gap.

We agree that there is a gap in the development of one to 2 MW wholesale distributed solar projects due to the focus of our existing programs. The CSI is intended for projects of up to 5 MW in size, but because only the first MW of the project is eligible for incentives, most CSI projects tend to be 1 MW or less in size and located where sufficient load exists on site. The RPS competitive solicitation approach is generally utilized by larger installations, due in part to transaction costs.

We also agree that the existing gap in the one to two MW segment of the solar industry may be filled by a variety of policy or legislative options. Indeed, as parties have noted, a feed in tariff (FiT) is currently under review at the Legislature and may result in future legislation, particularly affecting the one to two MW market, which is the subject of this application. The Commission is also considering expanding the current FiT for small renewable generation in Rulemaking (R.) 08-08-009. However, nothing precludes us from taking reasonable steps to address this gap while either the Legislature or the Commission consider other options. We have stated our desire for the California investor-owned utilities (IOUs) to develop renewable generation in California. Renewable generation that is close to load, can be deployed quickly, and requires less transmission is a desirable option.

The State of California has made substantial commitments to renewable energy including renewable distributed generation. The Energy Action Plan I, adopted by the Commission in 2003, identified clean distributed generation as a priority resource for the state, including utility owned distributed generation¹¹ The EAP I states, "the state is promoting and encouraging clean and renewable customer and utility owned distributed generation as key component of its energy system."¹² More recently, the California Air resources Board adopted a scoping plan that specifically identified a target of 33% renewables by 2020 as a key strategy that will help the state achieve its 2020 greenhouse gas emission reduction goal. Consistent with these principles, and given the magnitude of the state's renewable objectives, we find that the SPVP is a reasonable step to encourage development of more distributed renewable resources in the one to two MW range. The SPVP projects can be located near load, thus avoiding the need to build new transmission facilities and help reduce local congestion. The ability to deploy this technology quickly also can help advance California's broad goal of developing renewable energy and specifically help make progress toward the state's emphasis on developing distributed rooftop solar PV projects while other options are being considered. Although we agree with the intent of the SPVP, as discussed below, several modifications to the proposed SPVP are necessary in order to allow more competition consistent with Commission policies. The following sections address these issues.

⁴ SCE's Application states that "SCE envisions the individual Solar PV Program installations to be in the 1 to 2 MW range. As the program proceeds, however, some installations may be larger or smaller than this range due to roof size or circuit loading

considerations." (See SCE Application at p. 1.)

⁵ SCE's application, pp. 13-14.

⁶ Concurrent with its application, SCE filed an advice letter requesting authorization to establish a SPVP memorandum account (SPVPMA) to record the start-up costs associated with the SPVP while this application is pending. SCE proposes to transfer the balance recorded in the SPVPMA to the SPVPBA once SCE's SPVP is approved. SCE's advice letter was approved in Resolution E-4182.

⁷ SCE Opening Brief at p. 4.

⁸ SCE's Opening Brief p. 5.

⁹ SCE's Application at p. 5.

¹⁰ SCE's Application at p. 5.

¹¹ Energy Action Plan I at p. 7.

¹² Energy Action Plan I, p. 8