Los Angeles has approved a solar feed-in tariff (FIT), the first large city in the US to do so.
Feed-in tariffs are the most effective way to quickly expand renewable energy because they allow solar system owners (homeowners and businesses) to make money by selling energy to the grid under a long term contract.
Under the CLEAN LA program, solar energy will be sold to the Department of Water and Power, the largest municipal utility in the US. The program has a cap of 150 megawatts (MW), which will provide electricity for about 35,000 homes.
That’s a tiny program, but it’s a start. The goal is to reach 600 MW by 2020.
Research by the Los Angeles Business Council, which has been advocating for the program since 2009, shows CLEAN LA – if it were to reach 600 MW by 2020 – would create 18,000 solar jobs, generate $2 billion in economic activity and produce long-term cost savings for businesses, ratepayers and the Dept of Water & Power.
"The 12,000+ acres of available rooftop space available for solar could generate as much as 5.5 gigawatts of power in Los Angeles," says Jacob Lipa, LA Business Council Chairman. "While getting to a 600 megawatt FiT only takes advantage of a fraction of the total capacity in the city, it’s a great start to encourage investment in the city."
Most of LA’s renewable energy comes from outside the city right now. By incentivizing local solar production on the city’s vast, unused rooftops, the result will be more efficient power delivery and meaningful local jobs in solar sales, installation and maintenance.
The Board of Water and Power Commissioners is expected to quickly approve a 10 MW demonstration project and the first 75 MW are expected to come on line this year, with an additional 75 megawatts expected by 2016.
"We have the largest underutilized rooftop capacity in California, and one of the sunniest cities in the country. This is a smart, cost-effective method for businesses to create economic opportunity while weaning ourselves off the coal-fired plants that generate most of the city’s power," says Brad Cox, Senior Managing Director of Trammell Crow Company, a commercial property owner.
"Los Angeles’ energy mix leads to significant carbon pollution, waste ash and other toxic byproducts. By contrast, the CLEAN LA Solar plan will provide renewable energy that’s reliable, affordable, and sustainable. Better yet, we’re investing money back in local businesses across the city to produce clean energy, rather than sending money out-of-state to pay for dirty coal," says Bill Corcoran, Western Director of Sierra Club’s Beyond Coal campaign.
Currently, San Diego leads California with the most solar PV installed, which doubled over the past two years.
Besides being a tiny program, there are other criticisms. Paul Gipe notes, "The program is not a feed-in tariff by international standards." It only goes through 2016, not long enough to provide a long term signal to investors.
"Some of the briefing documents clearly describe an auction or bidding program to allocate contracts in the 10 MW program," Gipe says. For example, contracts will be awarded to the "lowest bidder". This is the antithesis of a feed-in tariff which offers a publicly posted price to participants in an open and transparent manner.
California FIT Moves Ahead
Enacting a robust FIT in California to achieve the state’s 33% Renewables Portfolio Standard (RPS) would create three times the number of jobs, over $2 billion in additional tax revenue, and stimulate tens of billions in new investment, according to a University of California, Berkeley study.
Adoption of a comprehensive FIT would ensure that the 33% RPS goal is met on schedule and cost-effectively.
Initial FIT legislation passed in 2008 that’s been largely ineffective. Several laws have passed since then improving on it, which it looks like the California Public Utilities Commission (CPUC) is finally ready to move forward on.
CPUC says it will raise the maximum size of eligible facilities to 3 MW and adjust the pricing mechanism. Part of the problem has been the market-based pricing system, which unlike successful programs like Germany’s doesn’t set a consistent price based on the type of renewable energy.
The new mechanism still seems overly complex. It will be modified monthly and the starting price will be based on the highest contract bid through auction. There will also be adjustments for time-of-delivery of the energy.
The program is also capped at 750 MW, which is way too low to meet California Governor Jerry Brown’s goal of add 12 GW of renewable energy by 2020.
California already has enough renewables on tap to get 33% by 2020. 7.99 GW is online, pending or authorized, more than half the 12 GW, making it feasible to double that goal.
Read about the advantages of a Germany-style FIT for California:
If the solar vendor and the solar homeowner make money where does the money come from?
The vendor makes money by installing the solar system, and the homeowner or business makes money by selling the electricity to the utility.
If one reads the article installing 160 MWs will create 4500 jobs. That’s ridiculous.
In reply to Rona Fried: In order to entice a homeowner or business to install solar the incentive would have to be higher than purchasing electricity. Therefore the ratepayer without solar solar usually the poor will pay more for electricity
4500 jobs is not so much. My company has created over 20 new jobs in the past 2 years and the utlitites haven’t created any. With solar, you control the power costs with the utility we have no control. Jobs and energy security for the Nation and homeowners of California.
Poor people can go solar easily and with no money down as well, they just need good credit. There are also programs out there for low-income folks who want to go solar, see Grid Alternatives and their model. Help is out there for people who look for it.
Solar is the way of the future. I can foresee that eventually we will all be going green! The incentives are great for homeowners. Now we have a way to reduce our electricity bills. Before the utility companies had a monopoly and we had no options. Congratulations on this new project!
Before figuring out how many solar panels you need, it’s best to reduce your current electricity usage as much as possible. Doing this will make your system more cost effective. Making small and simple changes to your electricity usage can make a huge impact on your electricity bill.