California Utility Receives Huge Response to its Renewable Energy Feed-in-Tariff

The Sacramento Municipal Utility District (SMUD) recently reported that its feed-in tariff (FIT) program for renewable or combined heat and power generating facilities met with an overwhelming response in its first week.

Accepted for the first time in January, the applications for the new FIT, which were all for solar photovoltaic power, exceeded its 100-megawatt allotment.

The program is designed to remove barriers to interconnection with the utility by providing standard rates and contract conditions that make it easier for SMUD and its power-generating customers to do business. Under a Feed-In Tariff, a utility offers standard published rates, and standard contract terms for generation that qualifies under the Feed-In Tariff criteria. In September, SMUD's Board of Directors approved a Feed-In Tariff for the purchase of energy from eligible renewable energy resources and combined heat and power installations up to 5 MW.

For contracts signed in 2010, Sacramento Municipal Utility District customers with photovoltaic systems will be paid on average $0.0968 per kilowatt-hour (kWh) for a 10-year contract, $0.1040 per kWh for a 15-year contract, and $0.1107 per kWh for a 20-year contract. Applications must include $1,400 for the Interconnection Review Fee and a deposit of $20 per kilowatt, and each system is limited to 5 megawatts in capacity.

“We are very pleased with the interest and heartened by the possibility of bringing another 100 megawatts of clean electricity to the area,” said SMUD AGM of Energy Supply Jim Shetler.

“It will benefit the region by protecting the environment, saving money, reducing climate impacts of electrical generation and providing local economic benefit.”

FITs, which are widely used in Europe, face regulatory constraints in the United States. However, according to a January 2010 report from the Department of Energy’s National Renewable Energy Lab, the path for states seeking to provide legal FITs is tricky, but possible. The report, "Renewable Energy Prices in State-Level Feed-in Tariffs: Federal Law Constraints and Possible Solutions," [pdf] concludes that states can offer feed-in tariffs, but need to create them in such a way as to meet federal requirements under the Public Utility Regulatory Policies Act of 1978 and the Federal Power Act of 1935.

The report describes several possible ways for states to proceed to create incentives for renewable energy. One suggestion is for payments based on cost of generation, in keeping with federal limits, but then adding incentives on top of that cost through subsidies, Renewable Energy Credits, or state tax credits. The report notes that given the legal uncertainties, state regulatory groups should consider getting advice from the appropriate federal agencies.

As the nation’s sixth largest publicly owned utility, SMUD has been providing low-cost, reliable electricity to California for more than 60 years. SMUD is a recognized industry leader and award winner for its innovative energy efficiency programs, renewable power technologies, and sustainable solutions for a healthier environment. The utility is on track to become the first large California utility to receive 20 percent of its energy from renewable resources.

SMUD lists only five applicants for the new program, and they are all commercial entities: Belectric, Inc.; Global Connect; McClellan Park; Recurrent Energy; and SunPower Corporation (Nasdaq:SPWRA).

Image courtesy of www.smud.org