Wednesday, February 22, 2012

Palo Alto's CLEAN Program (Feed-In Tariff)

Hello Jon

I have a question and some comments concerning Palo Alto's proposed Feed-In Tariff. Can you provide any detail on how the capacity value was determined? I've looked through several documents without any luck. $.006 is considerably lower than I'd expect but I fully realize this determination is utility specific. Also, the program appears to force operators to sell all their production at the FiT rate. I think you should make this part of the program flexible and allow operators to make a choice between gross and net generation payments. A gross payment structure (the status quo) would pay the 14 cents/kWh for all generation. The net payment structure would subtract out production that was consumed on-site at the time of production. You'd be able to measure this because you have two meters recording these quantities. If you give operators the choice between net and gross payment structures I think you'll learn more from the program. You'll also be providing these system owners with another source of potential revenue at no expense to the city.

In Germany the FiT program has a special self-consumption bonus. The operator that chooses to take the self-consumption rate rather than the FiT rate gets paid 8 to 12 cents/kWh rather than 24 cents/kWh. This seems like a ripoff before you consider the fact that electricity in Germany costs 25 cent/kWh. This means the operator who self-consumes electricity is effectively getting 33 to 37 cents/kWh for their production. To me this is almost overkill but it shows you how much they want to encourage self-consumption. The FiT architects in Germany see that the more production is self-consumed the less PV relies on the FiT. The only way for Germany to wean PV off subsidies is to maximize self-consumption.

You can do a similar thing with Palo Alto's FiT. Electricity rates will assuredly be higher than 14 cents/kWh within the next 20 years. Once rates are higher than the FiT the operator would prefer to self-consume their electricity. You should make it so your FiT program allows this. If there is a reason why you are disallowing it I would like to know.

I suspect your 50 MW cap will be heavily over-subscribed. You're in the belly of the solar beast after-all. You'll end up getting 100 applications the first month and the staff will be over-loaded. This defeats part of your program's purpose. It would be smart to consider portioning out the 50 MWs. You start with a 20 slot apportionment that is lottery based. Then you have a 40 slot apportionment that is again lottery based. With this structure you avoid overloading the staff and you also provide a means of observing learning over time. You'd also be able to tweak the FiT down over time based on the number of subscriptions you got.

One last thing Jon. I don't think your program is a true FiT. Feed-in tariffs are independent of the market and technology specific whereas your payment plan is based on avoided cost. Your program is what FiTs become when they grow up. I think Palo Alto should play up the competitive nature of their tariff program. Maybe you could hold an acronym competition that would double as a advertising campaign. The winner would get some solar panels or something. If you do end up changing the program's name I'd suggest Light Pricing - it gets the point across and it has a nice old school acronym. Have a great day.


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