posted on Monday, May 22, 2006 9:06 AM
by
Gunnar Birgisson
Southern California Edison and Renewable Suppliers Agree on Fixed Prices
Southern California Edison (SCE), reputed to be the nation’s largest wholesale purchaser of renewable energy, announced it has reached an agreement with four of its largest renewable energy suppliers establishing a fixed price for the utility's renewable energy purchases. Subject to California Public Utilities Commission approval, the agreement would amend certain existing contracts for SCE’s power purchases from Qualifying Facilities (QF). It applies to wind, solar, biomass, geothermal, and small hydro purchases through mid-2012, and would pay participating developers 6.15 cents per kilowatt-hour, increasing by 1% per year.
Not clear at this time is whether SCE will seek to offer these terms to future as well as existing renewable energy suppliers. Nor did the utility elaborate on its reasons for seeking to amend the contracts. Since the inception of QF "avoided cost" pricing in 1978, prices under QF agreements have been a point of contention between owners of QFs and utilities. The fixed price now adopted by SCE appears to mirror the fixed-priced feed-in tariffs that have been used in countries such as Spain and Germany. By offering all renewable energy developers the same price, and by mandating that utilities buy renewable output at that price, the feed-in tariffs have spurred a great deal wind energy development in those countries. Until now feed-in tariffs have not been used in the United States, where renewable portfolio standards (RPS) and the federal production tax credit have been the primary stimulus for renewables development. However, in some states, including California, the administrative process for implementing and complying with RPS has proven cumbersome and unattractive to many developers. It remains to be seen whether standardizing prices, or other contract terms, might help promote further renewable energy development in the US as it has in Europe.