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Encouraging Solar Development in California

Commissioner Mark FerronCalifornia Public Utilities Commission

July 13, 2011

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Presentation Overview

1. Introduction

2. Renewable Energy in California

3. Solar’s Role in California’s Renewable Portfolio Standard

4. Focus on California Solar Initiative

5. Other Solar Programs in California

6. Challenges and Future Issues

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The Regulatory WebA complex web of state and federal regulatory bodies

administer California’s energy policy

State1. California Public Utilities Commission (CPUC)

2. California Energy Commission (CEC)

3. California Independent System Operator (CAISO)

4. California Air Resources Board (CARB)

5. Local, Municipal and County Authorities

Federal 6. Federal Energy Regulatory Commission (FERC)

7. Department of Energy (DOE)

8. Environmental Protection Agency (EPA)

9. Nuclear Regulatory Commission (NRC)

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California Public Utilities Commission

• Regulates distribution and retail sales by Investor Owned Utilities (PG&E, SoCal Edison, SD Gas & Electric, and other small or multi-state utilities)

• Responsibilities:– Setting electricity rates – Protecting consumers– Guiding procurement practices (i.e. renewable energy)– Promoting energy efficiency & conservation– Ensuring electric system reliability

• Five commissioners:– Appointed by the governor with senate confirmation, for staggered

six-year terms

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What do I bring to the Commission?

Quite a lot Not so much

• Commercial experience

• Outsiders Viewpoint

• Quantitative Approach

• Independence

• Regulatory experience

• Deep insider knowledge

• Legal Approach

• History and Connections

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California Leads the Way in Renewable Power

• California is the largest single market in the US for renewable energy

• California’s renewable goals will:

• Add another ~20,000 MW of new renewables to reach 33% by 2020

• Reduce CO2 emissions by 18.7 million metric tons in 2020

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IOU RPS Procurement ForecastWith risk weightings based on viability calculator

Source: California Public Utilities Commission, 2nd Quarter 2011

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,0002

00

3

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

MWh (000s)

Viability > 70%to 80%

Viability > 80%to 90%

Viability > 90%"

ExpiringContracts

Online

2020 33% RPS Mandate

20% RPS Mandate

0

20

40

60

80

100

120

2003 2004 2005 2006 2007 2008 2009

MWh (000,000s)

Biogas

Biomass

Geothermal

Small Hydro

Solar

Wind

Source: California Public Utilities Commission, 4th Quarter 20108

Solar projects are now dominating RPS bids

RPS solicitations by Technology

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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2010 2015 2020

Percentage of RPS Portfolio

Biogas

Biomass

Geothermal

Small Hydro

Solar

Wind

Source: California Public Utilities Commission, 4th Quarter 2010

Solar will be the most important RenewableBased on IOUs’ signed RPS contracts

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Solar PV Bids up to 20 MW

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2005 2006 2007 2008 2009Solicitation Year

GWh / year

Source: California Public Utilities Commission, 1st Quarter 2010

0 bids 4 bids13 bids

122 bids

24 bids

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Major Growth in Installed Customer-side Solar PV

Program Size (MW)

Participating Buyers and Sellers

Eligible Technologies and Project Size

Market Opportunity

Renewables Portfolio Standard

~20,000 new MW needed

All IOUs All technologies

Up to 1.5 MW

IOUs hold annual RPS solicitations

Feed-in Tariff 750 IOUs and municipal utilities

All technologies

Up to 3 MW

Contracts accepted until cap reached

Renewable Auction Mechanism

1,000 3 large IOUs All technologies

Up to 20 MW

2 auctions per year

IOU Solar PV Programs

1,100 Utility-owned generation (UOG)

Independent Power Producers (IPP)

Solar PV

SCE: 1 - 2 MW

PG&E: 1 - 20 MW

SDG&E: 1 - 5 MW

At least 1 auction per year per program

Qualifying Facilities (QFs)

Uncapped 3 large IOUs All RPS-eligible technologies plus CHP

Contracts accepted on an ongoing basis

California Solar Initiative (CSI)

1,940 Customers Solar Photovoltaic and Solar Thermal

Applications accepted until incentive budget is exhausted

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Solar has many optionsCPUC Procurement Programs

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The California Solar Initiative

• The second largest solar incentive program in the world with the goal to create 3,000 megawatts of new, solar-produced electricity by 2017

• Statewide budget of $3.3 billion over 10 years; Incentives decline to zero by 2017

• Allocated $50 million in grants for RD&D and an unprecedented $108 million low-income incentive program - the first statewide low-income solar program to be implemented at this scale.

• Builds on success of Self Generation Incentive Program that included incentives for solar, but also combined heat and power, wind, fuel cells, and other customer generation technologies.

• Joint CPUC/Energy Commission website: www.GoSolarCalifornia.ca.gov

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General Market Program has a goal of 1,750 MW

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CSI incentives decline as demand grows

¢/kWh $/watt

We are here

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CSI Applications in 2010 Means Robust and Sustained Growth

Source: www.californiasolarstatistics.com, data through December 31, 2010

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Average CSI System Cost per Quarter

Source: www.californiasolarstatistics.com data through April 1, 2011.

Systems under 10 kW

Systems over 10 kW

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Program Size (MW)

Participating Buyers and Sellers

Eligible Technologies and Project Size

Market Opportunity

Renewables Portfolio Standard

~20,000 new MW needed

All IOUs All technologies

Up to 1.5 MW

IOUs hold annual RPS solicitations

Feed-in Tariff 750 IOUs and municipal utilities

All technologies

Up to 3 MW

Contracts accepted until cap reached

Renewable Auction Mechanism

1,000 3 large IOUs All technologies

Up to 20 MW

2 auctions per year

IOU Solar PV Programs

1,100 Utility-owned generation (UOG)

Independent Power Producers (IPP)

Solar PV

SCE: 1 - 2 MW

PG&E: 1 - 20 MW

SDG&E: 1 - 5 MW

At least 1 auction per year per program

Qualifying Facilities (QFs)

Uncapped 3 large IOUs All RPS-eligible technologies plus CHP

Contracts accepted on an ongoing basis

California Solar Initiative (CSI)

1,940 Customers Solar Photovoltaic and Solar Thermal

Applications accepted until incentive budget is exhausted

Solar has many optionsIOU Solar PV Programs

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Program Size (MW)

Participating Buyers and Sellers

Eligible Technologies and Project Size

Market Opportunity

SCE Solar PV Program (SPVP)

500 250 MW UOG

250 MW IPP

Solar PV Primarily rooftop 1-2 MW

Fully Implemented (D.09-06-049)

PG&E Solar Program

500 250 MW UOG

250 MW IPP

Solar PV Primarily ground-mount 1-20 MW

Approved in D.10-04-052, Staff implementing

SDG&E Solar Program

100 26 MW UOG

74 MW IPP

Solar PVPrimarily ground-mount 1-5 MW

D.10-09-016 approved program, Staff to implement

Investor-owned Utility Solar PV Programs

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Program Size (MW)

Participating Buyers and Sellers

Eligible Technologies and Project Size

Market Opportunity

Renewables Portfolio Standard

~20,000 new MW needed

All IOUs All technologies

Up to 1.5 MW

IOUs hold annual RPS solicitations

Feed-in Tariff 750 IOUs and municipal utilities

All technologies

Up to 3 MW

Contracts accepted until cap reached

Renewable Auction Mechanism

1,000 3 large IOUs All technologies

Up to 20 MW

2 auctions per year

IOU Solar PV Programs

1,100 Utility-owned generation (UOG)

Independent Power Producers (IPP)

Solar PV

SCE: 1 - 2 MW

PG&E: 1 - 20 MW

SDG&E: 1 - 5 MW

At least 1 auction per year per program

Qualifying Facilities (QFs)

Uncapped 3 large IOUs All RPS-eligible technologies plus CHP

Contracts accepted on an ongoing basis

California Solar Initiative (CSI)

1,940 Customers Solar Photovoltaic and Solar Thermal

Applications accepted until incentive budget is exhausted

Solar has many optionsRenewable Auction Mechanism

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Challenges and Future Issues

1. Transmission

2. Interconnection

3. Grid Integration

4. Permitting

5. Cost containment

Transmission Is Needed To Meet RPS Goals

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DG Interconnection Requests have Increased Exponentially

91

4113 18

2 11 1

586

11 7 9 1 5 10

100

200

300

400

500

600

700

Solar PV Biogas Biomass Small hydro Solar thermal Wind Geothermal

Nu

mb

er

of

Pro

jec

ts

Executed RPS Contracts Interconnection Requests Since 2008

Source: California Public Utilities Commission, 1st Quarter 2011

50 MW thermal or larger?

Coordinated State Level Review, including CEQA

Less than 50 MW non-thermal?

Select State Agency Review + Local Government Review (incl CEQA)

58 Counties, 120 Charter Cities

Permitting in California is complex, particularly for smaller projects

Cost containment is a significant issueCost of Renewable Contracts vs Market Price Referent (MPR)

• Under the 20% RPS rules, projects are compared to the Market Price Referent (essentially the generic price of a new 500MW gas-fried combined cycle gas turbine facility) to determine their “above‐market” costs

• More than half of all renewable contracts have prices in excess of the MPR. On average, these contract prices are 15% higher than applicable MPRs.

• The total costs of approved projects exceeded the targeted levels by over seven times

• The new 33% RPS law ends the use of Market Price Referent, but requires the CPUC to establish a limit on procurement costs for each utility

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Source: CPUC, Divisions of Ratepayer Advocates, “Green Rush: Investor-Owned Utilities’ Compliance with the Renewable Portfolio Standard” February 2011

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Solar PV Project Prices Vary

$0.00

$0.05

$0.10

$0.15

$0.20

$0.25

$0.30

$0.35

0.5 - 2 MWRooftop / Fixed

Tilt

0.5 - 2 MWGround / Tracker

2 - 5 MW Ground /Fixed-Tilt

5-20 MW Ground/ Fixed-Tilt

Utility Scale /Crystalline /

Tracker

Utility Scale /Thin-Film / Fixed-

Tilt

Le

veliz

ed

Co

st (

$/k

Wh

)

Mojave Desert (Daggett) South Coast (Riverside) Central Valley (Fresno) North Coast (Oakland)

Note: cost assumptions developed in June 2010 for long-term resource planning, not market data

Source: California Public Utilities Commission, 1st Quarter 2011

MPR

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The Future of Solar in California is Bright

Distributed Utility-Scale Proxy Projects (20 MW)Large Centralized Proxy Projects (200 MW)Large Centralized Pre-Identified Projects (200 MW)Candidate Land

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The Future of Solar in California is Bright

Distributed Utility-Scale Proxy Projects (20 MW)Large Centralized Proxy Projects (200 MW)Large Centralized Pre-Identified Projects (200 MW)Candidate Land

29 29July 31, 2009

Solar Rooftop Identification

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Solar Rooftop Identification

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Los Angeles Area “Rooftop Resources”

Puente HillsLos Angeles

Ontario

Anaheim

3232

For Additional Information

www.cpuc.ca.gov