California utility SMUD to award feed-in tariff contracts in May
June, 2015: The Sacramento Municipal Utility District (SMUD), the second-largest public utility in California, expects to begin offering contracts under its new feed-in tariff program by May, allowing for construction to begin on dozens of projects between 1 and 5 MW.
Since launching the program in January, SMUD has reserved a total of 97 MW in generating capacity from 28 separate PV projects that are currently under interconnection review. Another 3 MW of projects are »on hold,« while 20 MW are on a waiting list. The total program is capped at 100 MW. According to the developers, which include SunPower Corp., Recurrent Energy and others, all of the projects are scheduled for completion by late 2012. Although capped, the program should vastly increase the amount of PV installed in SMUD's service territory in the next several years, since only just over 6 MW was installed in 2009. No follow-up program or extension has been discussed publicly.
The program has two pools – 33.5 MW in projects up to 3 MW and 66.5 MW in projects up to 5 MW. SMUD offers 10-, 15- or 20-year contracts at the same rates for all types of renewable energy, even though only solar electric projects are participating in the program. Nevertheless, the rates are relatively low, ranging from 7¢ to 8¢ per kWh in off-peak hours and up to 31¢ in peak summer hours. The average weighted production payment for a project under a 20-year contract that starts in 2010 is 13.9¢ per kWh. The average payment increases to 14.4¢ per kWh for projects starting in 2011 and 14.8¢ per kWh for facilities breaking ground in 2012.
When the utility began accepting applications for the feed in-tariff program on Jan. 4, the response was, as their press release 15 days later put it, »huge.« In fact the entire 100 MW had been subscribed within a week. The average size for projects is about 3.5 MW.
The SMUD tariff rates are based on avoided cost to the utility. The method dates back to the 1978 Public Utility Regulatory Policy Act (PURPA), the national policy that required utilities to purchase power from non-utility producers at rates not exceeding their own generation costs. Under new amendments to California law, which came into law this year but have yet to be implemented statewide, utilities are required to supplement feed-in tariff rates with certain indirect costs of fossil fuels. In the case of the SMUD tariff, this means a greenhouse gas premium of 1.1¢ per kWh to account for mitigation costs, and a gas-price add-on of 1.15¢ per kWh, which represents the price risk avoided by replacing natural gas.
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