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Ratepayer advocate says DWP overpaying for large-scale solar power, but others say program off to a "promising start"

The DWP's
The DWP's "feed-in tariff" program aims to encourage solar projects larger than those on typical residential homes in the LA basin by buying back energy through long-term contracts.
Metro Transportation Library & Archive/Flickr

Six months in to the L.A. Department of Water and Power’s “feed-in tariff” program, the jury’s still out about whether the program’s working.  But it’s clear the DWP’s ratepayer advocate, Fred Pickel, hasn’t exactly warmed up to the utility’s efforts to put more solar panels on big rooftops in the L.A. basin.

First, a reminder about what “feed-in tariff” is. State law requires utilities to encourage larger projects, such as on commercial rooftops and parking lots, by purchasing power from the developers and companies that set them up. So under the “feed in tariff” program, these rooftop owners feed solar onto the grid and get paid for it by the DWP in long-term contracts.  Environmentalists and business lobbies alike are bullish on the prospects for such a program. Check this Los Angeles Business Council video touting its awesomeness.

An average home’s roof has about three kilowatts of energy producing capacity. This feed-in tariff program encourages projects at least 10 times larger. The total amount of energy the DWP says it will buy is 100 MW, broken up into 20 MW “tranches” to be distributed by lottery. The first lottery happened back in February; the DWP paid 17 cents a kilowatt hour for projects in that first batch.

In January, solar developers, lobbyists and companies that might take advantage of the program argued for higher prices and more room for smaller projects (on this scale, that means projects 30 kw to 150 kw). Was that necessary?

Ratepayer advocate Fred Pickel would say no. He concludes that DWP customers will pay significantly more than they need to for projects in the first batch: between $61-$68 million. 

Pickel says the DWP should stop signing contracts with the companies that won the February lottery. He also argues that the DWP shouldn’t go forward with seeking more large-scale projects in a scheduled July 8 lottery.

Pickel compares the DWP’s feed-in tariff program to the California Public Utilities Commission’s “renewable market adjusting tariff.” That program pegs the price for renewable energy to the contracts the investor-owned utilities signed with solar providers, and lets the price float some with market conditions.

Near as I can tell, DWP liked the fixed pricing mechanism for predictability reasons. DWP’s contracts also extend longer, in some cases twice as long, as the CPUC ones. So far the DWP contracts only cover solar, not all renewables.

It’s worth checking out the blog by Run on Sun’s Jim Jenal on this subject; he’s been reading the technical work on this and other similar programs for years.  For his part, Jenal says DWP is off to a “promising start.” He mapped projects in the first batch, flagging zip codes where the initial phase of the program had two or more projects proposed. The map reveals that most of the projects are in the northern part of L.A., the north San Fernando Valley; few are in the south bay or central Los Angeles, or even on the west side.

Jenal argues the DWP may be paying too much for the largest projects, and for those located in the Owens Valley, based on the deep demand in those areas. But Jenal believes that the DWP should keep the rate it pays for smaller projects right where it is.

The DWP will open the lottery for the next 20 megawatts of solar contracts fairly soon. The base price for these projects will be lower – 16 cents per megawatt.

Something interesting to watch going forward is how many local jobs this will create. Jenal, in his analysis, suggests seven of the top 10 contracting companies from the first round of the feed-in tariff lottery are actually out-of-state corporations. To him, that seems to suggest that those companies will bring people with them, or hire from out of state. If he's right, that could weaken the blue-green alliance on renewable development.