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California Reveals Price It Pays For Renewable Energy

Published at: Feb 6, 2012
source: Forbes
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California has one of the nation’s most ambitious renewable energy mandates – 33% of its electricity must be carbon free by 2020 – yet the price of that power had long remain locked in a black box, kept confidential by state regulators.

Not any longer. Forced by a new law to publish the electricity rates of utility contracts it has approved, the California Public Utilities Commission on Friday issued a report detailing what green energy costs consumers.

Prices paid for renewable energy ranged between 5.4 cents per kilowatt-hour in 2003 to and 13.3 cents in 2011, with an average cost 11.9 cents. However, the commission said that for contacts signed in 2011 but not counted in the report, prices fell about 30% from 2009 contract prices. Many of those contracts promise to supply electricity below the cost of energy produced by natural-gas fired power plants.

(The increase in renewable energy prices from 2003 to 2011 is a result in part earlier contracts that tied the price paid for renewable energy to prevailing natural gas costs, which spiked in 2008. Green energy prices also rose as utilities – Pacific Gas & Electric, San Diego Gas & Electric and Southern California Edison –rushed to sign contracts to meet the mandate to obtain 20% of their electricity from renewable sources by 2010 – the called the renewable portfolio standard, or RPS – a target not yet achieved.)

The steep drop in the 2011 contracts comes from the plunge in photovoltaic panel prices over the past two years, largely due to competition from China. Tellingly, about two-thirds of bids for solar energy contracts last year (by electricity generated) were for photovoltaic projects and only a third were for solar thermal power plants, which deploy vast arrays of mirrors to heat liquids and produce steam to drive an electricity-generating turbine. Photovoltaic solar, or PV, also represented the bulk of contracts short-listed by utilities, followed by wind energy bids.

“Results from the 2011 RPS Solicitation indicate that the market, especially for solar PV, has matured meaningfully over the last two years, as measured by an increase in experienced market developers, an increase in projects with high viability and a significant decrease in bid prices,” the report’s authors stated.

Still, high-priced renewable energy contracts continue to be approved. For instance, in November the utilities commission green-lighted utility Pacific Gas & Electric’s contract with Spanish developer Abengoa for a 250-megawatt solar thermal power plant over staff and some commissioners’ objections that it would cost customers twice as much as other renewable energy projects.

The report shows there’s no shortage of interest by developers in building renewable energy projects in California. Last year, they submitted 1,000 bids that, if all were accepted and built, would have generated 91,000 megawatts of electricity – far above the state’s power demand.

Though only a fraction of those bids end up being built, California last year installed a record 839 megawatts of renewable energy – from solar and wind – a 28% jump over 2010. To date, California has built 2,541 megawatts of renewable energy under the renewable portfolio standard program.

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