Letter to Senate Energy, Utilities, and Communications Committee: AB 1106 – support if amended

By Paul Gipe

 

The Honorable Alex Padilla
Chair, Senate Energy Utilities and Communications Committee
State Capitol, Sacramento, CA 95814
By FAX to: 916-445-1389

RE: AB 1106 – support if amended

Dear Senator Padilla,

Feed-in tariffs are the world’s most successful policy mechanism for stimulating the rapid growth of renewable energy in the most fair and equitable manner possible at the lowest cost to consumers.

Feed-in tariffs have led Germany to the creation of 280,000 new jobs within the last decade and have created as much as $75 billion in new economic activity. And despite the worldwide financial crisis, Germany, France, and Spain are continuing the rapid development of their domestic renewable energy resources.

I applaud you and Assembly member Ruskin’s leadership for introducing AB 1106. The bill could be a powerful force for California economic development and job creation, but only if amended to be a successful policy.

Based feed-in tariffs elsewhere AB 1106, to be successful, must contain the following elements.

 

  • Program Cap: The cap must be as high as possible to encourage manufacturers to locate in the state to meet the demand for renewable energy technology. Ontario’s precedent-setting policy has no cap. The cap in AB 1106 should be set at the state’s RPS targets. The RPS cap could be prorated such that an annual cap is no less than 2% of the state’s electricity consumption until the RPS target is reached.
  • Project Size Cap: The project size cap should be raised to 20 MW as recommended by the California Energy Commission.
  • Eliminate Tier 2: Tier 1 projects, those whose tariffs are based on the cost of generation plus a reasonable profit and the only way to create successful feed-in tariffs. Tier 2 simply restates the unacceptable status quo. The cap, as in the note above, for Tier 1 projects, should be 20 MW.
  • Contract Terms: All contracts under AB 1106 should be for 20 years or longer. Shorter contract terms are ineffective and raise rates to consumers. Longer contracts assure that ratepayers receive the economic benefits that renewable energy provides.
  • Differentiated Tariffs: Tariffs should be differentiated by technology for projects of all sizes up to the project size cap of 20 MW.
  • Wind Tariffs: Wind energy tariffs should be further differentiated by type of technology and wind resource intensity. There should be a tariff for “small” wind (wind turbines less than 10 meters in diameter) and for “large” wind. In addition, the tariffs should be differentiated for large wind turbines on the basis if resource intensity. This method is used successfully in Germany and France and has been introduced into Switzerland. It encourages economic development of wind energy across the state and not just in a few windy passes while limiting costs to consumers.
  • Open to All Californians: It’s critical to success of AB 1106 that the program is open to all Californians and that generators do not need to be a “customer” of an electric utility to participate.
  • Tariffs Based on Cost of Generation: AB 1106, to create the economic stimulus necessary to create the jobs needed in California as well as to meet the state’s RPS and global warming targets, must be based on the cost of generation plus a reasonable profit. Ontario’s new feed-in tariffs are all based on such calculations. The PUC is fully capable of determining what is a fair return on investment is needed to attract capital while minimizing costs to ratepayers. The PUC has been doing so for decades. All successful feed-in tariff programs have based the tariffs on the cost of generation. It is how we regulate electric utilities in North America and it is only reasonable to extend this principle to renewable sources of generation.

I encourage you to amend AB 1106 to incorporate these changes. By making these changes, AB 1106 has the potential to put California back into the forefront of renewable energy development in North America that it gave up 25 years ago.

Sincerely

Paul Gipe