California is serious about a host of CSP projects but the entire regulatory procedure needs simplification

By CSP Today staff writer

California’s Renewables Portfolio Standard (RPS) is considered among the most ambitious of its kind in the country.

Utilities in California are gearing up to meet a deadline of having at least 20% of electricity flowing from renewable sources by the end of 2010.

The Sun Belt region of the US, particularly the Southwest, is one of the largest areas in the world for CSP exploitation. Not surprisingly, the authorities have been looking to integrate CSP into their national electricity supply grids through large-scale commercial plants.

Overall, the California Public Utilities Commission (CPUC) has approved over 7,000MW of IOU contracts for RPS-eligible energy.

While it appears that the RPS procurement process is working, even the commission considers project development to be on the slow side.

The commission explains that a typical project must obtain a CPUC-approved power purchase agreement (PPA) with an IOU; a host of generation facility permits from the county, the CEC, air quality districts and other agencies, including environmental ones as required under the California Environmental Quality Act (CEQA) or the National Environmental Policy Act (NEPA); site control through purchase or lease from a private landowner or a land use agency; financing; interconnection agreement with the California Independent System Operator (ISO) or another grid operator; equipment; and an engineer-procure-construct contract.

In all, California has nine solar thermal RPS projects of which 1450MW have been approved, with a further 1350MW pending.

Barriers to progress

The CPUC has identified permission and transmission barriers as the main challenges affecting RPS projects.

Obtaining permission for renewable generation facilities can be complex, long and uncertain.

“Although permitting costs in California may be higher than elsewhere, those have a much bigger impact on the development risk and expense that a project must bear during the pre-construction period, and not very much on the ultimate price of electricity,” said Glen Davis, CEO of Agile Energy LLC.

Policy makers are doing several things to bring down the cost of CSP projects.

First, they are establishing a market through RPS legislation to foster technology advancements and economies of scale. Second, through ITC grants and loan guarantees, they are increasing the availability and reducing the cost of project capital. Finally, mostly at state level, they offer various property and sales tax breaks for solar projects.

If policymakers want to further stimulate CSP development, they can increase RPS requirements and add solar carve-outs, offer additional tax incentives, and ensure that the policies already in place, particularly the loan guarantee programme, are implemented in a useful and timely manner, said Davis.

Last November, Governor Arnold Schwarzenegger issued Executive Order S-14-08 to remove the red tape surrounding the permitting of renewable projects. To streamline the application process for renewable energy development, the CA Energy Commission and Department of Fish and Game will create a "one-stop" process with the goal of reducing the application time for specific projects by half. This is to be achieved through the creation of a special joint streamlining unit that will concurrently review permit applications filed at the state level.

“We understand that California is working diligently to streamline the process, improve transmission access and provide incentives, such as tax abatements to deal with these issues,” said Dan Kabel, president and CEO of Acciona Solar Power Inc.

Calls for coordination

Transmission planning and approval involves substantial lead time and various interdependent evaluations and approval processes.

The state lacks a coordinated and efficient process to support an expedited review and approval of proposed transmission lines that respect jurisdictional boundaries and statutory obligations, while allowing entities to benefit from information-sharing and coordinated review. As a result, it can take seven to 10 years to plan, permit and construct a new transmission line.

For its part, the CPUC is beginning to coordinate resource and transmission planning, procurement and policy.

Because CSP projects are best located on large tracts of land in remote desert locations, access to sufficient, reliable transmission will always be critical to the growth of the sector.

Economic imperative

In the US, getting new transmission built is a huge challenge that will ultimately require both the federal and state governments to implement stronger policies, as well as building a consensus among a very diverse set of stakeholders. Programmes like renewable energy zones will help but in the end transmission will get built if the economics of doing so are improved and the associated risks are reduced to manageable levels.

“This can best happen directly through utility rate cases, environmental permitting processes etc,” said Davis.

Acciona’s Kabel said this issue applied to all large scale renewable projects.

The issue is not only availability of transmission, it is also siting (jurisdictional issues). There are initiatives in Congress and in the Western States legislatures to establish transmission authorities and further define the jurisdictional responsibilities of the federal overnment and state governments.

“Also, the timing of interconnecting our projects to the grid is a significant factor,” said Kabel. He added that Acciona is working with public policy makers to take these issues into account.

Still, this remains a significant and practical challenge.

Technology advancements

In all, California has nine solar thermal RPS projects. Of these, 1450MW have been approved, with approval for 1350MW pending.

Two companies began operating test facilities in the US in 2008. One is Ausra, which completed a 5MW demonstration plant in Bakersfield, Calif., as a precursor to the 177MW linear Fresnel plant the company agreed to construct for Pacific Gas & Electric.

Renewable procurement status

According to the CPUC, California’s three large IOUs collectively served 12.7% of their 2007 retail electricity sales with renewable power.

Pacific Gas and Electric (PG&E) – 11.4%

Southern California Edison (SCE) – 15.7%

San Diego Gas & Electric (SDG&E) – 5.2%

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Contact Sara Lloyd-Jones by email sara@csptoday.com