Feed-In Tariff Designs for California: Implications for Project Finance, Competitive Renewable Energy Zones, and Data Requirements

Publication Number:    CEC-300-2010-006

Abstract:

A feed-in tariff is typically a tariff that guarantees: (1) to pay a renewable project for the electricity produced, (2) access to the grid, and (3) stable long-term contracts (15-20 years). Feed-in tariffs are globally the most prevalent policy mechanism to promote renewable energy and have driven rapid renewable energy market growth. California has been actively investigating feed-in tariffs during the past several years as a policy mechanism that could help the state achieve its goal of 33 percent renewable electricity by 2020. This report focuses on utility-scale, building-scale, and community-scale renewable energy projects and addresses the following topics: feed-in tariff design implications for financing renewable energy projects, conceptual design issues for feed-in tariffs in competitive renewable energy zones, and data requirements for cost-based feed-in tariff price setting. The report provides a recent history of renewable energy financing, examining the various risk factors that lead to higher cost of capital. The report recommends feed-in tariff design characteristics that address the identified risk factors and therefore may lead to the lowest-cost of capital for renewable energy projects. Building on the research that has been done under the California Renewable Energy Transmission Initiative, the report also examines ways feed-in tariffs could be used to stimulate timely use of transmission developed in regions that have high densities of renewable resources called competitive renewable energy zones (CREZ). Competitive renewable energy zone-based feed-in tariffs can be tailored to facilitate development of specific quantities of renewable technologies, (biomass, geothermal, solar, and wind), to achieve diversity of resource supply, and/or minimize ratepayer cost. The Energy Commission has recommended a feed-in tariff based on the generation costs of specific technologies, an approach based on successful European policy models. Tariff-setting methodologies are examined for the Netherlands, Germany, France, and Gainesville, Florida. This report compares the data inputs used in European cost-setting models with the data that is available in the Energy Commission’s Renewable Energy Cost of Generation Update Study.

Keywords: Feed-in tariff, tariff design, energy policy, Renewables Portfolio Standard (RPS), renewable resources, renewable energy policy, project finance, competitive renewable energy zone (CREZ), data requirements, tariff degression, cost of generation, fixed-price payments, tariff price setting and adjustment, greenhouse gas emissions

Author(s):  Karin Corfee, Matt Karcher, Hans Cleijne, Jitske Burgers, Caroline Faasen, Nellie Tong, Wilson Ricerson, Robert Grace, Jason Gifford

Commission Division:    Renewables Program (300)

Office/Program:    Renewables Portfolio Standard

PIER Program Area:   

Date Report Completed:    August 2010

Date On Line:    08/24/2010

Acrobat PDF File Size: 98 pages, 1,190 kilobytes**