Burn Some Daylight

Am working through a request from Marin County and looking at the request from San Francisco to understand one, whether community power is a good thing, and if so, how solar can help.

Conceived about five years ago as a response to the 2001 California energy crisis, local communities can own their power generation assets and supply power via wires and poles maintained by the investor owned utility.  Areas such as Palo Alto, Los Angeles and Santa Clara [all municipally owned utilities, or MOU's] stood out during the crisis because they did not suffer, but had sufficient energy independence to avoid blackouts and actually sell surplus power back during the crisis.  Now, using the in-place rate base for the community as an asset, local power authorities have the power to not only choose who provides their power, but also where it comes from.  Called a Community Choice Aggregator [CCA], these joint power authorities are being set up in a number of California communities who want greener, and cheaper grid power.

Marin CCA revenues paid in power rates would be about $80 to $90 million per year, San Francisco's about $200 million.  The key assumption that is being tested is whether CCA's can source power that is greener and cheaper than the investor owned utilities doing business here.

CCA's can be a great ramp and job creation engine for local distributed generation assets.  San Francisco's plan shows a need for 31MW of solar in the city, for example.  The question is how best to use the CCA format to capitalize the development of this local green power.  The goal is using inexpensively generated baseload power to help fund development of lots of cheap, green power.

The Marin request has the following main points:

1. power generated must meet or beat local utility cost, be load following, and be quoted for a five year term.  Resource adequacy must be guaranteed.
2. power generated must have at least a 25% renewable component
3. market size is estimated, not guaranteed.  Customer re-entry charges are not set.

Here is Marin's forecast energy demand:

To date, no CCA has been established in California. Uncertainty due to true-up costs related to utility stranded costs and customer drop-outs and the short term meet or beat requirement has stopped CCA implementation.  San Francisco, Kings River and Marin are now testing the primary premise of whether an energy service provider can meet or beat  investor-owned-utility pricing.  

My interest is how you use CCA purchasing power to increase the amount of local solar.

The implementation of the American Recovery and Reinvestment Act's renewable energy provisions is a huge stimulus for the deployment of renewables.

Combine this with the oversupply situation of silicon and modules, and we have a situation where I forecast where we will be able to provide carbon-free peak power at a lower cost than fossil fuel within five years.

Add to this the carbon cap-and-trade legislation in the Congress right now, and there is a nice tailwind developing.

The trend is our friend, the question is becoming one of implementation.

Issues I am working through include:

1. how to structure a relationship with an energy service provider to give us a good ramp to develop local distributed generation assets in the service area,
2. how to leverage revenue bond financing to provide a discounted purchase price for the asset once the tax attributes have fully vested either through a lease or partnership structure,
3. how to effectively deploy energy productivity [efficiency] and demand management initiatives given that CCA entities can access a pro-rata share of energy efficiency funds,
4. what kind of monitoring equipment will be needed at substations and at larger end users to balance load with distributed and variable generation assets, and
5. what the cost of this shaped power looks like, given a combination of long term, tolling, opt-outs, energy efficiency, and spot market contracts.