The California Public Utilities Commission on Thursday approved a unique reverse auction market to let renewable energy developers bid on small-scale projects under a program that would generate up to 1,000 megawatts for the state’s three big investor-owned utilities and further spur the solar industry.
Think of it as the eBay approach to ramping up production of carbon-free electricity.
The idea is to avoid problems with so-called feed-in-tariffs that set rates artificially high for renewable energy production. In Spain, for example, high rates spurred a solar building boom that was followed by a crash when a cap on renewable energy production was reached and rates fell.
Under the plan approved by California regulators, the onus would be on developers to calculate the cost of their projects and then offer a bid high enough to generate a profit yet low enough to beat out competitors. The 1,000 megawatts to be developed would be split between Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric.
At peak output, 1,000 megawatts would power about 750,000 homes.
“This mechanism would also allow the state to pay developers a price that is sufficient to bring projects online but that does not provide surplus profits at ratepayers’ expense,” utilities commission staff wrote in their original proposal. “Providing a clear and steady long-term investment signal rather than providing a pre-determined price can create a competitive market.”