Sidestepping the utilities to go green
By David Ehrlich
Published February 19, 2008 - 11:52am
Getting commercial-scale renewable power generation up and running can be a long, costly, and bureaucratic process for investor owned utilities, but some cities in California are working around that by setting up a system to control their own power supply.
San Francisco-based consulting company Local Power is helping a number of cities in the Golden State set up a Community Choice Aggregation agency, or CCA.
The system, adopted into law by the states of California, Massachusetts, New Jersey, Ohio and Rhode Island, allows cities and counties to use the aggregate buying power of its citizens to secure renewable energy supply contracts.
In addition to being able to roll their own packages of energy supply, cities and counties in California can fund the programs using tax-free municipal bonds, giving CCAs a significant financial advantage over utilities and potentially leading to lower rates for consumers.
Local Power CEO Paul Fenn, who drafted the CCA legislation for California, said the system can streamline the process of getting clean energy online.
“CCAs are rate setting authorities. They are authorized under state law to make decisions regarding investments and the rate structure to support those investments,” he said.
“They don’t have to seek approval or win approval by regulators, so they won’t be subject to the kinds of delays that have limited the ability of the investor owned utilities to plan their resources.”
Last June, San Francisco adopted a CCA system designed by Local Power.
“We are now preparing to take the plan to market and find suppliers that are interested in becoming the new energy supplier for San Francisco,” said Fenn.
Under that plan, San Francisco would become an electricity purchaser for residents and businesses currently served by utility PG&E.
Although PG&E would continue to provide electricity transmission and distribution services, as well as meter reading and customer billing, CCAs aren’t making the utility very happy.
PG&E sent a letter to Marin county supervisors who are also considering a CCA, questioning whether the power the CCA would be able to buy would be greener than what PG&E already delivers.
In its letter, PG&E said it was “concerned whether a CCA operating by a Marin County Authority could meet its goal of achieving a significantly higher percentage of renewable power than is currently available from PG&E electric service without the risk of higher rates compared to those being offered by PG&E.”
San Francisco and Marin county are both aiming for a 51 percent renewable portfolio standard by 2017.
PG&E gets about 12 percent of its power from renewable sources and plans to exceed 20 percent under contract or delivered by 2010.
But the utility has hit some potential snags in getting to that target (see PG&E to meet renewable energy requirements - sort of). Earlier this month, Vancouver, British Columbia-based Western Geopower terminated its contract to sell 25.5 megawatts of geothermal power to PG&E.
While the investor owned utilities would be missing out on some revenue streams if they’re taken out of the power generation loop, Fenn said CCAs would lower the utilities’ renewable energy obligations, since the companies would no longer need to provide renewable energy to the cities using CCAs.
The San Francisco project will start out by building 360 megawatts of new renewable and demand side resources.
“That first phase will be followed by a second phase emphasizing baseload capacity,” said Fenn. “That number has not yet been defined, but it’s going to probably be another three or four hundred megawatts baseload capacity.”
He said the first phase calls for just over a billion dollars in investment, and should take just a few years to build.
If a similar package were put through by a utility, Fenn said it would all be broken into separate contracts, each requiring approval by the regulators.
“In this case it’s all approved as a single package. The bonds are issued, and all the facilities are taken together as, in effect, a single investment.”
The types of power generation used by the CCAs can vary.
“Up in Sonoma, you’ve got a lot of geothermal resources,” said Fenn. “Down south, we designed a similar portfolio for San Diego,” he said. “There they have really no tidal resources down there, so it’s all mostly wind out in the desert or photovoltaic.”
“We’re technology agnostic. We just try to find the best applications for a geographic region.”
Fenn believes the system of using CCA and tax-free bonds could spread to more states and even beyond the U.S.
“We’re very hopeful that once you see the Bay Area cities go up and start building that it’ll cause a wave across the country. And perhaps even in European markets, because I know they’re looking for ways to finance renewables in a more liberalized environment.”
Fenn said his company believes that decentralization of the grid is key to changing the system.
“There’s really a global potential, ultimately, for this type of approach.”