One of the problems with solar feed-in tariffs is that if the price is set too high, there’s a frantic gold rush to claim the richly subsidized projects. If the price is too low, there’s not too much enthusiasm by developers to build marginal projects.
That’s what appears to have occurred in Palo Alto in the heart of Silicon Valley, California.
Jon Abendschein, Resource Planner at the City of Palo Alto Utilities, recently sent out a letter which said: Tuesday, July 31 was the deadline for submitting an application to receive a Palo Alto CLEAN contract in August. No applications were received, so there is still 4 megawatts of capacity remaining in the program. The City is now accepting applications for September contract issuance. We encourage interested property owners and developers to submit an application by Friday, August 31 to receive a contract at the beginning of September.
Craig Lewis, Director of the CLEAN Coalition, a distributed generation advocacy group, said, “Although disappointing, this is not entirely unexpected, given that Palo Alto’s objective was to set the price based on avoided cost and to test whether the market could deliver wholesale solar at a ratepayer-neutral price.”
The city is looking to pay $0.14 per kilowatt-hour for 20-year contracts. Jon Abendschein, Palo Alto’s Resource Planner, had commented earlier that $0.14 per kilowatt-hour is a price that will attract developers to the program.
Palo Alto initiated this program in March of this year with a unanimous vote by the Palo Alto City Council. Palo Alto looked to join Germany, Italy, Gainesville, Florida, and Sacramento, California as regions with solar feed-in tariffs (FIT).
Palo Alto called its program a CLEAN program (Clean Local Energy Accessible Now) rather than what they considered the awkward term ‘feed-in tariff,’ or FIT.
It’s a pilot program for the City of Palo Alto Utilities (CPAU) — the first year is capped at 4 megawatts and meant for medium-sized commercial rooftops with a minimum size of 50 kilowatts per installation. The FIT is applicable to solar only, although other renewable energy sources such as solar hot water could be considered later on.
Palo Alto is arguably the heart of Silicon Valley, home to dozens of venture capital firms and thousands of new companies, and armed with a startup- and innovation-friendly culture fueled by its immediate neighbor, Stanford University. The city itself has about 26,000 electric meters and a peak load of approximately 180 megawatts.