PG&E Solar PV Program PPA awaits final CPUC nod

Will large Solar Photovoltaic (PV) systems with $0.13 per kiloWatt-hour or lower contract prices dominate the reverse auction?

4728711468_d77e855fd7 PG&E Corporation (NYSE:PCG) subsidiary Pacific Gas and Electric Company celebrated the completion of the 2 MWp (MegaWatt-peak) VacaDixon Solar Station last month as heralded in “CPUC President Peevey, Governor’s Office Join PG&E in Dedicating New Solar Generation Station”.

The VacaDixon Solar Station, located at 5138 Midway Road, Vacaville, CA 95688 USA, is the pilot project for PG&E’s five (5) year program to develop, own, and operate 250 MW (MegaWatt) of solar PV power generation capacity within California.

However, independent PV project developers are more interested in the second five year, 250 MW tranche of what PG&E calls the Solar PV Program PPA. PG&E will procure an additional 250 MW of power generation via standard PPA (Power Purchase Agreement) contracts with independent developers or independent power producers (IPPs) who bid on the base contract dollar price per MegaWatt-hour (MWh) only in a Reverse Auction process.

PG&E filed Advice Letter 3674-E with the CPUC (California Public Utilities Commission) on May 24, 2010, “seeking approval of implementation and administration details for the” Solar PV Program PPA. The Friday, May 28, 2010, CPUC Daily Calendar of ADVICE LETTER FILINGS states the program is “anticipated effective 09/23/10”.

Once the CPUC approves the Advice Letter, PG&E will issue an RFO (Request For Offers) for the first 50 MW and expects all offers and interconnection applications to be submitted within four (4) weeks. PG&E intends to select and notify winning offers with seven (7) weeks of the RFO and anticipates submission of the Final PPAs for regulatory approval five (5) weeks after signing. Quick calendar math indicates projects will be lucky to start before yearend 2010, so Treasury Grants are a risky option unless extended or a project is begun without absolute contract certainty.

Projects can be sized between 1 MW and 20 MW and must be located in the PG&E service area. 3 MW and larger projects are governed by the Large PV PPA while projects smaller than 3 MW follow the Small PV PPA.

While independent developers need to handle all the normal PV project details (please see the draft Appendix A – Offer Sheet for example), contract price, project size, and transmission interconnection progress will be crucial to successful offers. In the draft Solar PV RFO Program Protocol document (.doc file), PG&E will evaluate offers meeting minimum site control and interconnection requirements based on the contract price though also considering supplier diversity criteria. The lowest contract price offers will be selected up to 50 MW. PG&E cautions:

Participants must submit with their Offer their best and final price. Participants will not be given another opportunity to update pricing.

IPPs are paid based on the contract price adjusted for Time of Delivery Periods and Factors detailed in the Large and Small PV PPAs. Although contract price bids cannot exceed $246/MWh ($0.246/kWh), a “Maximum Bid PPA Price for SCE SPVP Program” comment at the The Solar CA Blog of John Barnes said:

The reverse auction PG&E 250MW program IPP winners are expected to win at a rate around $0.13/kWh with a TOU adder.

Per industry scuttlebutt, I hear large projects are expected to win the reverse auction. Small projects may just be getting lip service since each project requires comparable work by PG&E. Likewise, “PG&E IPP Program Implementation Details” at the The Solar CA Blog of John Barnes said:

Each year for the 5 year period there will be an allotment of 50MW as part of that year’s bidding process. Since the maximum size of project is 20MW, then theoretically the winners could be 3 bids of two 20MW projects and one 10MW project.

PG&E provides a draft map, promising an interactive Google map with the RFO, identifying substations with capacities suggesting a higher probability of successful interconnection within the service area. Independent developers need only find a suitable interconnection site as no premium or offer criteria is assigned to the value of power at each substation. The site permitting process is a separate matter.

Please note the curious Confidentiality section from the RFO:

Except with PG&E’s prior written consent, no Participant shall disclose its participation in this RFO (other than by attendance at any meeting held by PG&E with respect to the RFO, if any) or collaborate on, or discuss with any other Participant or potential Participant bidding strategies, the substance of any Offer(s), including without limitation the price or any other terms or conditions of any Offer(s), or whether an offer has been selected.

I don’t know if the above provision is enforceable and collusion on bidding is covered by existing law. An equivalent provision does not address predatory pricing tactics. As a result, I predict a new PV developer entrant will undercut the bidding on one of the two 20 MW projects to establish a U.S. market position.

Do you know where your SmartMeter is?


  1. Anonymous says:

    I am disappointed to read that your qualifications listed include “diversity” issues. This limits many qualified bidders from winning based on the cultural diversity of there companies. Many companies are not large enough to balance out there employee ethnicity to qualify for this bid. I plan to offer a bid. Will this diversity qualification prevent me from being considered? We employ people who are qualified to do the work assigned regardless of there ethnicity. Can you explain the diversity percentages you are looking for to qualify as a bidder for this program?

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