Feed-In Tariff for San Diego

The Clean Coalition is excited to be partnering with the City of San Diego on the City’s Solar Energy Innovation Network (SD SEIN) Initiative.

As part of this work, the Clean Coalition designed a Feed-In Tariff (FIT) with streamlined interconnection to address the financial and economic limitations that currently exist in the market.

FITs are powerful tools that leverage a standardized power purchase agreement (PPA) to bring clean local energy online quickly, reliably, and cost-effectively.

• Download the San Diego Final FIT Design Recommendations (PDF).
• Download the FIT vs BAU economic analysis for San Diego (Excel spreadsheet).

The importance of using a FIT

Significant challenges remain to the deployment of distributed solar systems between 500 kilowatts (kW) and 2 MW in size using the current built environment:

• Most sites in the built environment that can host solar systems, such as parking lots, do not have the onsite demand for net metering to make financial sense; net metering only works for sites whose net power use is equivalent to the power generation of the solar system.
• Many buildings that could site solar have the problem of split incentives between building owners and renters.
• Some procurement mechanisms fail to send the correct market signals for the value of renewable energy, storage, and locational value.

Because of issues like these, a mechanism is needed to allow a developer to sell the power generated by a solar system to a load-serving entity in such a way that incentivizes the deployment of solar across the built environment. The FIT developed by the Clean Coalition addresses these market constraints and needs.  

FIT for San Diego details

The design for the FIT recommends the use of Market Responsive Pricing (MRP), which allows the price paid under the FIT for both solar and storage to adjust based on market response; this ensures that the load-serving entity pays the optimal price for clean local energy. Market Responsive Pricing is critical to successful procurement under the FIT, because it avoids these potential issues:

• Prices set too high will ensure rapid development of local renewable energy capacity but will result in less clean energy produced for a given budget or cause unnecessary upward impact on electricity rates.
• Prices set too low will not attract the market to develop the desired amount of local renewable energy capacity.

A pricing comparison between the SD FIT and SDG&E’s business-as-usual (BAU) renewables procurement, on a 20-year levelized basis, shows that local renewables procured under the San Diego FIT will cost less than half the price of SDG&E’s BAU renewables, which would almost entirely be remote centralized renewables that also require exorbitantly expensive transmission lines. The analysis found that the FIT-procured local renewables will cost 5.3 cents/kilowatt-hour (kWh), compared to 14.1 cents/kWh for BAU-procured renewables.

Another innovation in the San Diego FIT design is a Dispatchability Adder to make renewable energy available whenever it’s needed, instead of only when the sun is shining or the wind is blowing. The San Diego FIT also includes a community benefit adder to encourage project siting in disadvantaged communities and on tax-exempt facilities, such as municipal properties, nonprofit facilities, public housing, and schools.

The FIT design for San Diego made these recommendations for project eligibility:

• New resource: The generating resource should be new, meaning that it has not produced or delivered electric energy prior to the date in which the LSE receives its application.
• Location: The project should be located entirely within the City of San Diego.
• Technologies: All technologies that are compliant with California’s Renewables Portfolio Standard (RPS) requirements should be eligible to participate in the FIT.
• Project sizing: The maximum recommended project size was set at 3 MW. This is slightly larger than the sizing in some FIT programs; however, the City of San Diego offers plenty of large project siting opportunities, and this larger size will enable lower pricing for clean local energy through increased economies of scale.