Electric Utilities Issue Requests for Proposals for Renewable Energy Projects
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In an endeavor to broaden their generation portfolios, electric utilities across the United States have brought out requests for proposals (RFPs) for renewable energy projects. Among the primary reasons that these have been released is that utilities are aggressively pushing to conform to state-level renewable portfolio standards (RPS), also known as renewable electricity standards.
The decisions will not only be based on price, but only on factors such as risk of project failure, transmission constraints, date of completion, delivery schedule (i.e. production correlation to peak), etc. Each public utility will evaluate these virtues differently.
Renewable energy project declarations that include utility contracts come from either RFPs or bi-lateral negotiations directly between a public utility and a developer. Utilities and states have different processes for how they adopt new energy projects. Some states call for a competitive bidding process and will not allow bi-lateral dialogues. Renewable energy companies are reacting to both processes as utilities’ requirement for renewable energy increases.
According to Liz Salerno, manager of policy analysis for the American Wind Energy Association (AWEA), a well-designed RPS is a very effective policy. If required levels are set high enough, they will encourage new development.
“The actual installation of renewable energy in RPS states, compared to non-RPS states, is proof that state RPS programs are working. Between the late 1990’s and 2007, 8,900 megawatts (MW) of new non-hydro renewable capacity was installed in RPS states, which is more than 50% of all new non-hydro renewable capacity, and RPS compliance was at 92% in 2006,” Salerno said.
She admonished nevertheless that implementation of even the best RPS policies is hampered by the expiration and extension cycles of the production tax credit (PTC), which is presently set to expire at the end of 2008 and has not yet been renewed by Congress. Congress is reportedly working this week on bills that would extend the tax credits.
Utilities generally bring out three different types of RFPs: all-source, renewable and solar only. From the utilities’ view, there are advantages to all three. Keeping an RFP broad allows for a utility to look at all the applications in agreement. This is the most common RFP. Utilities are looking for renewable MWh delivered on a needed schedule at the lowest cost. From the developer’s view, technology specific, or all renewable RFPs are preferred because they can provide a more level financial playing field.
Sources allege that included in the current energy debates in Congress is a national RPS. If Congress manages to pass a bill that includes a federal-level RPS, the country could see an even greater rush in renewable energy development.
A big selling point for increased development of renewable energy is the jobs and investment funds that it creates, potentially giving a jolt to the sluggish U.S. economy. With increased demand for electricity, officials in many states as well as the federal government are well aware of the rising fuel price and construction prices associated with developing new gas, coal or nuclear plants leading some experts to believe that renewables are well-positioned to pave the way into the future.
States with open RFPs include Hawaii, California, New Mexico, Massachusetts and North Carolina among others. Hawaii is looking for 100 MW of renewable energy resources with proposals due September 25. Northern California is searching for up to 58 MW of renewables with proposals due September 23. New Mexico has issued an RFP for multiple propositions for wind, solar, geothermal and biofuel energy resources that can go online from 2009 to 2011. Propositions are due October 15. Massachusetts seeks up to 260,000 megawatt-hours (MWh) per year from renewables with proposals due by December 1. Duke Energy Carolina’s is seeking bids from solar power companies to install at least 16 MW of PV with proposals dues October 15.
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