February 3, 2012February 3, 2012 by AbsolutelySolar

California Regulators Make Long-Awaited Changes to the CREST PPA

In November, California regulators made some long-awaited changes to the CREST PPA offered by SCE, with a potentially more favorable climate for developers to finance their projects. This article from the January 2012 issue of Photon magazine features an interview with ASI’s Al Rosen and offers some additional background and views. How does it climate for solar development in California look to you – sunny and bright or slightly cloudy?

Note: After this article went to press, SCE withdrew its request for a CPUC rehearing and is signing these PPAs without reservation of rights or protest. Projects which will produce an estimated 70 MW signed the modified PPA before the end of 2011 (including two projects developed by ASI).

PPA fix beat the clock

Photon Magazine, January 2012

Al Rosen knows all about patience. Two years ago Rosen and his business partner, Peter Weich, who together operate California-based solar developer Absolutely Solar Inc., began installing photovoltaic (PV) projects under the CREST program from Southern California Edison (SCE). The program was created through the state’s Assembly Bill (AB) 1969, which was passed in 2009. Designed to spur the development of wholesale renewable energy projects 1.5 MW and smaller, CREST is SCE’s version of the feed-in-tariff program that was mandated for investor-owned utilities (IOUs) by the same legislation.

Article published in Photon International ~ The Solar Power Magazine

Rosen has been persistent in his efforts to develop his portfolio of small PV projects in Southern California’s Antelope Valley. One major issue, according to Rosen, is the fact that the power purchase agreement (PPA) offered by SCE had terms that made it extremely difficult for developers to obtain financing. The biggest problem was that the PPA contained termination language which was unacceptable to any of the mainstream financing sources, says Rosen. He’s referring to wording that made banks worry that projects could be cancelled almost on a whim.

Rosen’s experience was not unique. According to SCE’s own statistics, only 3.4MW of an almost 248 MW program have reached the point where they can execute contracts. Understanding there was a problem, the Clean Coalition, a Palo Alto based advocacy group, filed a motion with the California Public Utilities Commission (CPUC) in August to fix the troubling language. According to Craig Lewis, the group’s executive director, there was real urgency to the matter because of the looming expiration of the federal government’s 1603 cash-in-lieu-of-tax-credit program, which provides developers with a 30-percent cash payment, rather than the traditional investment tax credit.

With the 1603 program set to expire on Dec. 31, 2011, the need to move quickly was paramount, says Lewis. Evidently the CPUC agreed. In November, regulators opted to include almost all of the Clean Coalition’s suggested changes, which more or less rewrote the CREST PPA to, as Lewis puts it, remove the poison pills. One of the provisions that has been stripped allowed SCE to modify PPAs unilaterally after they were signed. The changes will also allow projects to come on line faster than was the case previously.

William Walsh, SCE’s manager of renewable energy contract origination, says the changes are a slight improvement. I think in terms of a contractor’s ability to get financing, it’s incrementally better, says Walsh, who notes that the utility is reserving its right to contest the changes.»We are certainly missing some pieces that would have protected customers that we would have wanted. But Lewis of the Clean Coalition is convinced that the changes to the PPA will spur a lot of pent up demand for PV. Developers have been lining up to participate but haven’t been able to because of the poison pill language, he says. We know there will be instant uptake on CREST.