How CSP projects can gain the critical edge over other renewable energy projects
CSP Today examines how CSP projects can gain the critical edge over other renewable energy projects vying to sign power purchase agreements with US utilities.
Utility-scale CSP projects must jump through a number of hoops to close a deal with Western US-utility companies, which are receiving more and more applications from alternative energy projects.
One often overlooked key to utility contract success lies in following protocol and instructions as close as possible, said Mark Severts, spokesman for NV Energy. Most applicants that take the time to bid seem to follow guidelines pretty carefully, Severts noted, because it's just too expensive not to.
The cash deposit necessary to place a bid with NV Energy has gone up steadily in recent years, from US$7,500 in 2009 for projects greater than 10 MW (US$3,500 for those below 10 MW), to a deposit of US$10,000 in early 2010 for the latest round of 10 MW project bids. It's undecided whether that price will continue to climb for the next bid window, set for within the next few months.
Price second to project viability
At Pacific Gas & Electric, projects are evaluated on a broad range of factors. These include viability, portfolio fit, geographic location (such as proximity to transmission resources), size, source, and price. While price is extremely important, company spokesman Denny Boyles says overall project viability has taken on more importance recently.
Experience with project failures and delays, on both conventional and renewable projects, has led PG&E to renew its focus on the peace of mind that a well-backed project brings. “Projects that appear more likely to be at risk for delays will score lower in this evaluation criteria,” Boyles said.
Some utilities have narrowed their RFP solicitations to an annual basis. Southern California Edison, the largest purchaser of renewable energy in the US, evaluates both a project's price proposal and its proposed advancement in key areas of interest, which are often permitting and transmission.
SCE likes to know how far along applicants are in getting permitting for the project's site, and where they are in the process of connecting to the grid. Also important are what level of studies they can present, and how much control they have over their site. For example, whether the project uses public or private land.
Other key items for any renewable project applicant include the viability and reliability of suppliers and equipment. It helps the utility judge the history of a technology that may be tasked with generating daily energy for millions of people. Is it commercially proven? Has it been applied elsewhere in the world at a comparable scale?
Having that breadth of context allows SCE to choose which new project will be the best investment, said Mark Irwin, manager of origination and part of SCE's renewable and alternative power department.
While most utilities like SCE have very detailed proposal instructions online, investors and potential applicants new to the market have had sit-down meetings with the utility to clarify any and all doubts about the RFP process. CSP projects that SCE has signed PPAs with thus far include two parabolic trough projects with Solar Millenium, a tower project with Brightsource, and a contract to utilize Stirling engine systems.
Is the price is right?
SCE generally doesn't enter into specific price negotiations with projects it likes. It requires price proposals in the first stage for applicants, offering them pretty much no insight into what price SCE is looking for to “green light” a project.
“We just ask people to put their best foot forward. We expect developers to figure out what return they require for investment on their project, and that creates the price they require,” Irwin said.
“Different developers need different returns, but we're looking for a strong, competitive market of projects making proposals to us, and we believe this process giving people one opportunity to put their best foot forward on price is an effective process for managing that competition.”
NV Energy's thorough process of vetting renewable projects seems to pay off, in that those chosen almost always pass muster with Nevada's public utilities commission afterward. Of a list of 13 recent renewable energy proposals accepted by NV Energy, all were later approved by the public utilities commission, one of which was CSP – a 110 MW solar thermal project from SolarReserve, expected to go online in 2014.
Viability is also important for the California Public Utilities Commission. Starting with the 2009 RPS solicitation, PG&E began judging viability based on a CPUC-mandated project viability assessment. It focuses on developer experience, technology viability, and project status, which includes permitting and transmission.
The CPUC assesses where a renewable project's contract is in relation to the market-price referent (MPR), and judges how this market valuation compares to other recent bids, or comparable technologies.
A contract can be above the MPR, its market valuation less attractive than other bids, and still be considered an acceptable contract, Boyles said. Price isn't the only factor in CPUC's decision, though it is quiet on what the standard is for reasonable price for above-MPR contracts.
The CSP Project Development Conference & Expo has dedicated 3 sessions solely looking at PPAs, which includes a case study on how to successfully sell power by CSP leaders Abengoa Solar.
If you would like to find out more information about this visit http://www.csptoday.com/projectdevelopment/
Contact Heidi Hafes, Event Director CSP Today
heidi@csptoday.com
+ 44 207 375 7206 / 1 800 814 3459 ext 206
Published on: 2010-09-02
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