LOS ANGELES (Reuters) - California’s innovative financing plan to help relatively small renewable energy firms get their power to market over high-voltage transmission lines won approval from federal regulators on Thursday.
Developers of new power plants generally pay the cost for building high-voltage “trunklines” to connect their plants to utilities that deliver the power to consumers.
But most renewable energy companies are smaller firms that develop wind, solar or geothermal resources in remote locations that need new lines, which they often cannot afford to build.
The U.S. Federal Energy Regulatory Commission gave the OK for the California Independent System Operator to spread the cost of building the new lines among the utilities that receive the power.
The wind and solar developers will pay their share of the cost once plants begin operating instead of before they produce power.
The California plan is the first of its kind for U.S. utilities, the Cal ISO said.
FERC Commissioner Suedeen Kelly said that California’s financing method “will become a model for others in the industry.”
The American Wind Energy Association, an industry group, applauded FERC’s unanimous approval of the Cal ISO plan.
Wind development has faced a “chicken or egg problem...where no wind farms are built unless there is transmission, and no transmission is built unless there are wind farms already in place,” the AWEA said in a press statement.
Texas, Colorado and Minnesota are also considering such financing plans.
Texas has the most wind power and California is a close second among U.S. states and Minnesota is fourth, 2006 AWEA rankings showed.
California has set a “portfolio standard” calling for each investor-owned utility in the state to have 20 percent of the power it delivers generated by renewable sources.
More than 4,000 megawatts of new renewable generation is proposed in California, the Cal ISO said.
California Public Utility Commission President Michael Peevey said the commission was pleased with the FERC ruling.
“One of the challenges we face in achieving our RPS goals is developing the transmission required to access remote concentrations of renewable resources,” Peevey said.
“With this change, FERC has effectively harmonized its cost recovery rules with the realities of renewable energy development in the state.”
Cal ISO will now work with stakeholders -- mainly the big three investor-owned utilities in California -- on a detailed plan that incorporates Thursday’s FERC ruling.
Those utilities are Pacific Gas & Electric Co., a subsidiary of PG&E Corp., Southern California Edison, a subsidiary of Edison International, and San Diego Gas & Electric Co., a subsidiary of Sempra Energy.