Stranded Utility Renewables in California

In an article for Renewable Energy World, Navigant looks at the competitive challenges facing early adopters of renewable energy technologies

In the last decade, capacity increases for U.S. wind and solar projects have soared thanks to federal and state policies, as well as technology advancements that have progressively driven the cost of utility-scale wind and solar power to low levels.


However, these cost reductions also pose a competitive challenge for utilities that were early adopters, particularly in California, says Paul Maxwell, director at Navigant.


In an article for Renewable Energy World, Maxwell says disparity between new and old power-purchase agreement (PPA) prices is leaving California utilities saddled with legacy PPAs, while new load-serving entities and community choice aggregators have access to new, lower-priced PPAs to meet their renewable portfolio standard requirements.


Maxwell says it’s likely that the California Public Utilities Commission will grant some level of relief to the utilities for these above-market “stranded” renewable purchases. The relief may come with a requirement to renegotiate purchase prices with the highest cost renewable PPA counterparties.


“In any case, the utilities will seek to minimize purchases under these PPAs due to high prices and departing load,” Maxwell writes. “They will also likely be reluctant to accept future regulatory mandates for the purchase of emerging technologies such as electricity storage or EV infrastructure for fear of being on the wrong end of those declining cost curves.”


He adds that while this is currently a California problem, a similar situation could surface in other markets that depend on relatively high priced, early technology resource purchases. Regulators, utilities, and resource providers could become victims of their own pioneering efforts in renewable resource adoption, he says.

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