California Implements Reverse Auctions for Small Renewable Energy Projects

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California is offering another opportunity for renewable energy developers to participate in the state’s electricity market. On August 18, the California Public Utilities Commission (“CPUC”) adopted rules for the Renewable Auction Mechanism (“RAM”) program, which enables smaller projects to sell power to the state’s largest electric utilities. Developers of renewable energy projects up to 20 megawatts should familiarize themselves with the new rules. To participate in the first RAM auction this fall, developers should also be aware that they will need to have made substantial progress with the California Independent System Operator (“CAISO”), an organization whose processes can be difficult to navigate.

The RAM program was established late last year when the CPUC ordered California’s three investor-owned utilities (“IOUs”) to procure up to 1,000 megawatts of system-wide renewable distributed generation through a reverse auction using a standard contract. The new rules implement the RAM program by establishing bidding protocols for the auctions and adopting a standard power purchase agreement for each of the IOUs.

To participate in the RAM program, renewable energy sellers submit price bids to the IOUs during the auctions. The IOUs select the projects with the lowest price first. Once a bid is selected, the seller and the IOU execute a standard power purchase agreement with a term of 10, 15, or 20 years. The price and terms are non-negotiable.

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