Money for Renewables

A colleague at a state commission was reviewing the 2010 paper I worked on for the National Renewable Energy Laboratory, entitled "Renewable Energy Prices in State-Level Feed-in Tariffs: Federal Law Constraints and Possible Solutions."  He was asking about ways to compensate renewable generators at levels exceeding avoided cost.

The paper at p.14 suggests a way for a state to provide compensation to a PURPA-qualifying facility that exceeeds avoided cost, without violating PURPA.  The state would require its utilities to purchase renewable energy credits (RECs) from QFs at a  state-set price calculated to cover the difference between the utility's avoided cost and the price the QF needed. For example, if a utility's avoided cost were $15/MWH and the cost of solar were $25/MWH, a state might require a utility purchase the electricity at avoided cost (in compliance with PURPA) and purchase a solar REC from the same generator at a prescribed price of $10/MWH.

The paper explains that this approach is not preempted by PURPA.  FERC has made clear that RECs and other forms of non-avoided cost compensation (like grants and loans) are outside FERC's jurisdiction.