Southern California Edison has gotten the go-ahead to install 250 megawatts of solar panels on other people's rooftops – but it will share another 250 megawatts of installations with independent developers, state regulators have decided.

In the emerging world of utility-owned solar power projects, this form of sharing the wealth appears to be a growing trend, in California at least.

The Rosemead, Calif.-based utility had originally requested permission for an $875 million project to build and own 250 megawatts of projects over the next five years.

But complaints from developers that this would drive up costs and cut out competition led to the California Public Utilities Commission proposing splitting up the total, with 160 megawatts for the utility and 90 megawatts for developers (see California PUC Mulls Changes to SoCal Edison's Rooftop Project).

Thursday's approval makes the split 50-50, preserving the economies of scale the utility said would be critical to making it cost-effective while opening up an equal share to independent developers, the commission said.

SCE spokesman Gil Alexander said the utility still expected its 250-megawatt section of the project to cost $875 million, or $3.50 per installed watt – a cost the utility told regulators was about half the average installed cost of photovoltaic solar power system in the state.

The cost of the additional $250 megawatts open to developers will be set by a competitive bidding process, and the utility is drawing up plans for that now, he said.

Thursday's decision makes SCE's projects look a lot like a 500-megawatt solar power plant program that Pacific Gas & Electric is proposing. The Northern California utility wants to build and own 250 megawatts of projects and contract with developers for the other 250 megawatts – a plan some said was designed to avoid the challenges that the SCE program had already begun to face at the time (see PG&E to Build and Own Solar Power Plants).

Utilities have traditionally turned to independent developers to build solar power plants and sell the power to them under long-term power purchase agreements.

But the economic downturn and credit crunch – combined with changes in federal solar incentives – have changed that equation. Congress in October approved opening up to utilities the 30 percent tax credit for investments in solar power projects that had previously been available only to third-party developers (see Lawmakers Approve Energy Tax Credits, Bailout).

The drying up of credit and equity financing for large-scale solar projects has given utilities the chance to make the case that their deep pockets and more or less guaranteed rates of return on power they sell from their own projects makes them ideal solar power developers.

SCE had already gotten going on the project, installing a 2-megawatt rooftop system with panels from thin-film leader First Solar (NDSQ: FLSR) on the roof of a Fontana, Calif. warehouse late last year. It is working on a second, 1-megawatt system at a Chino, Calif. warehouse, also with First Solar (see California Solar Rooftop Project Hits Milestone).

But it and other utilities proposing such self-owned projects have faced sharp criticism over what some have seen as the rather generous terms they've set for themselves.

Duke Energy, for example, underwent challenges and changes to a similar solar plant proposal, seeing its size shrink from a proposed $100 million to a final $50 million after regulators heeded complaints from customers and ratepayer advocates that the initial plan was too expensive (see Green Light post and Duke Chops $100M Distributed solar Project in Half).

New Jersey's largest utility, the Public Service Electric and Gas Co. (PSE&G), is also seeking permission to build and own about 120 megawatts of solar power systems (see New Jersey Utility Proposed $773M Solar Project).

All of the aforementioned utilities are laboring to meet state renewable portfolio standards that call for a certain share of utility power to come from renewable sources by a set deadline.

California has one of the strictest standards, requiring its investor-owned utilities to supply 20 percent of their power from renewable sources by 2010, and the state legislature is considering raising that to 33 percent by 2020 – a move that the CPUC has estimated will require $12 billion in new transmission lines (see California Dreaming: Achieving 33% RPS Could Cost $12B in New Transmission).

The California Assembly last month also passed a bill proposing to lift a cap on the amount of power from a utility that is eligible for "net metering," or receiving payments for excess solar power fed back into the grid, from 2.5 percent to 10 percent.

Utilities had said they were fast approaching the smaller cap and that reaching it could stymie new solar power development in their service areas. The bill is being debated in the state legislature (see Green Light post).

While the federal stimulus package passed in February helps developers by offering new incentives, including a new loan guarantee program and the offer direct payment in lieu of the 30 percent tax credit, developers say that the government has been slow in delivering on the promised extra aid (see Solar Companies Fear Delays as Feds Work Slow Magic).

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