How project developers form their bidding strategies – and what it means for prices and the industry.
Greer Mackebee is a recent graduate of Stanford Univ. Law School, Palo Alto, Calif., and an associate attorney (energy and infrastructure practice) in the Washington, D.C. office of Orrick, Herrington & Sutcliffe, LLP. Justin Bowrsock is Research Director for the Steyer-Taylor Center for Energy Policy & Finance at Stanford Univ., where he served recently as leader of the Electric Power Commercialization Finance Project (EPCF). James Stack is Portfolio Manager for Energy Procurement at City of Palo Alto Utilities, a municipally owned electric utility in California.
In the renewable power industry, the relationship between utilities and project developers is crucial, yet at this point little understood. Based on numerous conversations with wind and solar project developers, it appears that many utilities do not understand how developers approach the competitive procurement solicitations (commonly known as requests for proposals, or RFPs) that utilities conduct to contract for new generation resources. To shed some light, this paper will address two related issues concerning RFPs for renewable energy:
Bidding Behaviors. First, how have project developers changed their bidding strategies over time, as competition has grown not only in the number of developers, but also in the availability of sites for viable projects?
Energy Prices. Second, what can we learn from the prices, project sizes, and technology choices exhibited by the bids that developers submit in response to utility RFPs?
To answer these questions, we will turn to two sources: a) RFP bidding behaviors exhibited by renewable energy developers as collected through phone interviews with active wind and solar industry professionals, and b) a decade's worth of renewable energy RFP bid data collected by City of Palo Alto Utilities (CPAU), a municipally owned California utility located in the heart of one of the most dynamic and competitive renewables markets in the United States.