Georgia Solar Policy Forum—A Discussion about PPAs, Utility Rates, and Economic Development

The Georgia Solar Energy Solar Association (“GSEA”) hosted its 2013 Policy Forum last week at the Georgia Tech Research Institute.  The program focused on the status of solar markets nationwide and in Georgia, as well as discussions about current Georgia laws and regulations governing energy policy and future changes that would open the markets for solar in the state.

2012 Solar Policy Initiatives

In 2012, GSEA conducted a major campaign with Georgia legislators to pass a bill that would have expressly permitted the use of power purchase agreements (PPAs), solar equipment leases and other types of third-party financing for solar projects.  According to the presenters at the Policy Forum, the solar market will never really open up in Georgia until those financing arrangements are permitted.

The 2012 bill met with steep opposition from Georgia Power and local EMCs because, they claimed, that such transactions violated the state’s Territorial Act, which regulates the utility industry and provides that only registered utility companies can sell power, and assigns territories to those utility companies. (see my 2012 blog post about this issue).  While the 2012 bill ultimately did not pass, it certainly caught the attention of Georgia Power and made the utility companies realize that the Georgia solar industry and its advocates were gaining momentum and support.

2013 Solar Policy Initiatives

GSEA appears to be continuing its course to pursue legislation that will allow PPAs and third-party financing.  A revised version of the 2012 bill has been introduced this year by Senator Buddy Carter as SB 51 2013.   GSEA will also continue to push to raise the cap on the state tax incentives for renewable energy projects.

What stands in the way of these solar policy initiatives? 

According to several panelists, including State Representative Chuck Martin and Georgia Public Service Commissioner Tim Echols, the biggest hurdle to solar-friendly legislation is Georgia’s low power rates.  Georgia and the southeastern states have the lowest electric rates in the country (by a lot in comparison to areas like the northeast).

Here’s why that is important (or at least why legislators and regulators think it’s important):  low power rates are apparently one of Georgia’s competitive advantages in attracting businesses to move to this state—and no one in elected office wants to take any action that could be seen as anti-economic development. 

Commissioner Echols and Representative Martin believe that legislation that opens the market to solar PPAs could create conditions that “run off companies and manufacturers with higher utility rates.”  No elected official wants to be positioned as “anti-business” or “anti-economic development” if the debate is framed in those terms.  But….

Does adding solar power to Georgia mean higher rates?

Georgia Power doesn’t think so.  Georgia Power sought approval to increase its purchase of solar power from independent producers from the current 55MW to 210MW over the next two years.  The program is called the Advanced Solar Initiative Program.

According to Ervan Hancock, a manager of renewable and green strategies for Georgia Power, the reason that Georgia Power is voluntarily seeking to increase its solar purchases is that “it is now economically feasible to add solar to [Georgia Power’s] portfolio.”  Hancock went on to explain that Georgia Power has considered solar and other renewable energy sources for a long time but has never believed—until now—that it could include solar in its portfolio without causing a rate increase to its customers.  The reason Georgia Power believes that solar power can now be added without rate increases is because the costs of equipment have significantly decreased in the last 12-18 months, making the cost of solar power much less expensive.

So, if Georgia Power can add solar power without increasing rates, why do legislators believe that PPAs or solar leases will cause utility rates to go up?

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Performance Contracting 101 for Public Owners

A new law went into effect on January 1, 2011 allowing state agencies to enter into performance contracts.  While this type of contracting is new to Georgia, it is has been in use by the federal government and many other states for many years.  Georgia’s law has some unique features that are different from other states’ laws, and in the next few weeks I’ll be explaining the new law and posting updates about GEFA’s progress in finalizing the details for implementation of the new law.

This week, I participated in what I hope will be the first of several workshops for state agencies about performance contracting.  The workshop was really an introduction to performance contracting–I would liken it to a “Performance Contracting 101.”   Performance contracts are not like traditional construction contracts or service agreements, and the goal of the workshop was to teach public owners the nuances of performance contracts and to make them comfortable with the process.

Here is a rundown of the workshop:

Richard Stogner,  C.O.O. of DeKalb County: Richard gave opening remarks as the host of the workshop and shared his experience in having overseen the first major county-wide performance contracting project in Georgia.

David Godfrey, Director of Georgia Environmental Finance Authority (GEFA): David’s office is in charge of overseeing and administering the performance contracting program in Georgia.  He provided a review of important sections of the performance contracting statute and gave an update on status of implementation.

Wayne Robertson, Principal at EnergyAce: Wayne explained the fundamentals of the technical aspects of performance contracting, such as energy audits, baseline energy use calculations, and measurement and verification methods.

Peter Floyd, Partner at Alston & Bird: Peter addressed some of the statutory requirements for performance contracting, and explained some of the unique features of the financing aspects to performance contracts.

David Fisher, Director of Facilities Management of DeKalb County: David gave a detailed presentation about DeKalb County’s nearly $10 million performance contracting project, which was so successful that it has turned out to generate even more savings than had originally been projected.

My presentation focused on best practices and avoiding pitfalls of performance contracts.

It was clear from the questions and comments made by the attendants that public agencies are excited about the opportunity to use performance contracting and anxious to get started.  There will be no shortage of “potential customers” for performance contracting projects.  I suspect that the only limit will be whatever cap is established (as required by the statute) for purposes of including the financing obligations in the state budget.  (I’ll explain that in more detail in a later blog post).

If you are interested in learning more about the workshop or performance contracting, the presentations have all been posted on the website of the workshop’s sponsor, EnergyAce.

 

Experts Give Insight to Managing for the Rebound

Yesterday the construction practice group of Chamberlain Hrdlicka together with McDonough Bolyard Peck, Inc. and Sterling Risk Advisors hosted a seminar for real estate, design, engineering, and construction professionals called “Managing for the Rebound.”   The program included a public sector panel, private sector panel and the keynote speaker from Jacoby Development, Inc.  Click here for more detailed information about the panelists.

Here are some of the highlights addressed by the panelists:

Public Sector Panel

• Fort Benning is rapidly expanding and building due to the movement of troops and operations from Fort Knox in Tennessee

• Five years ago, annual construction at Fort Benning was consistently around $50 million per year

• In 2009-2011, spending for construction projects at the base will exceed $350 million per year

• As a result of the increased training mission at Fort Benning, it will have a higher priority for future congressional funding

• After the major expansion is complete, annual construction budgets for the base are expected to increase for operations and maintenance contracts

• The expansion of Fort Benning and the movement of troops to that area will bring additional construction projects in the form of county infrastructure improvements and schools and private development in residential, commercial and retail

• GSFIC currently has 10 major projects open for solicitation that listed on the Georgia Procurement Registry and total more than $110 million

• GSFIC recently had a bond sale in October which will fund just under $100 million in new construction projects

• GSFIC also has 40 “smaller” projects totaling more than $35 million in energy-related upgrades that range from $50,000 to $2.2 million per project

• Most new GSFIC projects will have some LEED requirements

• GSFIC is embracing BIM (Building Information Modeling) and will include BIM expectations in future solicitations

• General Services Administration (GSA) has active opportunities for the construction of courthouses in Mobile, AL; Savannah, GA; and Nashville, TN

• Funds have been designated by Congress for the design of courthouses in Charlotte, NC; Greenville, SC; and Anniston, AL

Private Sector Panel

• Experts believe that the Atlanta residential real estate market has bottomed out, but will not recover quickly

• Apartments and multi-family housing will likely be the first sector of real estate to see capital investments and the first sector of construction to see increased activity

• Panelists did not believe that the Atlanta commercial real estate market bottomed out

• Technology has permanently changed the need for office space

• Banks have liquidity and capital but are not lending due to the uncertainty of regulations and policies from the federal government

• Once there is certainty in banking regulations, banks will begin funding new projects again but credit will be harder to obtain

• Even during the recession, data shows that new companies are coming to Georgia and that existing companies are expanding

• Atlanta metropolitan area has experienced a net increase in population even during the recession

• Georgia is attracting companies in the biomedical, renewable energy, film producing and imaging industries

• Future growth for the Atlanta area will have to be focused on more density rather than growing “outward”

Key Note Speaker

• Jacoby Development purchased the former Ford Hapeville assembly plant to re-develop into a mixed-use development called “Aerotropolis” and has already completed demolition and cleaning of brownfields at the site

• The timeline for development of Aerotropolis has shortened as a result of interest from potential tenants and end-users

• The roof of the parking deck at Aerotropolis will be covered with solar panels capable of generating 10 MW of electricity that will be sold back to the grid (10 MW is roughly 1/3 of the electricity needs of Atlanta Hartsfield-Jackson Airport)

• Jacoby is working on solutions to connect Aerotropolis to the airport and Atlanta through fixed-rail systems or other transit systems

We want to thank our co-hosts, panelists, key note speaker, and attendees for making this such a successful event!   Please tell us what you think.

 

Some Sunnier News for Solar in Georgia

Last week, I attended the Southern Solar Summit presented by the Georgia Solar Energy Association (GSEA).  Public Service Commission Chairman Lauren “Bubba” McDonald, Jr. gave the key note address and remarked about how far solar energy initiatives have come in Georgia in the past year, which isn’t saying much given where it started.

But, what he did say that was of interest to everyone in attendance was that the PSC is expected to approve Georgia Power’s proposal to effectively double its purchases of solar energy from private producers—up to 5 megawatts.  This is up from 2.5 megawatts that is currently purchased by Georgia Power, and up from 500 kilowatts that it purchased just two years ago.  Additionally, Georgia Power plans to build 1 MW of solar capacity from its own panels.

Many have argued that Georgia is not solar-friendly because of laws (specifically, the Territorial Act) that prevent anyone other than public utilities from selling power to customers.  This means that parties with excess solar energy may not sell it to any other party—the only option is to sell it back to the grid and that amount is capped by regulation.  Moreover, Georgia Power will only pay for solar power from proceeds it receives from customers paying extra for Green Power.  Solar power purchases are not included in the regular rates.

Other states that are known for their solar-friendly policies allow solar energy to be bought and sold through power purchase agreements (PPAs).  Under a PPA, a commercial building owner may contract with a provider to install solar panels on its rooftop (or other location) and the building owner simply purchases the power generated from the solar panels from the provider—usually at a rate less than the power purchased from public utilities.  The Territorial Act prevents parties in Georgia from entering into PPAs, effectively making Georgia Power the only customer of solar power in the state.  Instead, the building owner would have to make the capital expenditure to purchase and install the solar panels and would then own the power produced by the panels—but would not be able to sell to any other party the excess energy that is produced by its solar installation.

It remains to be seen whether this increase in the cap on solar power purchased by Georgia Power will actually correlate to an increase in solar projects around the state.  One thing is certain…if it does not, there is still plenty more Georgia can do to promote solar energy production here.

BONUS: Check out Beth Bond’s Tweet Diary from the Southern Solar Summit with a list of takeaways and important information.