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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Georgia Public Service Commission approves Solar Power Tarrif

The Georgia Public Service Commission announced this week that it has approved a new Solar Power Tariff to increase Georgia Power’s purchases of solar power from independent producers by 2500 kilowatts.

I mentioned this proposed increase in a post following the Southern Solar Summit in back in August, when PSC Chairman Lauren “Bubba” McDonald announced the news at the summit to a group of solar industry professionals and advocates.

In a statement issued by the PSC this week, McDonald claims that Georgia now can “lead 32 other states in solar energy.” However, there is still more that can be done here to promote solar energy projects. States like New Jersey and Pennsylvania still beat Georgia in solar production despite the fact that these states do not have nearly the solar capacity of Georgia.

 

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.