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’s Solar Energy Bill Needs Immediate Support to Pass In 2012

The Atlanta Business Chronicle reported Monday that Georgia State Senator, Buddy Carter, withdrew his proposal for a bill that would have bolstered the use of solar energy in this state because he believed it did not have enough votes to pass.  This is sad news to the solar industry in Georgia and to really anyone that is not Georgia Power or an existing utility company in this state.

Senate Bill 401 was introduced in February to encourage private investment in renewable solar energy by allowing individuals and companies to finance solar installations on their property through private power purchase agreements (PPAs).  PPAs work like this:  a solar company owns and installs the solar panels that are placed on the customer’s property (usually rooftop installations).  The customer either leases the solar equipment from the solar company for a monthly fee, or enters into a PPA to make regular payments to the installer based upon the amount of energy that will be generated.

PPAs are the most common form of financing for these projects because they typically involve significant up-front capital costs.  Many other states, particularly those with Renewable Energy Portfolios, allow the use of PPAs for solar and other renewable energy projects.

The reason they are not currently allowed in Georgia is because a Georgia law, known as the “Georgia Territorial Electric Service Act,” limits the sale of power to regulated utilities like Georgia Power and local EMCs.   Under the current state of the law, anyone can purchase and install their own solar panels to produce electricity for themselves.  But, they can’t rent the panels from a third party, buy the power generated from the panels from a third party, or sell the excess energy created from their panels to a third party.

It’s hard to believe that anyone would oppose to a bill that would encourage investment in renewable energy and foster a burgeoning industry that is bringing good jobs to this state.   It just makes sense to use one of the state’s most abundant resources—sunshine—to reduce demand from coal and gas-based energy plants and create jobs at the same time.  But, as predicted, Georgia Power has put up a vigorous fight and is lobbying hard to defeat this bill at all costs.  Georgia Power and existing utilities are heavily invested in coal and gas-based energy plants, and they do not want to see a reduction in demand and revenue due to these PPAs.

The fact that Senator Carter has pulled the bill for lack of votes means that Georgia Power is currently a louder voice in the legislative ears than the solar industry and advocates for green energy.  In order for this bill to have any real chance of becoming law in 2012, it must pass the senate by Wednesday in order to be sent to the House for consideration.

If you support renewable energy and solar-friendly legislation, then you should contact your representatives right away to urge them to vote for the passage of SB 401.  Otherwise, the expansion of solar energy in Georgia will be delayed for at least another year.  That’s a lot of sun that we will have missed out on!

 

NASCAR and Renewable Energy in the Same Sentence?

Most people would never associate NASCAR with renewable energy.  I think it’s a long way off before solar or biofuel technology is advanced enough to power engines that will allow cars to travel at speeds of nearly 200 miles per hour for hundreds of miles.  I will admit that I have never been a big fan of NASCAR or any other racing sports programs, but when I race across this Chicago Tribune article about a 3-megawatt solar installation at the Pocono Raceway, I had to post it and comment.  I thought it was particularly relevant in light of my last post about the latest developments in solar energy programs in Georgia.

I am a little impressed that an industry that is wholly based upon consuming large quantities of fossil fuels is at least trying to minimize its impact on the environment by embracing alternative energy sources for its stadiums.  It’s this kind of innovation that promotes renewable energy projects and increases public awareness of the benefits and effectiveness of solar projects.

As a quick tie-back to my last post, this project underscores the argument for lifting restrictions or caps on the amount of solar energy that is sold back to the grid and/or for allowing power purchase agreements (PPAs):

The solar field will yield enough power to cover all the racing complex’s energy needs — the garages, concession stands, offices, spectator suites and media rooms — with enough left over to feed 1,000 homes.

The track hosts two annual NASCAR Sprint Cup Series summer events, each of which attracts more than 100,000 fans. It also is used by car clubs, driving schools and auto dealerships. During winter, when Pocono is essentially shut down, nearly all the power coming from its solar array will go into the grid for use elsewhere.

Keep in mind that this one project generates 3 megawatts of solar power, which is more than the current cap on the amount of solar power Georgia Power purchases from all private solar installations in the state (2.5 megawatts).

Another key point I picked up from the article was the fact that with the 30% tax credit and state alternative-energy incentives, the project will pay for itself in 6 to 8 years.  That’s the kind of return on investment that really makes these projects worthwhile and cost-effective.

Since the South arguably (and I say arguably, not definitely) has more sun and more NASCAR fans than Pennsylvania, let’s see if we can get some of our southern NASCAR fans and stadiums to embrace this same enthusiasm for solar energy.

 

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.