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!