[Reprinted from the March-April 2015 issue of Public Power magazine.]
FACT: Customers want solar. And no matter how they access it, they will turn to their utility for help. The technology may not be for everyone, but utilities that prepare proactively can better respond if customer interest does arise. The United States added 4 gigawatts of solar generation to its grid in 2013. Public power contributed 200 megawatts to that total, bringing its own solar generation capacity quota to 900 MW.
As public power utilities, working with the community we're a part of is our No. 1 priority. Utilities are uniquely positioned to maximize the customer benefits of solar, and public power utilities in particular are poised to support innovation and effective integration through customer relationships.
Public power utilities are already employing a variety of business models to facilitate solar build-out. Some models suit public power better than others, according to research produced by the American Public Power Association's Demonstration of Energy and Efficiency Developments grants and scholarships program and the Solar Electric Power Association.
Power purchase agreements are a utility-level solution to adding solar generation that can avoid the high upfront cost that the technology requires despite declining equipment prices.
Sterling Municipal Light Department in Sterling, Massachusetts, secured lower-than-market pricing on a power purchase agreement for solar energy that helped land it SEPA's designation as No. 1 utility for solar integration on a watts-per-customer basis in 2013.
Sterling's utility maintains a portfolio with 30 percent of its power from renewable sources on its own accord. Municipalities in Massachusetts are exempt from the state's 400-MW solar carve-out, but those like Sterling choose to participate.
The utility leveraged relationships with large customers to create public-private partnerships so that it can participate in solar generation projects without owning them. As a municipality, the utility solicited bids and selected vendors who were required to provide the lowest fixed purchase price-per-kWh for the solar power. While Sterling electric customers were guaranteed a low rate, project partners benefited, too. The municipality made the project easy to build for the private partners who took advantage of solar tax incentives and renewable energy credits.
Owning Your Power
Tax credits for renewable power project development are mechanisms that public power utilities, as tax-exempt entities, cannot take advantage of on their own. So while generation projects offer economies of scale that can lead to cost savings for utility customers, they may be challenging for public power utilities. But in those challenges, public power finds creative opportunities.
Joining forces is one way public power has been making generation ownership more affordable since the 1950s. To finance a 3.54-MW solar facility in Napoleon, Ohio, American Municipal Power, Inc., worked with three of its member communities and the Solar by Soldiers program and located the project on a brownfield site. Solar by Soldiers puts military veterans to work constructing renewable power projects.
AMP is a wholesale power supplier and service provider for 130 public power utilities in Ohio, Pennsylvania, Michigan, Virginia, Kentucky, West Virginia, Delaware and Indiana. Three Ohio members own the Napoleon project: Napoleon, St. Marys and Waynesfield. The project is connected to Napoleon's electric system, which saves AMP money on transmission costs.
Engaging the Community
While utilities who own solar generation can control transmission and interconnection, managing customer-owned or customer—leased assets is a separate challenge, but one in which many options exist for engaging those customers. Utilities in municipalities may choose to employ financing mechanisms such as net metering or feed-in tariffs to make solar economically feasible for customers.
Gainesville Regional Utilities in Gainesville, Florida, began using a feed-in-tariff in 2009 with approval from its city commission. The feed-in-tariff paid as much as 32 cents-per-kWh with a 20-year contract for solar systems constructed in 2009 and 2010. The utility recalculated rates in 2011 and organized generation into three classes, prices for which ranged from 15 cents-per-kWh to 21 cents-per-kWh.
Residential solar installations are typically small in comparison to utility-scale projects, so the utility capped capacity for the program at 4 MW per calendar year. The program was overly successful, receiving eight years' worth of applications within its first few months of operation. In 2013 a total of nearly 4 MW was installed through the program.
It can be easier for utilities to manage one centrally located solar generation system rather than find ways to interconnect and integrate separate distributed installations, which is why community solar projects are an attractive alternative.
Community solar projects, sometimes called solar gardens, involve customer ownership through shares of the project's cost. Depending on the financing mechanism in place, a customer's participation may mean an offset to their electric bills.
Community solar projects may be sponsored by the utility, a group of consumers or a third party. Colorado Springs Utilities took the latter option when it added community solar garden rules to its renewable energy standard in 2012. The utility offered a bill credit program for customers and the gardens are constructed and owned by the developer. The third party is also responsible for customer participation.
The Colorado Springs city council in 2013 extended the rebates for the community solar garden program's initial run and directed the utility to roll its lessons learned into a new program. The utility launched a 2-MW program later that year with monthly bill credits for each rate class between .04 and .06 cents-per-kWh. Developers for the projects are chosen through a request for proposals process and customers can either purchase or lease a share of the garden. Developers receive payment from customers for their purchase or lease of the share and also receive payments based on the solar garden's performance."