SACE applauds Georgia Power Company (GPC) for developing new opportunities to support the state’s solar industry and for demonstrating cost competitiveness of solar technology in a part of the country that boasts below-average electricity prices. GPC’s proposed Georgia Power Advanced Solar Initiative, (GPASI) was unanimously approved by the Georgia Public Service Commission (GPSC) on November 20, 2012. Under this program, GPC aims to procure 210 megawatts (MW) of solar photovoltaic (PV) capacity over the next two years, making it the country’s largest voluntarily developed solar portfolio from an investor-owned utility. According to GPC, there is currently 11.6 MW of solar capacity in the GPC service territory, and 49.9 MW under contract.
SACE is cautiously optimistic that this initiative signals a more aggressive stance by GPC to incorporate both utility- and distributed-scale solar within their integrated resource planning. That said, GPASI should be viewed as an intermediate step toward a larger clean energy strategy rather than a comprehensive victory for the industry or state.
The GPASI program evolved from events occurring over the past couple years. For one, several contracts that GPC had assigned with biomass projects fell through, freeing up planned capacity for reallocation to other renewables. According to GPC, the GPASI is also a response to recent “urging of the Commission, our customers and Georgia’s solar entrepreneurs to procure additional solar resources.” That “urging” has come in many forms, including a legislative proposal (SB 401) early in 2012 to adjust Georgia code law so that third party entities (solar developers) could also sell energy to GPC customers, a financing mechanism that has propelled solar markets across the country. Though the legislation did not pass, it did spawn considerable media attention and public awareness of in-state barriers to solar development. Finally, GPC recognized that now is “an excellent time to proceed” with GPASI due to solar technology advancements and significant cost reductions in recent years.
GPC filed a detailed plan of GPASI on September 26. After several weeks of public comment – of which SACE contributed – the PSC approved the program with several modifications. The most significant change was adjusting the allocated capacity targets so that small- to medium- scale (i.e., distributed) generation accounts for 43% of the total capacity procured rather than only about 14%, as originally proposed. GPC intends to procure 120 MW of utility-scale and 90 MW of distributed solar over a two-year period using 20-year power purchase agreements (PPA), with any unsubscribed distributed generation will be made available for procurement in the third year. GPC will purchase the solar generated energy at a price up to 12 cents/kilowatt hour (kWh) via requests for proposals (the “GPASI RFPs”) from solar developers to fulfill the utility-scale capacity target. For distributed-scale purchases, GPC will offer PPAs at a price of 13 cents/kWh for the smaller-scale (up to 100kW) and medium-scale facilities (greater than 100 kW up to 1 MW), with the option to use an escalating price payment for medium-scale contracts. It’s important to note that those participating in the distributed program must send ALL of the energy produced from their solar system to the GPC grid, therefore not consuming any of it on site. The below table summarizes the basic elements of the program design.
|GPASI Program||Total Capacity Allocation*||System Size Limit||20 Year PPA Price||Other**|
|Small scale||22.5 MW||Up to 100 kW||Levelized at 13 cents/kWh||Application fee of $25|
|Medium scale||67.5 MW||100 kW to 1 MW||13 cents/kWh or Escalating||Application fee of $5/kW|
|Utility scale RFP||120 MW||Up to 20 MW||Not to exceed 12 cents/kWh||Bid fee of $.25/kW|
|* Note that Georgia Power reserves the right to adjust this allocation after the first year.|
|** For all programs, the Participant retains RECs, but assumes meter and interconnection costs.|
The small- and medium- scale solar programs are slated to accept applications starting March 1, and an RFP will be issued for the utility-scale program on April 12. The small and medium scale draft contracts were posted on the PSC website on December 17, and GPC allowed for stakeholder feedback through January 1. Discussions with industry reveal some concern with the contracts based on two issues: the requirement for collateral security (i.e., Letter of Credit or Guaranty) for medium-scale applicants choosing the levelized payment option (13 cents/kWh; and, the ability for contracts to get modified by GPC (at any time) so long as approved by GPSC. It’s not yet clear if/how these industry issues will be addressed by GPC before the program launches. Nor is it clear if the issues will have a material impact on the success of the program. A somewhat longer comment period is being made for the draft RFP from January 16 – February 25, in addition to a bidder conference held on February 20.
From an industry perspective, the initial feedback on what’s offered through GPASI is that it’s “good but not great.” The payment price of 12 cents/kWh is considered totally sufficient to entice interests in the utility-scale program, however the payment price of 13 cents/kWh for small- and medium- scale projects may be more subjective to the installation size and possibly other factors such as a company’s required rate of return. The distributed program will probably make the most sense (economically) for installations that are at least 200 KW to 500 KW in size. Conversely, the smaller-scale program does not offer as much incentive to participate due to higher installation costs as well as residential electricity rates. Specifically, a GPC homeowner already paying an electricity rate of over 13.5 cents/kWh, the average rate for a homeowner that consumes 1500+ kWh/month during a summer peak period, may not see value in being paid less (13 cents/kWh) for the same amount of energy generated from their solar system. This becomes particularly true for a 20-year contract given the likelihood of continued increases in electricity prices.
In the end, the GPASI strikes a reasonable balance between keeping GPC in control of solar capacity additions and cost recovery within their territory while allowing consumers and industry the freedom to own their solar assets and support market growth. For the residential market, it may come up short from a consumer perspective, and also lacks some of the energy independence euphoria associated with owning a solar system – since all generation is sent to the grid and can’t be used onsite. However, the program should add significant solar capacity overall and provide a solid boost to expanding the larger-scale distributed solar industry in Georgia. It also proves that solar has achieved a level of cost-competitiveness where it can be both procured by a utility at a price that avoids putting upward pressure on rates, and also effectively draw the interests of consumers and developers (at least for medium- to- large-scale installations). SACE’s hope is that this program is not merely a temporary nod to customers and solar entrepreneurs, but instead a precedent for continued innovation by GPC to incorporate solar and other renewables in their energy portfolio.
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