Montana's big sky. Photo by Lexie Briggs.
This week, the news was shining bright with solar energy, both new generation and new policies. We’re used to those stories coming from a few key states, but this week it’s like Kevin Spacey’s entire oeuvre: not just the usual suspects. Take Montana, for instance. Though the state is known as an energy producer, it’s mostly been in the news as an example of the resurgence of the U.S. gas and oil drilling industry or of the country’s growing wind generation capacity. This week, however, Tom Lutey, writing for the Billings Gazette reported that recently, solar has become the rage.
Early in 2015, NorthWestern Energy, Montana’s largest utility, had received 22 applications for solar interconnection – 19 more than it had ever received before. By April of last year, the utility had more than 100 applications. “NorthWestern was feeling a little sunburned,” Lutey wrote.
Why are solar developers suddenly flocking to Big Sky country? It’s all about the way the state is implementing the federal Public Utilities Regulatory Policy Act (PURPA), which requires utilities to buy power from small “qualifying facilities” (QFs). In Montana, the Public Service Commission (PSC) set the size for a QF at 3 MW – and not by accident, as wind projects would typically be too big to qualify. Larger wind developments had to negotiate their contracts with utilities, instead of getting a deal automatically.
“The PSC under former chairman (William) Gallagher implemented the current 3 megawatt project cap to try to kill off QF renewable energy projects,” said Jeff Fox of Renewable Northwest. “What they didn’t count on is here comes solar, getting so cheap, so fast, solar companies can now compete at smaller project sizes.”
And compete they can, with QFs getting a 25-year contract for power at a rate of $66/MWh. A dozen commercial-scale projects are about to come online, starting with a 40-acre solar farm outside Helena built by Cypress Creek Renewables, one of three planned by the California-based developer.
NorthWestern is looking to get the PSC to cut the rate down to $34/MWh, or shorten the length of the contract, out of professed concern for the bill impact of these solar QF contracts on customers. The PSC plans to meet on it this week, but the vice-chairman doesn’t sound disposed to heed the utility’s call for a rate cut.
“The reality is, the price they’re getting paid is roughly the price NorthWestern is getting paid for their hydros,” PSC vice-chairman Travis Kavulla told The Gazette. “So, what’s good for the goose is good for the gander.”
There’s also Nebraska, another state known mostly for wind generation, which is beginning to install solar at a rate heretofore unseen. At the beginning of the year, Nebraska only had about 1 MW of solar online, which earned the state 48th place in last year’s SEIA state ranking. Fred Knapp, reporting for NET News Nebraska, says that might be about to change.
The state’s largest solar farm, 15,000 panels over 20 acres, will have a 3.6 MW capacity – just too big for a Montana QF, but large enough to more than triple the amount of solar generation in the Cornhusker State. David Bracht, head of the Nebraska Energy Office, said between this project and others that plan to go online this year, Nebraska will end the year with five times as much solar power as it had in 2015. There’s nothing like starting small for impressive growth rates.
Of course, some big solar news also came out of the places where you’d likely expect it. In Arizona, the state’s largest utility is pushing for demand charges on all residential customers, with solar customers to pay even higher demand charge rates. A demand charge is a portion of the customer’s monthly electric bill based on peak usage. Demand charges are typically assessed on commercial and industrial users, but utilities have become more interested in these and fixed charges for residential customers as load growth has lagged – and interest in distributed generation like solar has grown.
Under the Arizona Public Service plan, consumers would have a choice between three demand charge rates. According to Greentech Media, the first two options would stay the same between winter and summer, and are $6.60/kW and $8.40/kW. (The higher of the two demand charge options comes with a lower fixed charge). The third option would charge $16.40/kW in the summer and $11.50/kW in the winter and would be mandatory for solar customers. It would come with a lower volumetric charge.
So how would that work? Utility Dive’s Herman K. Trabish explains:
The new demand charges will be assessed based on the hour of the customer’s highest average kW usage between 3 p.m. and 8 p.m. each month. The kW of that hour’s average usage will be multiplied by the per-kW demand rate and the total will be added to the monthly bill, in addition to the volumetric charge and other bill fees.
A small proportion of consumers would have a flat bill rate available: snowbirds who occupy their homes only during winter months, people with low usage, and low-income customers.
This is the latest move by APS to change things up in response to the solar boom in Arizona. In 2013, net-metered customers in Arizona faced a challenge when APS petitioned the state’s Corporation Commission to impose a monthly charge of $8 per kilowatt of installed capacity to be connected to the grid. The Commission then adopted a compromise, authorizing utilities to charge a “connection fee” of $0.70 per kilowatt of installed capacity per month for net-metered customers. In 2014, the utility proposed installing and owning rooftop arrays on the homes of willing customers itself, in essence renting rooftops for $30 savings on the customer’s bill.
Then, just this week, KJZZ reported on the APS strategy of “buying” incredibly cheap solar energy generated in California. Will Stone wrote that it’s a little like a “blowout sale to end all sales where, for a few hours, you’re the one who’s paid to take stuff.” On nice days, solar panels are generating so much power that the prices for power generated in California are going negative, as much as $3 to $7/MWh. Arizona “buys” that electricity, essentially getting paid cash money to take it off the hands of the Californians. This situation might be short-lived, as electric vehicles spread and flatten demand, and as energy storage becomes more widely available. It will also become more systematic later this year, when Arizona joins the Western Energy Imbalance market. That system of dealing with short-term electricity oversupply is expected to save APS $7 million to $18 million per year.
In the meantime, the selloff of excess solar doesn’t seem to be hurting consumers in California. Greentech Media this week reported that Californians saved $192 million, “thanks to efficiency and rooftop solar.” Soon the entire country might be able to take advantage of those savings! The sun shines everywhere.
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