Georgia Power included in an Integrated Resource Plan (IRP) filed on Jan. 29 with the Georgia Public Service Commission a framework on how to evaluate renewable energy projects and two separate studies on the variables involved with solar and wind development.
When considering any generation technology, including renewable resources, it is crucial that all of the appropriate benefits and costs of such technology be determined and allocated in a way that ensures equitable treatment and continued reliability of the system, said the Southern Co. (NYSE: SO) subsidiary. Such analysis is particularly important in light of the dramatic increase of renewable resources being deployed to serve customers.
Additionally, there have been numerous “Value of Solar” (VOS) studies performed in the industry in recent years suggesting various benefits associated with solar generation. Over the same period, there has been increased activity by the solar industry at the various state regulatory agencies of the Southern Companies, some of which have suggested the need for a “Value of Solar” determination within those jurisdictions.
As a result, the Southern Companies have established this Framework for Determining the Costs and Benefits of Solar on the Southern Co. electric system.
Given the vertically integrated, state-regulated nature of Georgia Power, there are certain limitations regarding what can (and cannot) properly be considered in such analyses. This framework is based on existing legal and regulatory requirements applicable to Georgia Power as well as industry standards. The overall value of solar generation to Georgia Power is sensitive to changes in such rules, regulations, and standards, but until any such changes are known with certainty, an analysis cannot be predicated upon them. Similarly, this framework considers technology and supporting infrastructure, as they exist presently.
Looking at each study for solar and wind:
A number of conclusions can be drawn from the study results. They include:
- The total benefit provided by solar generation exceeds the total cost caused by solar generation; however, with increasing penetration levels the overall benefit to the system declines.
- On average (after a 2,000 MW tranche and excluding an 8,000 MW tranche which represents a substantial cost breakpoint), the decline in the total avoided cost of solar amounts to roughly [redacted amount] for each 1,000 MW of solar installed on the system (i.e., each 1,000 MW of distributed solar installed – up to 7,000 MW – is worth about [redacted] less than the previous 1,000 MW installed).
- Total avoided costs remain fairly stable up through 2,000 MW of distributed solar, after which the costs tend to decline steadily until the next big cost breakpoint at 7,000 MW of distributed solar – the point at which there is no longer a deferred generation capacity and deferred transmission investment benefit from distributed solar due to the time shift of the peak to dusk.
- Compared to the avoided energy benefits provided by distributed solar, the deferred transmission investment benefits are extremely small on a relative basis.
- Costs associated with Support Capacity and Generation Remix are immediately incurred with low penetrations of solar.
The study noted: “Even with perfect knowledge and perfect confidence in the expected solar profile, the system reaches a point between 4000 and 5000 MW of distributed solar in which it can no longer recommit to avoid bottom out conditions; although the costs are estimated to be relatively low (as calculated here using avoided energy cost as a proxy for over generation costs), it can be assumed that this increase in bottom out conditions represents a significant increase in the operational challenges associated with solar generation.
“Based on these conclusions, all new proposed solar resources should be evaluated in light of all previously committed solar projects so that the declining value of solar generation can be appropriately measured. Based on today’s view of the future, it can also be concluded that due to the breakpoints in operational costs associated with solar and the potential for significant increases in operational problems at these levels, consideration of solar penetrations in the 4000-5000 MW range could create the need for mitigation measures. Although this study was performed for distributed solar generation, the general conclusions are applicable to all solar generation added to the system, including utility scale solar generation.”
A number of conclusions can be drawn from the results in regards to wind, the study said. They include:
- Compared to the solar analysis, the Generation Remix impacts at the assumed levels of penetration are a benefit rather than a cost (discussed further in the Generation Remix analysis section of this document).
- Since the wind analysis studied imports of wind to Georgia at the bulk transmission level, there are no Deferred Transmission Investment costs or Reduced Distribution Losses.
- The difference in value between fixed wind and variable wind is relatively small due to the use of the same assumed wind production profile; therefore, while the procurement costs and/or transmission delivery costs of these two wind products may be significantly different, their avoided cost values to Georgia Power are similar.
- Due to the higher capacity factors of wind generation as compared to solar generation, the per-MWH costs for Support Capacity and Bottom Out are relatively small.
- Although the per-MWH Bottom Out costs are small, these costs occur immediately in the first 1,000MW wind tranche, suggesting that operational concerns may be present even at low penetrations of wind generation.
“Based on these conclusions, all new proposed wind projects should be evaluated in light of all previously committed renewable projects so that the declining value of wind can be appropriately measured,” said the study.