Georgia solar groups criticize Georgia Power deal with PSC staff in IRP case

The Georgia Solar Energy Industries Association (GSIEA) and Vote Solar (VS) said in a June 29 brief filed at the Georgia Public Service Commission that they oppose a June 23 stipulated agreement worked out by Georgia Power because it doesn’t support solar development to the extent it appears to.

The stipulation was entered between the Georgia commission’s Public Interest Advocacy Staff and Georgia Power in the utility’s 2016 Integrated Resource Plan (IRP) and related cases.

GSEIA and VS instead proposed the following for new solar generation deployment between 2016-2019:

  • Utility Scale – 825 MW procured by competitive bidding designed to take advantage of the federal Investment Tax Credit (ITC);
  • Stand Alone Distributed Generation (DG) – 250 MW procured by competitive bidding; and
  • Customer Sited DG – Based on customer demand, up to 250 MW of behind the meter deployment with excess export priced at Georgia Power’s solar avoided cost savings determined by the company’s framework (when complete) levelized over a 15=year term.

This plan covers the deployment of 1,125-1,325 MW of new solar over the next three years.

The groups said: “The Stipulation appears to authorize deployment of 1600 MWs of renewable energy (mostly solar), but close examination reveals that it may actually only authorize deployment of as little as 525 MWs of additional solar generation between 2016 and 2019 in which stakeholders and competitors may participate with the Company. This is the same amount of solar generation the Commission authorized in the 2013 IRP. It is the same amount of total new renewable generation the Company proposed in its Renewable Energy Development Initiative (‘REDI’).  Across all types of solar generation, the Stipulation increases solar deployment over 2013 only for the Company’s self-build projects and Stand Alone DG.

“In the Stipulation, the Company and PIA Staff did not consider uncontested evidence and testimony that Company ratepayers will benefit from deployment of additional renewable generation of up to 2000 MWs from 2016-2019 with stable avoided costs, no grid impact and no upward pressure on rates — a market reality that will continue for a while. The Stipulation fails to recognize that deployment of solar and renewable generation is now competitive, with private enterprise entrepreneurs competing directly with the Company to deploy these resources faster, cheaper and more efficiently. That said, the Commission (not the Company) must insure that additional solar generation will be deployed pursuant to policies and procedures that do not afford any competitor (including the Company) competitive advantage.

“The Stipulation fails to recognize the property rights of the Company’s customers to make their own decisions regarding their own energy generation and usage. For excess generation exported back to the grid, the Stipulation fails to require the Company to pay fair market value (based on value of solar or solar avoided cost savings) for its use of its customer’s property, i.e., the electrons exported to Georgia Power and used by it to provide electricity to its other customers. The payment of fair market value for export at the Company’s solar avoided cost savings is required since Georgia Power is the only monopoly purchaser of those electrons.”

Georgia Power says its solar plan is both aggressive and prudent

Said Georgia Power in its June 29 brief in this matter: “The Company’s IRP outlines a number of proactive steps that continue to build on the Company’s track record of industry-leading foresight and leadership. The Renewable Energy Development Initiative (‘REDI’) is a significant commitment to new renewable generation development in Georgia. The Company’s original proposal for 525 MW of renewable procurement was measured and based upon the Company’s experience. The increase in the size of REDI to 1,200 MW provided for in the Stipulation is not without risk, but the Stipulation is significantly more measured in this respect than the alternative levels of procurement advocated for in this proceeding by some intervenors. And yet, in procuring 1,200 MW of renewable generation through REDI—which will be the largest active renewable solicitation in the country and the largest in recent history (the majority of which will have projected benefits for customers)—the Company and this Commission will solidify the reputation of the state of Georgia as a regional and national leader in renewable generation development. 

“Similarly, implementing the methodology detailed in the “’ramework for Determining the Costs and Benefits of Solar Generation in Georgia’ (such methodology, the ‘Framework’) is a proactive step designed to ensure that all renewable resources are fairly evaluated through a comprehensive and detailed technical analysis so that the Company and its customers receive net benefits that are commensurate with the price being paid. It is especially important to approve the Framework in a timely manner to ensure it is in place when additional non-dispatchable, intermittent resources are added in the future. The Company’s increased target planning reserve margin also represents proactive action to adjust the Company’s planning to account for actual operational changes observed on the system in order to provide customers with increased reliability.”

The utility later added: “REDI, as modified by the Stipulation, will build upon the measured, market-based procurements previously implemented by the Company and this Commission and should be adopted. This 1,200 MW procurement would be the largest currently active renewable solicitation in the United States and one of the largest in the recent past. REDI will leverage the success of the Company’s existing Advanced Solar Initiatives in order to continue to responsibly grow the renewable generation market in Georgia and provide projected energy savings for all customers in the absence of a capacity need.

“The Stipulation specifies that 1,200 MW of renewable resources will be added through the REDI program over the next five years, comprised of 1,050 MW of utility scale and 150 MW of distributed generation (‘DG’) renewable resources. This level of procurement will ensure that the Company remains an industry leader in renewable generation. In fact, REDI will be the largest current renewable procurement in the United States. The Company estimates that the 1,200 MW represents nearly two billion dollars in investment in renewable energy and a 150% increase in the Company’s current contracted renewable generation. The proposed 1,200 MW procurement strikes a fair balance in this proceeding and appropriately reflects the fact that the Company does not have a capacity need. Continuing to employ an incremental approach will allow the Company to appropriately evaluate and take advantage of technology improvements, costs reductions, and state and federal incentives, and to manage integration benefits and challenges.

“While the total amount of resources to be procured is larger than initially proposed by the Company, it is also significantly smaller than the amounts recommended by several intervenors. It is important to note that under the Stipulation, the Company could potentially procure over 1,600 MW over the next 3 to 5 years. The procurement size for REDI, which is set at 1,200 MW in the Stipulation, continues the measured, incremental approach that has served customers well throughout the Company’s prior procurements. Each time the Company has offered a renewable request for proposals (‘RFP’) to the market, the market has responded with lower, more attractive pricing for the benefit of Georgia Power’s customers. For instance, the Company obtained resources through the Large Scale Solar program at 13 cents, whereas average prices for the ASI and ASI-Prime programs were 8.5 cents and 6.5 cents, respectively.”

Georgia Power opposes further expansion of REDI program

The utility also argued: “The Commission should reject certain intervenors’ requests to dramatically expand the size of REDI beyond what the Company and PIA Staff agreed to in the Stipulation. Such intervenor recommendations fail to consider the risks that customers assume when the Commission deviates from the success it has achieved through measured procurements. Given that the Company has no current forecasted capacity need for the years that REDI resources will come online, recklessly expanding the size of the REDI program generates additional and potentially significant cost risk for customers.

“It is important to note that the benefits identified in the context of REDI (as well as other renewable procurements) are based on projections. Future differences between projected and actual costs could ultimately cause such benefits to be reduced or eliminated completely. And while it is true that all resource decisions are necessarily based on projections, historically, the vast majority of the Company’s resource decisions involve the evaluation of resources to meet an identified capacity need. In other words, the resources were needed to ensure reliability for customers and the amount of MW procured were based upon that express need. 

“In contrast, the Company’s renewable resource procurements have been initiated not on the basis of meeting a capacity need but on the basis of projected energy benefits (though such resources have been assigned some capacity credit as well). When a capacity need is identified, new capacity resources are required to ensure reliability; however, resources obtained primarily for energy benefits are not procured for the sole purpose of ensuring reliability for its customers. Therefore, caution should be exercised when the Company enters into long-term, fixed and levelized PPAs on the basis of projected energy benefits. In the absence of a forecasted capacity need, it is reasonable to procure select amounts of resources where the projected benefits are significant, but it is also reasonable to exercise caution to avoid placing unnecessary risk on customers.      

“While the Company supports the procurement of 50 MW of customer-sited DG resources at prices based on the Company’s projected avoided costs as specified in the Stipulation, it is important to recognize that such procurement does place risk on customers. Procurement of renewable resources at the Company’s projected avoided cost results in essentially no projected benefits and, in fact, creates the potential for increasing the costs to customers. When resources are procured at projected avoided costs (as compared with below avoided costs), even a slight downward movement in future actual avoided costs (relative to the projections) would mean that the Company would actually be paying more for energy than would otherwise be the case.

“Moreover, in the case of a levelized payment stream, the risk is exacerbated in the early years. Levelized pricing essentially over-pays early in the term and therefore creates greater risk of the Company and its customers not being made whole in the event of early termination or a change in operational profile.  As is discussed below, a market-based approach can mitigate this risk to the extent that such an approach results in PPA prices that are well below projected avoided costs. A large spread between the market-based PPA price and the projected avoided costs provides a greater degree of certainty that such resources will provide actual benefits to all customers over the life of the PPA.

“Several intervenors suggested that the Company should expand the REDI RFP to take advantage of investment tax credits (‘ITC’) and production tax credits (‘PTC’) and should adjust the timing of the RFP to more closely align with the currently expected phase out of the credits.

“The Company does not believe the potential tax credit phase out should serve as the predominant factor in determining the size of the Company’s renewable programs. The history of federal renewable tax incentives provides ample evidence that anticipated phase-outs and eliminations remain subject to change as dictated by a host of complex and often unpredictable political and regulatory drivers. Therefore, it would be inappropriate for the Company’s renewable procurement strategy to be driven by the exigency of the current market, including the potential expiration of particular tax credits.

“Nevertheless, the REDI program, as reflected in the Stipulation, creates the strong potential that customers will receive significant benefit from the tax credits through lower PPA pricing. In that regard, the increased level of procurement through REDI agreed to in the Stipulation already takes into account benefits that may be received through ITCs and PTCs under current law. However, the further increase in the procurement based solely on the tax incentives is not warranted, nor has it ever been the policy of the Commission to allow the federal government to dictate renewable procurement in Georgia by requiring that such procurement align with the frequently extended deadlines for ITCs and PTCs. Indeed, if such an approach to renewable procurement had been taken by the Commission in the past, customers would not be recognizing the benefits they do today from declining renewable technology cost and would be paying much more for renewable resources then they do now.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.