Solar Energy at Grid Parity in Utah, a Coal State With No RPS
The Utah solar experiment is officially underway as the state races from near-zero solar to potentially bringing hundreds of megawatts of PV online.
The Beehive State has great solar and land resources. However, the state does not yet have an RPS and burns cheap coal for the majority of its power. Utah's average residential electricity price was 10.4 cents per kilowatt-hour in March of this year according to EIA.
Despite low electricity costs, regional utility Rocky Mountain Power (RMP) is signing several 20-year solar power purchase agreements with renewables developer First Wind. The largest proposed project in this recent wave of solar PPAs is First Wind's 320-megawatt “Four Brothers” solar plant in Utah's Beaver and Iron Counties -- consisting of four separate 80-megawatt PV sites.
RMP, (part of Berkshire Hathaway Energy's PacifiCorp) also signed PPAs with First Wind’s 20-megawatt “Seven Sisters” solar projects earlier this month. The utility, under the Public Utility Regulatory Policies Act, must purchase power from an independent power producer if the price is less than the avoided cost of generating the power themselves.
The Juwi-developed single-axis tracker Pavant solar project in Millard County, Utah is coming in at a PPA price of $55 per megawatt, as per a public mention from the developer at a recent Energy Development Summit sponsored by Utah's Governor Herbert. Note that number is the proposed PPA price; power has not yet been delivered.
Regarding these recent solar PPAs with developers such as First Wind, Juwi, SunEdison and Scatec, Sarah Wright of Utah Clean Energy said, "It's a huge deal for ratepayers" with prices locked in for 20 years on "summertime, daytime energy."
While the U.S. does have 50 solar laboratories, it also has scores of utilities looking to impede the spread of solar. As Wright said, "Due to an antiquated regulatory system that rewards capital investments over services provided -- the utility likes to own its own projects and earn money on its assets." She said that RMP was "not just trying to slow down utility solar but distributed solar as well." She said that RMP has filed two dockets with the Utah Public Service Commission "to completely change the pricing for smaller projects, and then another stalling on prices for larger projects." Rocky Mountain Power is also proposing a $4.25 per month net metering fee.
Another party close to these deals told GTM that there is a "race to get projects done" before RMP reduces the price or capacity payment it pays for solar.
Pete Sullivan, Director of Business Development at First Wind and the lead on the “Four Brothers” solar project, told GTM, "The most interesting thing is that there hadn't been any solar in Utah." He cited RMP's Schedule 37 and Schedule 38 tariffs: "As the price of solar came down the listed schedules started making sense."
Here are the Schedule 37 Rates:
Cory Honeyman, GTM Research Solar Analyst notes that while zero megawatts of utility-scale solar has been installed in Utah, "in the past 6 months, nearly 550 megawatts have received PPAs from 12 individual projects in Utah."
He adds, "Utah's market in some respects mirrors North Carolina's market. Developers can take advantage of PURPA rules to receive fixed price PPAs for small scale projects based on the avoided cost of new build peaking natural gas plants. On top of that, there's the possibility of receiving an extremely attractive 50 percent in-state tax credit (not a guarantee to be received, whereas in North Carolina there's more certainty of receiving the 35 percent in-state tax credit)."
However, most of the recent PPAs are not taking advantage of PURPA as they are mega-scale projects. These are projects where in theory, assuming you receive the in-state tax credit, project economics are relatively speaking pretty attractive. Without the in-state tax credit, the project economics are a bit more murky."
Shayle Kann, Senior VP at GTM Research notes, "We've now seen enough outside-the-RPS solar procurement from utilities (see also, e.g., Xcel in Colorado or Georgia Power) that it lends a bit more optimism to the utility solar market in general. I think the predominant view for a while had been that 2014-2015 would mostly be about pipeline buildout rather than getting new PPAs, but smart/low cost developers are proving that they can still win new deals if they can get the costs down to the ~$50 per megawatt-hour range." Solar Analyst Honeyman adds, "Texas and Minnesota are two other prime examples where utilities have procured centralized PV based on its cost competitiveness with natural gas and its value as a hedge against natural gas price volatility."
First Wind has gone from zero to being the 11th largest utility developer in the U.S. according to the Utility PV Market Tracker.
Last year, 3.7 percent of Utah's net electricity generation came from renewables. Utah installed 5 megawatts of solar in the first quarter of 2014 for a cumulative total of 18.2 megawatts, landing Utah in 26th place based on total PV installations, according to GTM Research's USSMI. But Utah could make a huge gain in the solar state rankings if these projects can get built economically.
The state's PSC still has to approve these contracts.
Greentech Media (GTM) produces industry-leading news, research, and conferences in the business-to-business greentech market. Our coverage areas include solar, smart grid, energy efficiency, wind, and other non-incumbent energy markets. For more information, visit: greentechmedia.com , follow us on twitter: @greentechmedia, or like us on Facebook: facebook.com/greentechmedia.
Prior to joining Greentech Media, Eric Wesoff founded Sage Marketing Partners in 2000 to provide sales and marketing-consulting services to venture-capital firms and their portfolio companies in the alternative energy and telecommunications sectors. Mr. Wesoff has become a well-known, respected authority and speaker in these fields. He also was the publisher of the Venture Power newsletter, a ...
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