Wind Solar Alliance report shows how outdated wholesale market rules prevent price reductions

energy markets

Record low costs and consumer demand are driving growth in American wind and solar energy. However, outdated wholesale market rules are preventing the two technologies from further reducing prices for consumers, according to a new report, Customer-Focused and Clean: Power Markets for the Future.

With major grid operators in PJM and MISO planning fundamental redesigns of their electricity markets and operating procedures, the new analysis proposes reforms to better serve customers’ and regulators’ desire for clean, affordable electricity.

Sweeping changes in the electricity generation mix over the last 10 years are driving fundamental changes in the nation’s electricity grid, with wind and solar generating capacity having increased approximately 500 percent. Yet, market rules designed with other resources in mind fail to take advantage of these new resources’ excellent reliability capabilities.

“The report demonstrates the numerous ways that existing market structures, particularly in PJM and MISO, are biased in favor of older, large, slow-to-react resources,” said John Kostyack, Executive Director of the Wind Solar Alliance (WSA). “Although wind and solar power are beating all other sources on cost in many regions, grid operators limit their deployment by failing to utilize them for reliability services such as ramping and frequency regulation. It’s time for market operators to ensure these clean, low-cost technologies are appropriately recognized and rewarded for the reliability services they can provide.”

Shadow costs: How outdated local processes stifle the true solar market

Where they fall short

Most RTOs’ rules were written before renewables made up a meaningful portion of the generation fleet. Characteristics such as “inertia” and “spinning reserve” reflect attributes of certain generators, and are not actual reliability services. The actual services such as frequency stabilization and regulation, ramping, voltage regulation, disturbance ride-through, and 10- or 30-minute reserves can be provided as well or better by modern wind, solar, storage, and demand response resources.

“This report identifies ways to modernize electricity markets so all technologies can compete to provide the reliability services that keep the lights on and the costs low – that’s a win for innovative resources like wind energy and for consumers,” said Amy Farrell, Senior Vice President, Government & Public Affairs at the American Wind Energy Association.

“This report demonstrates some of the barriers that solar and other clean technologies face in markets designed for older resources, and helps provide a roadmap for future reforms that can both attract and retain sources of flexibility that are beneficial for the grid and consumers,” said Sean Gallagher, Vice President of State Affairs at the Solar Energy Industries Association.

Large industrial energy users and ratepayer advocates were also supportive of the findings in the report.

“This report offers many compelling ideas to make markets more efficient and benefit consumers,” said Devin Hartman, the incoming President and CEO of the Electricity Consumers Resource Council, the national trade association representing large industrial energy users. “Creating markets, in lieu of standards, for energy and balancing services like primary frequency response are especially important for manufacturers. The report also adds value in highlighting the right way to ensure reliability – through proper energy market prices – rather than venturing into prescriptive capacity market endeavors like ‘fuel-secure’ resource carve-outs.”

“Consumers and states in PJM are looking to bring clean, affordable, and reliable energy online, said Erik Heinle, Assistant People’s Counsel, DC’s Office of the People’s Counsel. “The Wind Solar Alliance has developed an important and well thought-out roadmap to achieve these goals by harnessing new low-cost, high-performing wind and solar technologies and successfully integrating them into the grid, while reducing consumers bills and improving reliability.”

— Solar Builder magazine

Nevada voters want the state to hit 50 percent renewable energy by 2030

nevada voters

The Nevada solar industry got a shot in the arm on Election day with the passing of Question 6 and calling for a stronger economy fueled by clean energy. By putting the state on track to use 50 percent renewable energy by the year 2030 (doubling the previous RPS), Question 6 will generate hundreds of millions of dollars in economic activity and create thousands of new Nevada jobs.

Independently, a broad coalition of supporters argued that Question 6 was the only way to guarantee that Nevada would get more of its power from renewable sources like solar. With this victory, it is clearer than ever that consumers are demanding more affordable clean energy.

“The momentum behind Nevada’s clean energy economy remains strong,” said Sarah Cottrell Propst, the Executive Director of Interwest Energy Alliance, a non-profit trade association that represents the nation’s leading companies in the renewable energy industry. “The passage of Question 6 will spur investment and advance the state’s leadership in one of the nation’s fastest growing industries.”

Check out the 2018 Solar Builder Projects of the Year!

“Investment in renewable energy is an investment in the long-term health of Nevada’s economy. A robust RPS promises to expand Nevada’s economic development and diversify its energy supply,” said Alli Gold Roberts, senior manager of state policy with Ceres, a sustainability nonprofit organization working with influential investors and companies. “Major companies are investing in Nevada because of its rich renewable resources and the state is now poised to continue to attract corporate renewable energy investment.”

“Clean energy is putting Nevadan’s to work, with more than 25,000 strong employed in 2017. By increasing the state’s renewable standard, Nevada has set itself up to continue reaping the economic benefits for years to come,” said Ray Fakhoury, State Policy Manager with the Advanced Energy Economy, a national group of businesses that seek to reduce market barriers to advanced energy investments. “Investing in clean energy resources helps diversify the state’s energy mix, protecting consumers from future energy price volatility.”

To become law, Nevada’s voters will have to pass the initiative again in 2020, but Fakhoury believes consumers will see benefits sooner than that. “Passing with wide support, the Legislature and Governor-elect should move forward in the upcoming legislative session to enact this landmark increase.”

— Solar Builder magazine

New report explores 10 grid reform concepts, case studies for utilities to consider

utility grid modernization

A frequent topic on this site over the last year is the need for more advanced utility business models and a new report from the Advanced Energy Economy and Rocky Mountain Institute echoes this sentiment, noting that advancing efficient and equitable approaches to update the utility business model is crucial to the grid’s transition to a more secure, clean and affordable customer-centric system.

In identifying, evaluating and encouraging innovation in business models, the report, Navigating Utility Business Model Reform: A Practical Guide to Regulatory Design, offers a menu of regulatory options for policymakers, utilities and electric customers to best support and manage the maturation of a 21st-century grid.

Powerful trends are impacting the contours of the electric system, including growing policy demands for improved environmental performance, the increasingly widespread availability of distributed energy resources like rooftop solar and storage, more customer demand for energy choice and the need for strengthened resilience in the face of more extreme weather across the country. Navigating Utility Business Model Reform offers electricity system leaders and stakeholders 10 reform options to best respond to these pressures and support policy and regulatory decision-making.

Check out the 2018 Solar Builder Projects of the Year!

“The grid is experiencing rapid changes in its shift to a 21st-century system, and electric utilities have a fundamental role to play in ensuring this transition strengthens resilience, improves environmental performance and protects the interests of customers while maintaining essential features of affordability and reliability,” Dan Cross-Call, a manager at RMI and one of the report’s authors, said. “This report offers a practical guide to industry leaders—regulators, utilities, grid operators, policymakers and policy influencers—on how to best engage with an increasingly decarbonized and distributed energy system, shepherding and managing this transition to maintain the fundamental role of utilities and achieve new policy objectives.”

The 10 reform options the report examines include revenue decoupling, platform revenues, performance-incentive mechanisms and multiyear rate plans, among others. In addition to Navigating Utility Business Model Reform, the three groups released a set of case studies providing current examples of utility business model reforms and the regulatory constructs that make them work.

The five case studies examine:

• Oklahoma’s Energy Efficiency Incentives—How Public Service Co. of Oklahoma and Oklahoma Gas & Electric are responding to shared savings and lost revenue adjustment mechanisms intended to remove the utilities’ financial disincentive to maximize customer energy efficiency opportunities.

• Maryland’s Behavioral Demand Response Program—How Baltimore Gas & Electric (BGE) lowered summertime demand driven by air-conditioning use through customer rebates for reducing consumption during peak-demand days, with BGE able to sell the energy and peak-demand reductions directly into the PJM wholesale market.

• Regulatory Accounting of Cloud Computing—How Illinois and New York are trying to level the playing field for service-based alternatives to traditional capital investments through the regulatory accounting treatment of software-as-a-service.

• Brooklyn Queens Demand Management Program—How Con Edison is deferring distribution infrastructure upgrades in an area of rising demand by deploying nontraditional methods of customer- and utility-side demand reduction, with the utility rewarded with performance incentives and accelerated depreciation.

• United Kingdom’s RIIO Performance-Based Framework for Driving Innovation and Delivering Value—How the UK’s Office of Gas and Electricity Markets (Ofgem) created RIIO (Revenue = Incentives + Innovation + Outputs), the most comprehensive performance-based regulatory system yet developed to reflect changing market conditions. RIIO allows utilities to take advantage of the growing service economy and rewards utilities for achieving desired outcomes.

“With so many utilities launching new grid modernization initiatives, now is the time to address utility regulation and business model shortcomings. Energy is now extremely cheap if solar and wind power are the backbone of our electricity system,” said Mike O’Boyle, director of America’s Power Plan. “To succeed, utilities must be intrinsically motivated to invest in modern technologies that make the grid more efficient, flexible, affordable and resilient. Navigating Utility Business Model Reformis a toolbox for policymakers, utilities and key stakeholders to do just that.”

— Solar Builder magazine

Dominion Energy Virginia petition approved for solar power purchase in Virginia

virginia dominion solar

The State Corporation Commission (SCC) approved two prudency petitions from Dominion Energy Virginia for new renewable projects. One petition is related to a 12-megawatt offshore wind construction project to be located nearly 27 miles off the coast of Virginia Beach. The other is related to an agreement to purchase solar power from an independent developer of an 80-megawatt solar facility to be located in Halifax County.

The offshore wind project consists of two wind turbines to be built by Dominion that would begin operating in December 2020. In its factual findings, the Commission determined that the company’s proposal puts “essentially all” of the risk of the project, including cost overruns, production and performance failures, on Dominion’s customers. Currently, the estimated cost of the project is at least $300 million, excluding financing costs.

Check out the 2018 Solar Builder Projects of the Year!

The Commission found that the offshore wind project was not the result of a competitive bidding process to purchase power from third-party developers of offshore wind. Doing so would likely have put all or some of the risks on developers as has been done with other offshore wind projects along the East Coast of the United States. The Commission also found that any “economic benefits specific to [the project] are speculative, whereas the risks and excessive costs are definite and will be borne by Dominion’s customers.”

The Commission concluded that the offshore wind project “would not be deemed prudent [under this Commission’s] long history of utility regulation or under any common application of the term.” However, the Commission ruled, as a matter of law, that recent amendments to Virginia laws that mandate that such a project be found to be “in the public interest” make it clear that certain factual findings must be subordinated to the clear legislative intent expressed in the laws governing the petition.

The solar project petition approved by the Commission is structured very differently from the offshore wind project. In finding the solar project to be prudent as a factual matter, the Commission noted that the proposal involves purchasing solar power from private developers and, unlike the offshore wind project, will therefore protect customers from bearing financial, performance and other risks.

The Commission also noted that Dominion conducted a competitive bidding process that produced a price to customers for the solar power project that is in line with the market. The solar facility is expected to begin operating in the latter part of 2020.

The purchase power agreement with Water Strider Solar LLC has a term of 20 years.

— Solar Builder magazine

Which utilities in the South are the most solar friendly? The Southern Environmental Law Center tells us

southeast solar

How do utilities grade our in terms of their solar friendliness? The Southern Environmental Law Center (SELC) launched a new website to tell us. The Rates of Solar website is an interactive site that provides simple, straight-forward information about how utilities across the Southeast United States are treating customers with rooftop solar on their homes. The website provides easy access to information on more than 400 utility solar policies across SELC’s six-state region.

Currently the Southeast has over seven gigawatts of solar installed, and another 10 gigawatts of capacity is projected for installation over the next five years. Southerners have some of the highest residential electric bills in the country and going solar is one of the few options consumers have when it comes to making their own energy choices. Rates of Solar distills complicated rooftop solar policies for hundreds of utilities across the Southeast into simple information for consumers and decision-makers.

“We believe that everyone should have the ability to harvest the sun’s energy at a reasonable price—creating stronger, cleaner, and healthier communities for all,” said Lauren Bowen, SELC staff attorney. “This website provides one of the first comprehensive views of how solar customers are treated by utilities across the Southeast.”

RELATED: Six solar industry storylines to watch from Solar Power International 2018

The website’s launch coincides with the release of SELC’s inaugural Solar Makers and Brakers list. The 2018 Solar Makers include Southern electric utilities with current programs and policies that encourage rooftop solar investments. The list also includes the region’s Solar Brakers, or utilities with rooftop policies that undermine, and in some cases, completely put the brakes on solar’s emergence as a feasible, cost-effective, and clean energy choice for customers.

rates of solar

The 2018 Solar Makers

• BARC Electric Cooperative, which serves more than 12,500 customers in the Shenandoah Valley of western Virginia. The co-op credits solar customers its full retail rate for the solar power they generate that flows back onto the grid and allows residential customers to install solar systems up to 20 kilowatts in size without imposing monthly solar fees or charges. BARC also introduced the first community solar program in Virginia.

• Duke Energy, one of the largest electric power companies in the country, which continues to implement a key policy encouraging the growth of rooftop solar throughout the Carolinas. The utility offers rooftop solar customers retail net metering, meaning solar customers get a 1-to-1 credit for the solar energy they generate. Aside from North Carolina customers with solar systems larger than 100 kilowatts, Duke does not charge rooftop solar customers any monthly solar fees. Duke is one to watch though, as it may seek changes to its net metering policy in 2019.

• Brunswick EMC, located near the coast of North Carolina, just southwest of Wilmington, serves nearly 100,000 customers. This innovative utility offers a variety of clean energy opportunities to customers. The co-op gives customers full credit at its retail rate for any solar sent back onto the grid. Although the utility charges a low monthly administrative fee, there are no additional solar fees based on a customer’s system size.

The 2018 Solar Brakers

• Alabama Power, which five years ago began imposing a monthly charge on customers who install solar to power some of their energy needs. This unjust charge has put the brakes on rooftop solar by eliminating at least 50 percent of the savings homeowners would see over the lifetime of their rooftop solar system. Residents in Alabamapay the second highest residential electric bills in the country, over $1,700 on average each year. Energy efficiency investments and rooftop solar power are among the only ways families can lower their electric bills. Rather than reduce the solar charge and make solar more accessible for customer bill relief, Alabama Power recently proposed to further increase this monthly solar charge.

• The Tennessee Valley Authority (TVA), which wields its authority as both a regulator and monopoly power provider to more than 154 local power companies. TVA mandates that all customers in the Valley who want to install rooftop solar systems at their homes and businesses and contribute to the grid must go through one of two solar programs. These programs give customers a choice between two bad alternatives, both of which seem designed to stifle the growing demand for homegrown solar in the Valley. The result of TVA’s bad policies is Tennessee falling far behind neighboring states.

• Blue Ridge Energy, which serves 75,000 customers in northwestern North Carolina. Several years ago, this utility began its efforts to undermine customers’ ability to go solar, and Blue Ridge Energy now hits solar customers with a charge of $53 every month – $29 more than customers without solar – severely limiting options for rooftop solar power in its territory.

— Solar Builder magazine