S.C. solar fight erupts over PURPA

Source: By Kristi E. Swartz, E&E News reporter • Posted: Wednesday, October 16, 2019

A battle is brewing in South Carolina that pits the state’s largest electric companies against solar developers.

At issue is how state utility regulators should interpret a new energy law designed to boost competition and renewable resources. The debate highlights challenges with the transforming electricity industry and how a weather-based trend in the Southeast is playing into long-term utility planning.

South Carolina utility regulators this week and next are hearing from electric companies, clean energy advocates and others on how to implement parts of the S.C. Energy Freedom Act. The law is aimed at expanding energy options in a state that has historically relied on baseload fuels like coal and nuclear.

“One thing clear was that business as usual in South Carolina related to electric generation is going to change,” said Bret Sowers, development and strategy vice president for Southern Current and chairman of the S.C. Solar Business Alliance.

A trigger point in the law has spilled over to the South Carolina Public Service Commission. It centers on the framework for what’s known as standard-offer contracts under a decades-old provision, the Public Utility Regulatory Policies Act (PURPA). Broadly, the federal law requires utilities to purchase energy from small-scale developers.

The terms of such purchase agreements are not to exceed the avoided cost, defined as the amount a utility would pay for the electricity if it built the same generation itself.

In opening statements before regulators Monday, a lawyer for Dominion Energy South Carolina said solar developers want to inflate that figure to reap higher profits.

But if the commission sides with proposals from Dominion and Duke Energy South Carolina, it would chill the solar market going forward, clean energy advocates say.

“The ongoing avoided cost proceedings before the commission are critical in determining the future of the industry,” said Maggie Clark, senior manager of state affairs at the Solar Energy Industries Association.

Dominion Energy South Carolina was formally known as South Carolina Electric & Gas before Dominion Energy bought SCE&G’s parent, Scana Corp., last year. Charlotte, N.C.-based Duke Energy Corp. operates two electric companies in South Carolina.

The electric companies have couched their argument in a weather-based trend that has emerged in the Southeast, where some power providers have become so-called winter peaking utilities instead of summer ones. They say that adding more solar power to their resource mix doesn’t help meet demand in new peak times with little sunshine.

Meanwhile, federal regulators are eyeing changes to PURPA. The Federal Energy Regulatory Commission has issued a notice of proposed rulemaking, with its chairman calling for an update to better reflect modern energy markets (Greenwire, Sept. 19).

The electricity industry has dramatically changed since PURPA was created. Cheap natural gas and renewables have made coal uneconomical in many areas, and distributed technologies are starting to take the place of centralized power plants.

Electric companies and their regulators are still grappling with the transition, however, as they weigh how changing a decades-old business model could affect grid operations.

“The last thing a utility will ever do is endanger reliability,” said Michael Craig, an energy systems assistant professor at the University of Michigan.

Winter peak

Wind and solar have emerged as go-to resources to help many electric companies deal with peak hours of the day. Renewable energy and storage technologies have started to replace so-called peaker plants — often powered by natural gas or other fossil fuels — in parts of the United States (Energywire, July 16).

But some electric utilities in the Southeast have argued that solar doesn’t help in the winter during peak times. They point out the grid is most stressed before the sun comes up and after it has set: both in the morning, when families are getting ready for work and school, and at the end of the day, when people typically return home for the evening.

“A generating resource has to provide capacity in the winter and in the summer,” said Matthew Gissendanner, a lawyer for Dominion Energy South Carolina. “Additional solar does nothing to help the company meet the winter demand. Additional solar does not provide capacity during the winter period.”

The winter peak has become a key factor in utilities’ proposed terms for the long-term renewable contracts. It’s the reason they give for building more gas generation, hanging on to older coal-fired plants or flashing caution signs at solar.

For example, Southern Co.’s Alabama Power unit said last month it needs to add 2.2 gigawatts to its generation portfolio to help meet a “pressing reliability need” during the winter (Energywire, Sept. 9). This is so the utility can have enough generation for a 26% reserve margin in the winter, compared with a 16.25% one in the summer.

Alabama Power plans to add 400 megawatts of solar to meet part of that demand. But the company wants the rest of the generation to come from natural gas, including a new power plant it wants to build.

The polar vortex of 2014 is a major reason Alabama Power wants more generation. The utility told state regulators it would have faced reliability challenges had it not kept adequate reserves.

“You can build and build and build and build and get your way out of a polar vortex because if half of your plants go down, you still have the other half,” said Craig, the University of Michigan professor. “But maybe we should be thinking of other strategies to handle these very rare events instead of just building more gas plants.”

That requires a change in the regulatory model where a utility’s profit is based on how much it spends, he said.

“The incentives are: If you build more, you make more money. The utility is going to build more because that’s what they are going to do to get a return on investment,” Craig said.

Solar ‘dominance’

Experts have studied how climate change has affected electricity demand and load patterns in the Southeast, which is known for having mild winters. Despite extreme events like the polar vortex of 2014, winters in the region are steadily getting warmer.

“It doesn’t make sense to me that they are going to get a winter peak versus a summer peak because in the winter, the temperatures are going up,” said Paulina Jaramillo, engineering and public policy professor at Carnegie Mellon University.

Jaramillo pointed to the Tennessee Valley Authority, which covers seven Southeastern states, including parts of Alabama. The public power utility’s summer peak was roughly 24 GW during the summer of 2015, she said. In the winter, it was 20 GW.

Load has been flat or falling for TVA, a key reason why the federal agency updated its long-term energy resource plan this year. Among other provisions, the revised integrated resource plan calls for adding more utility-scale solar and storage.

Solar is the renewable energy of choice in the Southeast because the region lacks wind resources, and most residents use electricity instead of gas to heat their homes.

“For the time being, we’re dealing with the fact that we’re more electrified than a lot of the rest of the country,” said Emily Grubert, an assistant professor of construction and infrastructure engineering at Georgia Tech. “And we have this solar dominance.”

Winter has a high-capacity need that shouldn’t be ignored, Grubert added, but most of a utility’s high-use hours are in the summer. Even though solar has its limits in the winter, that’s no reason to stop building, she said.

“That should not be driving resource procurement,” she said.