TenneSEIA Newsletter

Determining the Value of Solar

Last June (2013), at the TenneSEIA Stakeholder meeting, Karl Rabago presented on the "value of solar" and its unique benefits to a utility and the grid system, separate from and in addition to more qualitative societal benefits. Until recently, few utilities or policy makers had attempted to recognize or quantify solar's value beyond basic energy and (maybe) generating capacity benefits. Times are changing: Minnesota recently became the first state in the country to establish a value of solar methodology; and TVA, as with many utilities and states, is now pursuing a value of solar analysis.

Solar generation has unique value characteristics - some of which are not typically captured in traditional avoided cost methodologies. While methods for determining solar's value are well documented, the recognition that solar brings greater value than previously thought remains at the center of numerous debates on the equitableness of net metering rules and solar programs across the country. When solar valuation analyses have been conducted in a transparent process using the best available information, the value of solar (particularly distributed) is often above the retail rate.

Minnesota Regulators Approve Value Solar Methodology

On March 13, the Minnesota Public Utilities Commission approved the first state-mandated value of solar methodology in the country. This means that investor-owned utilities in that state now have the option to either continue offering net metering (which credits customers for excess generation at the retail rate), or can instead offer a dual metering option where they pay distributed solar customers a value of solar tariff (using approved methodology) under a 20-year contract.

There are many lessons to be learned and best practices to be gained from the Minnesota process in determining a value of solar methodology. For one, it was efficient. The MN Department of Commerce (DOC) was tasked with developing the draft methodology over a scheduled process that took about six months. Second, it was transparent and open to stakeholder input. There were numerous opportunities for the public (as well as utilities) to provide comments and feedback on iterations of the method as it developed. Third, it was guided by an independent expert. The DOC contracted with Clean Power Research (CPR), arguably the most prominent and credible technical expert in understanding the value of solar generation to utilities and is very upfront with being an independent organization interested in producing quality work and accurate results (rather than being on a utility or, conversely, environmental, agenda).

The below table highlights the "values" components identified for solar in the DOC's methodology, as well as one cost, "Integration Cost," which is more of a placeholder for future assessments when solar penetration levels become higher. The actual rates included are initial draft estimates by Xcel Energy (Minnesota's largest investor-owned utility).

While many of these value components may seem fairly standard, it's the deeper assumptions and methodologies behind calculating each component that reveal solar's great value. For example, the values are estimated based on solar providing benefits over a 25 year period. Included in that projection are not only avoided direct fuel investments, but also avoided risks (and therefore costs) associated with relying on volatile gas prices.

As demonstrated in the table, Xcel Energy came up with markedly different rates when using the state-mandated methodology (denoted as DOC), versus using Xcel's preferred internal avoided cost methods. The result is decisive: 14.5 cents/kWh for the method approved by the state, versus 7.4 cents/kWh using Xcel's method.

What's TVA's Value of Solar?

As discussed briefly in the IRP Working Group summary (see next article in this Newsletter), TVA has initiated a value of solar analysis to identify what rates should be offered to solar customers. This analysis has the potential to feed into, or take the place of, existing programs such as Green Power Providers, Solar Solutions Initiative, and the Renewable Standard Offer.

A sub-group of the current TVA IRP working group will be created and tasked with representing public stakeholders in this value of solar analysis. TVA has selected the Solar Electric Power Administration (SEPA) to lead the process, with support from the Electric Power Research Institute. The fact that TVA will engage public stakeholders and has identified credible groups to provide leadership and expertise during the process is a positive start. TenneSEIA will be engaged in this process along with SACE and others and will work hard to ensure the best information is utilized. For example, it would be ideal to include the expertise of Clean Power Research, seeing that they have so many capabilities in this area and could allow TVA to avoid re-creating the wheel or delaying the process, which, as it stands, will likely carry through 2015 (compared to Minnesota's ~6 month process).

TenneSEIA Working Groups

As a result of discussions at the December annual meeting and the Board’s recent retreat, the TenneSEIA Board decided to focus the organization’s 2014 policy efforts on two primary issue areas: (1) TenneSEIA’s concrete proposal for TVA’s Integrated Resource Plan (IRP); and (2) behind-the-meter generation emphasizing distributor relationships and interconnection policies. Gil Hough and Chris Bowles are leading working groups to support these areas, and all TenneSEIA members are welcome to participate.

Integrated Resource Plan (IRP) Working Group

The TenneSEIA Integrated Resource Plan (IRP) Working Group has monthly Conference calls on the third Monday of the month at 11 AM Eastern time. Please contact Gil Hough at ghough@rsienv.com if you are interested in joining the calls.

The February and March calls focused on the Tennessee Valley - Renewable Information eXchange (TV-RIX) process and the current “Solar Inputs". The TV-RIX stakeholders provided recommended data inputs for renewable technologies to feed into the IRP modeling process. TenneSEIA led the development of the solar inputs with support from the Southern Alliance for Clean Energy (SACE). The recommendations included price points as well as more technical aspects, like net dependable capacity factors (i.e., the ability of solar to provide energy during peak demand periods). So far, most of TenneSEIA's submissions have been well-received with only minor edits, however there remains some TBD areas under review.

One new development that came out of the last TV-RIX meeting is that the ongoing Value of Solar (VoS) work that TVA has been working on is going to be put under the ongoing TV-RIX process for stakeholder input and review. In addition to the Quarterly TV-RIX meeting, a subcommittee of interested stakeholders will be meeting to work on the Value of Solar development.

Behind the Meter (BTM) Working Group

The TenneSEIA "behind-the-meter" (BTM) Working Group meets via conference call on the second Wednesday of each month at 2:00 pm eastern/1:00 pm central. Email Chris Bowles at cbowles@babc.com if you are interested in participating.

The BTM working group is focused primarily on creating a uniform policy to be adopted by TVA distributors that provides compensation for excess electricity production from BTM projects and a minimally burdensome interconnection process. TVA has informed TenneSEIA that it is currently working with its distributors to develop such a policy, and TenneSEIA is closely monitoring this development.

Featured Project

Providence Solar Center - HelioSage

This month's "Featured Project" is the Providence Solar Center, a 20MWdc solar array being developed by HelioSage Energy in Madison County, TN.

Located in Madison County, TN, Providence Solar Center ("Providence") is a 20MWdc solar project on 134 acres of leased farmland. Providence was officially accepted into the 2013 TVA Renewable Standard Offering program and received its use approval from the Madison County Board of Zoning Appeals on February 26, 2014. Once operational, Providence will generate enough electricity to power 3,306 average U.S. households. In addition, Providence will provide over $1.2 million in tax revenue to Madison County during the project life and create 100+ project-level jobs.

Providence Solar Center is being developed by HelioSage Energy. HelioSage is a leading national developer of commercial and utility scale solar projects, with a development pipeline totaling more than 900 megawatts across 20 states. The Company was founded by several of the principals of Greenlight Energy, Inc., one of the country’s largest independent wind energy companies at the time of its 2006 sale to BP Alternative Energy. With experience gained across more than 500 megawatts of completed renewable energy transactions, representing over $1 billion in invested capital, HelioSage is a recognized leader in large-scale solar energy development. For more information about HelioSage, please visit www.heliosage.com.

Below image is of a 7.4MW project in Somers, CT., developed by HelioSage.