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PURPA has potential to push PV projects in Pacific Northwest

Wed, 05/28/2014 - 11:17am
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On May 13th, Idaho Power, an investor-owned utility (IOU) serving most of Southern Idaho and parts of Eastern Oregon, filed a petition with the Idaho Public Utilities Commission (IPUC) to suspend Idaho Power’s requirement to enter into purchase agreements with solar power generators seeking to install capacity via the Public Utility Regulatory Policies Act (PURPA).

PURPA is a federal law that requires utilities to purchase generation from renewable energy facilities if the cost of that energy is less than the avoided cost, which is the cost at which the utility could produce energy itself or purchase it from another source. Avoided cost profiles are now often related to the cost of energy from natural gas facilities.

PURPA has been a leading mechanism supporting wind power development in many states, but until recently, the cost of solar was high enough that few solar PV projects could meet the avoided cost threshold. As such, other policy mechanisms, such as feed-in tariffs, renewable portfolio standards, and net-metering have generally been the focus of solar project developers and industry analysts. However, in its filing, Idaho Power revealed that it had a solar project application pipeline of over 500 MW seeking to connect via PURPA contracts.

Idaho Power is currently undertaking a ‘solar integration study’ to determine the cost of connecting intermittent solar power stations to the grid and may propose an integration charge to new solar projects in order to maintain costs/rates for its customers. Idaho Power has requested that the exemption be in place until the study is completed in June, or that any projects that do qualify be open to having any integration charged imposed. The IPUC will consider information from public hearings and commentary received on May 21st, and will also consider the proposed solar integration charges once the results of the study are announced.

This is important for several reasons. First, it is a significant amount of potential demand in a state that has consistently ranked near the bottom in solar market share. Second, retail electricity tariffs in Idaho are among the lowest in the nation, meaning PURPA rates (the rates at which the solar project developers would be compensated) are also relatively low. Finally, the fact that solar project developers are even considering PURPA contracts indicates that solar PV has hit a new cost level, in terms of being competitive with other energy sources (taking into account all current incentive mechanisms such as the federal investment tax credit).

If projects in Idaho are able to produce power at avoided rates, this could create a new chapter in terms of U.S.-based solar PV development as it would open up other state-based markets that have low energy prices and few direct policy incentive mechanisms. While Idaho is a small market, the fact that a major IOU is taking seriously the potential impact of solar on its system and rates means that solar PV is starting to have an impact. Furthermore, the potential for solar to enter new markets via PURPA should not be underestimated; a trend well-represented by wind power development across the U.S.

More detailed discussions on the U.S. PV market, and potential growth paths, will be presented by solar industry experts at the forthcoming NPD Solarbuzz Seminar at PV America, on June 23rd in Boston, and at the NPD Solarbuzz North America PV, on August 6th in San Jose.

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