How Economics Finally Brought Community Solar to IREA
My uber-conservative utility, Intermountain
Rural Electric Association (IREA) has been against solar since
before I moved into the service territory in 2007. IREA's
long-serving general manager, Stanley Lewandowski Jr., would
include climate change denial leaflets in the envelope along
with the monthly electric bills.
Now he is gone, and attitudes seem to be changing towards solar. With a new general manager, a couple of forward thinking board of directors and a handful of active IREA owners/members the solar landscape has changed and now includes a large solar project.
Currently IREA has 550 MW of installed electrical generating capacity, about 270 miles of transmission lines and many more of distribution. Residential users account for about 65% of electricity demand. Like most rural electrical utilities, there are few customers per mile. At the end of 2014 there were 354 solar electric systems, end of 2015 had 1,087 and currently there are 1,250 totaling 7.1 MW out of 152,300 total customers. IREA’s perspective has been that net metering is a subsidy paid for by other ratepayers. Unfortunately, in a mis-guided attempt to recoup this perceived subsidy, since the beginning of the year IREA has placed a load factor adjustment (LFA) on all new customers including new PV. I expect that many people will soon be clamoring as to their unfair bottom line monthly bills compared to their neighbors.
LFA is a penalty charged for periodic high demand. The LFA discourages both customer sited PV and electric vehicle (EV) charging. It also presents further confusion to the typical energy consumer, a tower of babble. The new, much higher LFA rate is triggered if the average demand over the billing period divided by the peak demand over the same period exceeds 10% for residential service. If triggered a peak demand charge is added to the bill. The typical load factor for an average residential IREA customer is about 20%. But EV charging and PV generators will almost certainly send customers into lower than 10% LFA; EVs because of higher peak demand and PV because of lower average demand. One more intelligent solution would be to incentivize EV charging at night, when IREA’s electricity supply from Xcel Energy’s (XEL) Comanche III coal plant output and wind power produce the cheapest electricity.
For the 8 years I have been an IREA member/owner I have been going to the microphone at the annual membership meetings and been a pebble in the shoe of my representative to try and implement community solar gardens (CSG, also known as community solar or shared solar). In parallel, I was helping the state of Colorado pass the first ever CSG legislation (House Bill 10-1342, Levy), and before that I invented and implemented the first large scale utility owned CSG located in Sacramento starting in 2005. It almost feels like the efforts of a few people are helping to change the attitudes of our utility towards cost effective solar.
The economics of CSG are supported by the Public Utility Regulatory Policies Act (PURPA) which encourages the development of renewable energy projects by requiring utilities to purchase energy and capacity from qualifying facilities if at or below avoided costs. In 2015 juwi, headquartered in Boulder Colorado, was able to propose a solar project at IREA’s avoided costs. IREA announced the groundbreaking has begun by juwi on the 13 MW CSG named Victory Solar. This is close to Denver in Adams County. It is unique in that it is 15.9 megawatt DC but 13 MW AC, a 1.3% DC overrating which should save on the overall project economics. This project has a long-term power purchase agreement with an IREA purchase option in a few years. IREA upgraded an underutilized substation for the interconnection at a cost of $1.4M. The asset utilization for this project, the out of pocket expense for IREA, is fantastically low compared to ownership of other generation. Solar is now cost effective at this scale. Currently IREA is planning a portion or all of this project to be a CSG. I am excited to be able to charge my EV with solar electric power from my utility by the end of the year.
IREA obtained special approval from Xcel Energy to generate 15 MW of solar electricity in violation of their All-Requirements contract. Smaller utilities often have such All-Requirements contracts with larger utilities or with transmission organizations like Tristate. Recently, FERC has ruled against Tristate for imposing similar all-requirements on Delta Montrose Electric Association (DMEA). This is a major national tipping point for smaller utilities like IREA and DMEA to enable more distributed generation from renewable energy.
The next steps for the active IREA members are to correct the LFA to encourage EV and customer sited PV and to get an additional 2 MW CSG on disturbed or contaminated land in IREA territory. Electric Muni’s, Co-operatives and Associations are perfectly suited to reap the benefits of distributed generation, create local jobs, and revitalize land for local projects. A great example of such a project is located south of Boulder adjacent to the superfund Marshal Landfill site. EPA helped envision and spearhead this Community Energy Collective (First Solar FSLR has a 27% interest in CEC) project.
This large CSG by IREA is a watershed event, where like many conservative local utilities, IREA has been waiting for solar to be cost effective for their needs. That day has come, and will be showing up at many more utilities who are more focused on their customers than on stockholders. CSG’s are also well suited for rural utilities who have fewer customers per mile, justifying distributed energy from solar as opposed to central station generation from fossil fuels.
Joseph McCabe is an international solar industry expert with over 20 years in the business. He is a Solar Energy Society Fellow, a Professional Engineer, and is a recognized expert in developing new business models for the industry including Community Solar Gardens and Utility Owned Inverters. McCabe has a Masters Degree in Nuclear and Energy Engineering and a Masters Degree of Business Administration.
Joe is a Contributing Editor to Alt Energy Stocks and can be reached at energy [no space] ideas at gmail dotcom. Please contact Joe for permission to reprint.
Related article: Comparing Community Solar Subscriptions And Yieldcos
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