Renewable energy prices are at an all-time historic low, and we have opportunities right now to lock in cheap, clean electricity for decades. One way to achieve this is by developing utility-size renewable energy project in Utah. And thanks to a little known policy called PURPA, monopoly utilities are required to purchase electricity from small, independent renewable energy facilities (also called “Qualifying Facilities,” or “QFs”) through long-term, fixed-price contracts.
The catch is that the utility is only required to purchase the clean energy as long as the price of the energy is less than the cost the utility would otherwise have to pay to acquire energy of another source (called Avoided Cost pricing). Over the past several years, Utah Clean Energy’s experts have ensured fair pricing for these types of large-scale renewable energy projects in Utah. In fact, thanks to our successful work on this issue, Utah now has more than a gigawatt of utility-sized solar, wind and geothermal projects!
Unfortunately, Rocky Mountain Power is seeking to limit their obligation to purchase renewable energy, claiming that power from a renewable resource can only displace power from a renewable resource of the exact same type. Well, that’s just not how electrons work, so Utah Clean Energy provided evidence showing how a wind or solar resource can (and will) defer the need to invest in future resources, regardless of the type of resources. Click here to read our testimony.
The Utah Public Service Commission recently issued an order agreeing with RMP. Therefore, prices paid for large renewable energy projects will be falling once again, making renewable development in the state that much harder. However, there is one silver lining in the order as it applies to small QFs. The Commission accepted Utah Clean Energy’ recommendation regarding renewable facilities under 3 MW. These projects will not be subject to the same pricing queue as projects larger than 3 MW, as proposed by Rocky Mountain Power, at least for now.
Read on to get into the weeds of how pricing for renewable energy is calculated.
Determining the Value of Renewable Energy Projects
The price Rocky Mountain Power will pay a large-scale renewable energy plant already hovers right around 3 cents per kilowatt-hour, meaning that when a developer builds a solar project, Utah ratepayers get to lock-in extremely affordably-priced energy for 15 years. Rocky Mountain Power’s proposal claims that the value of a given clean energy resource is dependent on its ability to defer another resource of the exact same type, which effectively lowers the price paid to developers. For example, according to Rocky Mountain Power’s proposal, a solar resource built today could only be used to defer another solar resource – when in reality, we know that kilowatt-hours generated by a solar farm can be used to defer kilowatt-hours from a natural gas plant. In fact, the intent of PURPA is to use low-risk, long-term contracts from renewable energy resources to displace risky fossil fuel resources.
These proposed changes set a bad precedent for valuing solar energy in Utah. Avoided cost pricing is the Commission’s method for determining the price paid for renewable energy resources, and if we do not appropriately compensate renewable energy developers for the value clean energy is providing to all Utahns then the renewable energy market in Utah will stagnate.
Utah Clean Energy’s experts recently intervened before the Utah Public Service Commission on this issue to fight for fair pricing for utility-sized renewable energy development in Utah. Click here to review the full docket.