Five Texas electric cooperatives banded together and recently signed a collective deal for 7 megawatts (MW) of emissions-free, DC solar power generation capacity. Though small, the collective negotiation and purchase marks a first for the Texas solar power market, as well as a first for Rocky Mountain Institute’s (RMI) SHINE distribution-scale, community solar energy program.
Distribution-scale solar photovoltaic (PV) systems will be built near grid infrastructure owned and operated for their member-customers by Bartlett Electric Cooperative, Comanche Electric Cooperative, Heart of Texas, PenTex Energy and South Plains Electric Cooperative. Canada’s Saturn Power will develop, build, own and operate all of them as per the terms of individual, 20-year power purchase agreements (PPAs).
“Developing these solar energy installations makes a lot of sense for our members,” said Bryan Lightfoot, general manager and CEO of Bartlett Electric Cooperative.
Solar energy in Texas
Building the solar PV systems on land leased from the electric coops and connected to existing grid infrastructure used by the coops enables them to avoid peak-period power demand and generation capacity charges, which are levied when state-wide transmission grid operator the Electricity Reliability Council of Texas (ERCOT) has to build new transmission or distribution infrastructure to connect new power generation assets to the transmission grid, RMI Senior Associate Jason Prince explained in an interview.
Avoiding the demand and generation capacity charges was a key factor in lowering the collective project’s costs and enhancing the PPA’s economics, Prince continued. More broadly, the distribution-scale solar power systems are expected to enhance the reliability and resiliency of the coops and ERCOT power to a greater degree than an equivalent utility-scale solar power farm, as well as reduce the coops’ carbon and greenhouse gas (GHG) emissions.
Texas ranked fifth among U.S. states in terms of installed solar power capacity as of 2018’s fourth quarter with an installed capacity of 2.9 gigawatts (GW), enough emissions-free electricity to meet the needs of just over 349,000 average homes, according to the U.S. Solar Energy Industries Association (SEIA). In sum, solar power accounts for just 0.85% of total generation capacity in Texas, however.
Electricity is cheap in Texas as compared to U.S. average and the state hasn’t been a leader when it comes to instituting solar energy incentives, however. It doesn’t have a net metering requirement that requires utilities to connect to and compensate for electricity solar energy “prosumers” send on to the grid, for example.
That makes the economics of solar energy more challenging in The Lone Star State than in states where solar energy incentives are in place. Benjamin Meier and Jesse Thompson, researchers at the Federal Reserve Bank of Dallas, highlighted in a recent report that solar power accounts for just 0.5% of electricity generation in Texas and residential solar power just 0.1%. That’s less than one-third the national average on a per capita basis.
“Hot Texas summers and population growth continue to drive record electricity demand. Converting sunlight that would otherwise heat attics into power would seem to hold promise for homeowners. However, compared with other states with similar sunlight penetration, Texas has been slow to adopt residential solar,” Benjamin Meier and Jesse Thompson wrote.
The research duo put forward several reasons they believe can account for the comparatively slow growth of solar in Texas:
- Texas is one of just two states that do not require utilities to purchase surplus energy from residential solar energy systems, i.e. net metering;
- Low electricity prices. What Texas utilities buy back electricity produced behind the meter is below the national average even with net metering. The average price for electricity in Texas is $0.0838 per kilowatt-hour, 20 percent below the national average. That means it takes longer to recoup investments in residential solar power systems.
- The state’s low renewable energy generation requirements may be another reason residential solar uptake has been so slow in Texas. “States that lead in residential solar capacity, such as Arizona and California, have adopted renewable energy production targets of 15 percent or more of total power sold, as well as established solar-specific minimum generation requirements to reduce carbon emissions,” they pointed out.
Texas solar: Lots of latent, untapped solar potential
All that said, solar energy has a lot going for it in Texas: the state’s solar energy resource and distribution-scale solar site potential is huge and so it’s reported is latent, untapped demand. Then there’s the fact that Texas is the leading wind power producer in the U.S.. Furthermore, Texas electric coops can institute their own net metering policies if they choose to do so.
Based on its model and analysis, RMI’s SHINE team firmly believes “there’s a lot of value to be gained from investing in distribution-scale solar located near distribution centers,” and more specifically as compared to building out utility-scale solar power generation capacity, Prince told Solar Magazine. “Most of the Texas electric coops are siting the solar PV systems right by their distribution headquarters, so they will be very visible to all their members.”
RMI’s SHINE team was able to negotiate a lower price and good PPA terms and conditions by bringing together the five electric coops and representing them as a single purchaser. The emissions-free energy fed on to the coops’ distribution grids will simply be mixed into the coops’ energy mix.
As the solar energy generators’ owner, Saturn can qualify for the federal investment tax credit (ITC), which holds steady at 30% until the end of the year when it will start to decline. As the solar power projects owner, Saturn will pass on savings from the ITC to the coops, which lowers their PPA rates, Prince explained.
“These projects will save customers money. The coops are putting zero U.S. dollars down and Saturn is making the investment to build, own and operate the systems,” Prince said.
In addition, collectively, the 7 MW of solar power capacity is projected to avoid more than 150,000 metric tons of carbon dioxide (CO2) emissions over the 20-year terms of the PPAs, according to RMI’s SHINE.
A landmark, collective PPA for electric coops
The collective Texas electric coop PPA is not the first time RMI’s SHINE team has reached out to multiple prospective buyers and worked closely with them to design, structure and negotiate distribution-scale, solar PPAs as a buyers’ agent. SHINE has run similar distribution-scale PPA procurement deals in Colorado, New Mexico and New York, Prince noted.
The deal is the SHINE team’s largest in terms of magnitude and its first in Texas, however.
—Prince said in an interview.
SHINE’s effort began in late 2017. RMI is a non-profit with a board of directors and staff committed to advancing energy efficiency and low-carbon energy in the U.S. and internationally. “We have donors that have been pointing out to us that Texas is the most carbon emissions-state in the U.S. What can we do to improve the situation,” Prince said.
“We think electric coops are an interesting place to start. They’re owned by their members and, generally speaking, we get the impression that their members are engaged with energy than customers buying power from a much larger investor-owned utility possibly located far away in a major city.”
The five electric coops got on board in 2018’s first half and the SHINE team began working with them to draft a request for proposals (RFP) that was sent across a network of prospective project-developer bidders in July 2018. “We got a lot of bids. At the end of the day we selected a developer and negotiated on the buyers’ behalf,” Prince said. Doing so included negotiating land leases and interconnection agreements, as well as the PPAs themselves, he added.
The SHINE team’s evaluation of project proposals included carrying out “due diligence for each bidder’s pricing, proposed hardware, and ability to deliver, including their experience in financing and constructing similar projects, in addition to references,” Prince recounted.
Coops and independent solar, renewable energy acquisition
Furthermore, none of the electric coops own generation assets. The Texas coops have gone out of their way, in a sense, to make an initial foray into distribution-scale solar energy, Prince pointed out. Doing so not only makes good economic and environmental sense, but demonstrates the coops’ interest in and commitment to best serving their member-customers over the long term across a broader front than electricity distribution alone, he added.
Typically, electric coops in the U.S. negotiate, and are locked into, long-term power purchase agreements with a single, much larger power generation-distribution company that transmits electricity to distribution-utility customers in at least one, often several, states.
The federal Public Utilities Regulatory Protection Act of 1978 (PURPA) allows electric coops, which are owned by their member customers, to negotiate power purchase agreements with third-party producers given the projects are approved, so-called “qualifying facilities” (QFs).
In order to gain approval as a PURPA QF, the electric coop has to show that the project being developed will deliver electricity at “avoided cost.” That’s the cost of electricity the coop would pay to otherwise contract for or generate the same amount of energy capacity.
That has led to some precedent-setting legal confrontations between electric coops seeking to purchase solar or other forms of local renewable energy from independent power producers (IPPs) and their generation-distribution utility suppliers. In filing petitions to FERC (Federal Energy Regulatory Commission), they contended that purchasing energy from third parties violated the terms of electric coops’ contracts with them.
Solar energy on Texas electric coop distribution grids: More to come?
The SHINE team considered including battery energy storage capacity in the collective PPA but decided to take things step by step given this was a precedent-setting venture for the coops, Prince explained.
“We haven’t contracted for any storage, but we’re working on it. We’ve already gone most of the way there,” Prince said. “From the buyers’ perspective, we wanted to focus on getting the solar done first. Now that that’s done, we’re turning out attention to storage.”
Prince declined to offer any further details regarding the collective PPA’s pricing or its terms and conditions. He did say that the SHINE team is in discussions with other Texas electric coops regarding the possibility of them joining the original five as additional solar power purchasers, however. Stay tuned.
Looking to expand further on the work its done in Texas and other U.S. states, SHINE launched a new Solar Procurement Framework portal that it says provides “an easy-to-use, step-by-step guide for prospective buyers of distribution-scale solar projects.”
SHINE also announced it will convene an invitation-only solar energy development workshop to advance innovative clean energy projects in the Lone Star State.
Dubbed Energy Innovation Lab (e-Lab) Forge: Texas 2019, the event is scheduled to take place Sept. 16–18 in Austin. “E-Lab Texas will bring together teams working on high-impact, scalable ideas and projects in distribution-scale solar energy, battery storage and other distributed clean energy solutions,” according to RMI. As many as seven teams from across the state deemed to have solar energy development and project ideas with the greatest potential are to participate in intensive, two-and-a-half-day working sessions. comment↓