As we look for ways to generate more of our power from clean, renewable sources, state regulators can help deliver utility scale solar photovoltaic (PV) by strengthening state regulations and policies concerning energy use and greenhouse gas emissions.
Renewable Portfolio Standard (RPS)
Twenty-nine states have established renewable portfolio standard (RPS) policies, which require utilities to supply a certain amount or percentage of their electricity from renewable energy sources.
Several of these states also require that a portion of the obligation be met with solar or distributed generation sources. However, RPS requirements, which are generally met through a combination of utility and non-utility generation investments, are generally longer-term requirements and can vary widely in scope, from less than 2% up to 30%.
The following actions are needed to strengthen RPS policies and compliance requirements:
- Call for a minimum of 20% of electricity from renewable energy sources by 2020.
- Define and enforce short-term milestones toward achieving longer-term RPS goals.
- Provide a rate-of-return adder or other incentives to utilities for early compliance.
Ambitious PV programs and Fast-track Regulatory Approval
Utility-owned solar PV provides the lowest cost to ratepayers with the following benefits:
- Economies of scale in larger projects
- Utilities are now eligible for the 30% federal solar investment tax credit (ITC) and generally have tax appetite
- Utilities have an attractive capital structure to lower financing costs
- Utility rate-basing allows capital cost recovery to be amortized over a long period of time, often 30 years
- Asset ownership provides utilities with earnings through rate-based cost recovery
For more information on state policies, corporate tax incentives, grant programs and other initiatives currently in place, visit the Database of State Incentives for Renewables & Efficiency.
Non-Cost Benefits
State regulators approve electricity pricing based on a combination of factors, including electricity generation and delivery investments, fuel expenses, equipment operation and maintenance expenses, and financing costs. Particular technologies, such as solar PV, can reduce or avoid many of these costs, as well as provide greater predictability of future costs. These non-cost benefits of solar are rarely quantified or reflected in electricity pricing decisions.
Compared to traditional generation sources, solar PV has the following non-cost benefits that need to be accounted for in utility resource planning and contract pricing:
- Time-of-day displacement of expensive peak power
- Emissions-free electricity
- Reduction of cost volatility because the fuel is stable, free and virtually limitless
- Ability to locate projects within the distribution grid, avoid system losses and costly new transmission
- Shorter project lead times and rapid deployment potential
- Also, in the first year, the electricity generated from a typical 80MW solar farm would help avoid 46,000 metric tons of carbon dioxide (₂) - equivalent to the annual emissions of 8,425 automobiles.
