RE Magazine reports solar power will be the building block of the future. Read the entire article below:
Solar Power Project: A Hot Commodity
Prairie Sky Solar covers 8 acres of land amid tracts of wheat and milo fields in the Kansas countryside east of Wichita. A trapezoid-shaped field of dark blue solar panels, built in rows angled to face the setting sun, the photogenic installation is owned and operated by Kansas Electric Power Cooperative (KEPCo).
It’s a modest project by today’s utility-scale solar standards, producing 1 MW of power at full output. Mark Barbee, KEPCo’s vice president of engineering, says that at “one-tenth of 1 percent” of the annual energy needs of the generation and transmission cooperative, “it’s a small part of our overall power supply.”
But Prairie Sky has significance well beyond the power it produces. Barbee, who has worked in the electric power industry for 30 years and has managed the solar projects for KEPCo, says the work was “the most fun I’ve had in years.” It also represented a turning point in his perception of the relevance of solar to a G&T.
“Solar wasn’t on my radar even two years ago. I thought solar was too expensive,” he says.
Prairie Sky is among dozens of G&Ts across the country that have taken up the challenge of bringing solar to their distribution-cooperative members. At the root of these efforts are changing expectations of co-op consumer-members and rapidly evolving consumer technology options.
“I think we’re mistaken not just as co-ops or G&Ts, but as an industry if we think what the customer or member does in the future is not going to dramatically impact us,” says KEPCo CEO Marcus Harris. “We have to make sure that the G&T stays ahead of those changes.”
Harris says Prairie Sky gave the G&T valuable hands-on experience in solar that will be the building block of future investments. He also credits SUNDA, NRECA’s solar assistance project funded through the U.S. Department of Energy, with putting KEPCo on the right track.
“SUNDA was a fantastic source of information for us,” he says. “It gave us a really good base to work from.”
While learning by doing was the prime motivation, the project also demonstrates an essential ingredient for the future of solar as a G&T resource—an economic return on investment.
Barbee explains that in KEPCo’s wholesale power contract with Westar, an investor owned utility in Kansas, there is a coincident demand ratchet clause.
“We designed the project to get the maximum solar production at the time our peak matches [Westar’s] peak in July and August, which is very predictable—either 4 or 5 p.m.,” Barbee says. By constructing the solar farm to face the southwest, it maximizes peak production in the afternoon. With the resulting reduction in demand charges, KEPCo makes a small return on its investment in Prairie Sky.
Small to Big
Over the past decade, solar has grown organically in distribution cooperative service areas as consumer-members have advocated for renewable energy. But until recently, solar generation was not a priority for most G&Ts.
With a few exceptions, electric cooperatives have been largely exempt from some or all of the rules and regulations that have compelled investor-owned utilities to meet renewable energy targets. As a result, there was little motivation for G&Ts to seriously consider solar, which, before equipment prices began to plummet, had been a prohibitively expensive option for meeting large-scale power needs.
One notable exception was the output of the 30-MW Cimarron solar farm in New Mexico that Tri-State Generation and Transmission Cooperative added to its portfolio under a power purchase agreement (PPA) in 2011. Cimarron was not only exceptional among electric co-ops; for a period, it stood as the single largest solar project connected to the U.S. grid. (Denver, Colorado-based Tri-State did not stop there, adding the 30-MW San Isabel and the 25-MW Alta Luna solar projects in 2016.)
Still, the trend for co-op solar had been to stay small, with co-ops leading the way over the past five years in community-based solar systems, selling power by the panel or kilowatt-hour block. While co-op solar growth has been on a steep rise recently, it adds up to less than 1 GW. By contrast, more than 14 GW of solar was connected to the U.S. electric grid in 2016 alone.
However, as G&Ts have begun to engage, more and more co-op solar projects are being measured in megawatts rather than kilowatts.
So why are G&Ts putting their weight behind solar? One factor is economics. The installed cost of solar photovoltaics has dropped nearly 80 percent over the past five years, and it is increasingly competitive with all sources of power generation. For the first time in 2016, solar was the leading source of new generation in the United States, edging out natural gas and wind.
However, the consumer interest that inspired the rise of community solar remains a significant driver. That translates to a growing desire by distribution co-ops to develop solar energy as a tangible, visible, local power resource.
What is unfolding in a variety of ways is an effort to maintain the G&T contractual structure that has served electric cooperatives for more than a half-century while providing G&T member systems with the means and ability to acquire local power resources that their members increasingly favor.
Making these projects work while maintaining the integrity of the G&T/distribution co-op relationship has led to some creative solutions.
The Upper Midwest
Though it lacks the long sunny days of California or Arizona, the Upper Midwest has been a hotbed of cooperative solar. Maple Grove, Minnesota-based Great River Energy (GRE), a member of the SUNDA project, and Dairyland Power Cooperative in La Crosse, Wisconsin, were among the first to help their member co-ops develop solar.
Several GRE members had launched their own community solar programs when the G&T, in 2013, decided to “seed” that development by building 20-kilowatt demonstration projects at 19 of its member systems as well as a 250-kW array at its Maple Grove headquarters. By the time construction was complete, several of the distribution members had decided to work with the G&T to expand these initial investments.
Today, the initiative comes in at more than 5 MW of solar built by GRE and its members, with the largest being a 2.25-MW system GRE built for Rockford, Minnesota-based Wright-Hennepin Cooperative Electric Association in 2016.
Nathan Domyahn, GRE’s director of generation engineering, says two of its distribution members are expected to issue requests for proposals soon for another 11 MW of solar power. GRE, a for-profit organization with the ability to leverage federal investment tax incentives for solar, will bid on the projects.
All of these solar projects, in place and planned, fall within carve-outs for self-generation that GRE allows in its wholesale power contract.
At this time, the G&T does not plan to build solar to meet its overall power requirements, but Domyahn does not rule it out for the future.
“Wind is still more competitively priced than solar in Minnesota, and that’s what we rely on to meet our renewable energy requirements with the state,” he says. “But it is easy to underestimate solar. If you had asked me last year whether we’d already be building more, I’d have said no. But I was wrong. We’re continuing to get more requests from members.”
In 2014, Dairyland Power Cooperative quietly set a notable precedent when it accepted a winning bid for 517 kW of solar supply from three of its distribution members based in southern Minnesota. Tri-County Electric Cooperative (now MiEnergy Cooperative), Rushford Village; People’s Energy Cooperative, Oronoco; and Freeborn-Mower Cooperative Services, Albert Lea, own and operate the facility located outside the People’s Energy headquarters and sell the power to their G&T.
This twist on the usual G&T/distribution co-op relationship remains unique in the co-op world.
Dairyland turned to solar in a significant way after it lost a biomass plant in 2015 that had supplied 40 MW of power, a significant portion of the resources it used to meet its state renewable requirements.
That year, the G&T issued a request for proposals for up to 25 MW of solar to be procured through power purchase agreements. Rather than contracting for the full amount from one large project, which might deliver power at a lower cost, Dairyland requested solar from installations that would be connected to the distribution systems of member cooperatives.
“Our desire is to install solar as a distributed resource,” says Craig Harmes, Dairyland’s manager of business development. “[Consumer-members] are really excited about solar, and members like local resources. They like to see those resources close to where they live.”
Harmes notes that community solar projects constructed by member systems, including Eau Claire Energy Cooperative’s 750-kW community solar project developed as part of the SUNDA program, provided strong evidence of this consumer-member interest, and also demonstrated that distributed solar could be readily connected to the distribution grid and built at an attractive price.
Dairyland chose to contract for 20.5 MW of solar from 15 sites in the service areas of 14 member distribution co-ops. The projects range in size from 500 kW to 2.5 MW, and all 15 will be in operation by this fall.
While the G&T can buy wind in its region at a lower price, solar has some advantages in addition to member interest. Annual solar production peaks right when the G&T hits its annual system peak, between 3 and 8 p.m. in mid-summer. And, unlike wind, it provides Dairyland with a partial capacity credit in the Midcontinent Independent System Operator market.
“We didn’t want this to be a G&T program, us telling our members, ‘Here’s what we’re going to do,’” he says. “They are our member-owners, and we really worked hard on getting their input early and throughout the process.” All members benefit from the projects, he adds, with the last three arrays going into service this fall.Hoosier Energy, an 18-member G&T in Indianapolis, Indiana, serving central and southern Indiana and a portion of southeastern Illinois, also cites distribution member interest as a key factor in building utility-scale solar that will become part of the G&T’s resource base. An initial plan to build a single 10-MW solar farm turned into 10 separate 1-MW projects built in the service areas of 10 members, each located in a highly visible location, says Josh Cisney, Hoosier Energy’s renewable energy project developer.
Hoosier Energy has focused on becoming the centralized source of solar expertise and project execution for its members and consumers. As a result, consumer-member renewable energy awareness numbers have risen substantially since the G&T began installing solar projects in 2015, Cisney says.
Hoosier Energy’s board adopted a voluntarily target of providing 10 percent of member energy requirements from renewable sources by 2025 as part of an “all-of-the-above” generation portfolio that includes a variety of fuel sources. Positive responses to the 10 1-MW solar arrays support the G&T’s strategy of providing cost-effective renewable energy for members, says Mike Rampley, Hoosier Energy senior vice president of marketing and business development at the G&T. “Our board and member’s foresight in embracing a voluntary renewable goal, and member support for utilizing resources in their own backyard fit well with the cooperative focus on bringing affordable energy to members.”
“Our board and member’s foresight in embracing a voluntary renewable goal, and member support for utilizing resources in their own backyard, fit well with the cooperative focus on bringing affordable energy to members,” he says.
South Texas Electric Cooperative (STEC), an eight-member G&T that serves a huge swath of rural Texas south of San Antonio and Houston from offices in Nursery, has not yet added solar to its resource mix, which is dominated by natural gas. But John Packard, the G&T’s manager of power supply, says “solar has gained stature as a viable utility-scale resource,” and STEC is exploring creative strategies for member co-ops asking about solar options.
“Their first choice is to own at the distribution co-op level, but our wholesale power contract does not accommodate that option,” he says. “However, if ownership of solar is a key for them, we think that it can be done at the G&T level.”
To accommodate, STEC has established a renewable energy pass-through tariff plan.
“We’ve evaluated two options: procure solar through a PPA with a third-party developer or have STEC build and own it,” Packard says. “We are able to be flexible in our approach; either way, we will flow the cost of the renewable project through to the member.”
After running various scenarios past STEC members, Packard says their decision was motivated by more than economics. “A PPA would be the easiest route, and that entity can monetize the tax benefits, where STEC cannot,” he says. “But members see a benefit to be able to say that their G&T owns these resources. They see benefits in gaining experience with the technology through ownership.”
STEC will issue a request for proposals this summer, likely for less than 5 MW of solar “that can be built within the existing STEC footprint,” Packard says. “Our intent is to capitalize on both the good solar resource siting in our part of Texas as well as the property we own that can be used for the projects. We’re going to leverage whatever inherent advantages we have to make this economically feasible.”
Going farther west, it would be hard to find a more optimal situation for solar development than in Arizona and southern California. There are major population centers in an area with a world-class solar resource—the intensity of the sun combined with a lack of clouds—plus open land and a scarcity of other local energy sources, whether fossil or renewable.
While electric cooperatives have a relatively smaller geographic footprint in the far Southwest than in most other parts of the U.S., and less stringent policy requirements from the two states to add renewables, the combination of economics and grassroots member interest is helping drive cooperative solar.
Anza Electric Cooperative is an all-requirements member of Arizona Electric Power Cooperative (AEPCO), the Benson, Arizona-based G&T. Anza is also AEPCO’s only member in California and, as such, must abide by California restrictions on greenhouse gas emissions, which includes electricity imported from AEPCO’s 608-MW Apache coal and gas generation facility in Benson, Arizona.
AEPCO worked with Anza, a member of NRECA’s SUNDA project, to build a 2-MW AEPCO-owned solar project next to an Anza substation. The output serves a dual purpose: It meets California’s greenhouse gas emission reduction requirements and reduces congestion on the constrained transmission line that feeds Anza’s system.
Working on the project has “been a great experience,” says Kevin Short, Anza’s general manager. “Through it, we’ve blazed new trails with our G&T.”
Short says he is looking forward to phase two of the project: an additional 1.6 MW of solar to help supply his 4,600 members.
Green Power EMC
Other states may have a more ideal solar resources, but Georgia is far and away the national leader when it comes to cooperative solar, with 272 MW in production and more on the way.
The driver behind the solar expansion is Green Power EMC, the nation’s only renewable energy G&T, based in Tucker, Georgia. Green Power is partnering with Nashville-based Silicon Ranch (NRECA Associate Member) to add 200 MW of new solar capacity by 2020.
Green Power EMC’s first project was energized in 2003, and it slowly added a variety of resources: landfill gas, wood-waste biomass, wind, low-impact hydropower, and solar—a total of 30 MW by the time CEO Jeff Pratt was hired in 2010. Only 100 kW was generated by the sun, largely at a series of “Solar for Schools” demonstration and education projects.
But in 2013, the solar market in Georgia exploded. The trigger was a decision by the largest utility in the state, Georgia Power, to commit to building up to 900 MW of solar. Though there is no renewable energy mandate in Georgia, the public service commission felt pressure to open up the state to more solar development and strongly suggested that the investor-owned utility take the lead.
The co-ops followed suit, with three members of Green Power EMC agreeing to buy 143 MW of solar. The falling prices of solar photovoltaics, combined with available acreage in rural Georgia, yielded a price that the co-ops found surprisingly affordable.
Over the past three years, Green Power EMC has responded to members’ interest in more solar by developing offerings that range from small, locally owned and operated systems for individual co-ops to larger projects subscribed to by a group of members. Consumer-members purchase solar from the various projects as part of community solar programs, while some of the solar is simply added to the co-op rate base.
Pratt says Green Power EMC has become skilled at acquiring solar at highly competitive prices.
“Some of our members really want to see solar built right in their local area, and we’re able to provide it at prices similar to that coming from PPAs from larger systems. There is not a lot of risk,” he says.
With single-axis tracking, large-scale solar in Georgia is “getting close to a 30 percent capacity factor,” Pratt says. While he cautions that solar is not a dispatchable resource, it is becoming competitive with new combined-cycle natural gas. “The technology has improved and the price has dropped to the point that just in the last year, it has become a power supply opportunity, a good way to add diversity to your portfolio.”
And with a 9,000-MW system, the largest in the country, Pratt says Georgia co-ops can readily absorb even more solar.
Solar and the co-op model
Back in Kansas, KEPCo is monitoring the performance of its toe-in-the-water solar venture. CEO Harris sees more solar on the horizon, along with some significant changes for the electric utility business.
“Building several more solar projects is a real possibility,” he says. “Because of Prairie Sky, we’ll be ready to tackle that.”
He sees KEPCo embracing more than one approach.
“It could be that in the future, we will allow and work with our member co-ops to add their own solar,” he says, noting that G&Ts need to acknowledge that the electric energy business is changing on many fronts. “As an electric utility, we’ve always wanted to grow at 3 percent a year. With that growth, we could cover our margins and have the ability to invest in the new equipment required to meet that growth. Well, that world is changing.”
He says advancements in energy efficiency have driven demand down in much of the country to the point where it is either flat or declining.
“So maybe our goal is no longer to expect to see 3 percent growth a year in demand for electricity,” Harris says. “Instead, it’s to help our distribution cooperatives and their members adopt new technologies and do it in a way that keeps the co-op relevant and solvent. Maybe that means that we’ll provide new services and recover costs differently than we have in the past.”