Southern Company, which owns Mississippi Power, ranks nearly last when it comes to utilities’ use of renewable energy. However, a settlement announced earlier this week could open up as much as 100 megawatts of solar and wind in Mississippi.
The Gulfport-based utility recently reached a settlement with the local chapter of the Sierra Club to diversify its fuel mix away from coal. In exchange for Mississippi Power’s commitment to convert from coal to natural gas and procure more solar and wind energy, the Sierra Club has agreed to stop its legal and regulatory opposition to the Kemper coal gasification power plant.
The utility will pursue solar and wind power-purchase agreements and make “all good faith efforts to obtain an arrangement with approximately 100 MW in nameplate capacity and for a term of at least ten years.” The power-purchase agreements can be financed through its rate base.
Mississippi Power also agreed not to oppose net metering rules for residential solar that are now being considered by the state’s Public Service Commission. It also committed to $15 million in energy efficiency programs.
A representative from Mississippi Power said that the utility has started evaluating renewable energy projects and is now working on the most promising. “We do not have a timeline for signing a deal, but intend to proceed if we can find proposals that would make economic sense for customers and further diversify our energy mix,” Mississippi Power spokesperson Jeff Shepard said.
If the pieces fall into place for an RFP, it will likely attract a number of the solar developers that have been increasingly active in the Southeast to Mississippi. Georgia Power won approval from the state public service commission to purchase 210 megawatts of solar by the end of this year. It now has two programs -- a 100-megawatt residential solar procurement and 425 megawatts from utility-scale systems -- that are expected to be in service by the end of 2016.
While the California utility solar market barely grew at all, the pipeline for the rest of the U.S. jumped 69 percent from 2012 to the first half of this year, according to a report from GTM Research’s Corey Honeyman.
What’s particularly notable in Honeyman’s analysis is that much of the activity is being driven by economics, rather than state mandates for renewable energy. Utility-scale solar is often cheaper than building new natural gas plants and solar is a hedge against higher gas prices, he noted. Also, U.S. utilities are seeking alternatives to coal generation to meet EPA emissions and coal ash rules, further driving alternatives.
There remain a number of regulatory barriers to utility-scale solar, particularly among power companies that are trying to slow the spread of solar, noted GTM's Eric Wesoff in a recent piece on solar in Utah. But solar project developers have been able to take advantage of state-level incentives and justify projects economically based on the avoided cost of building new natural gas power plants.
In Texas and Minnesota, for instance, utilities have been able to procure centralized PV because it is cost-competitive with natural gas and can be used as a hedge against rising fuel costs.
"We've now seen enough outside-the-RPS solar procurement from utilities (such as Xcel in Colorado or Georgia Power) that it lends a bit more optimism to the utility solar market in general. I think the predominant view for a while had been that 2014-2015 would be mostly about pipeline buildout rather than getting new PPAs, but smart, low-cost developers are proving that they can still win new deals if they can get the costs down to the ~$50 per megawatt-hour range,” said Shayle Kann, senior vice president of GTM Research.
In the case of Mississippi Power, the solar industry is still waiting to see the details of any RFP. But for a coal-heavy state, the settlement is significant.
“[It] represents a quantum leap forward for Mississippians by creating a clear path for residents to install solar on their homes,” said Louie Millie, the state director of the Mississippi Sierra Club, who also noted that the agreement will improve air quality.
Renewable energy accounted for almost none (0.05 percent) of the 2012 retail energy sales of Atlanta-based Southern Company, which also owns Georgia Power and Alabama Power, according to a recently released Ceres report. It ranked Southern Company 31 out of 32 U.S. utilities in renewable energy and energy efficiency.