A single event doesn't equal a trend, but the recent approval by Florida regulators of a solar PV deal in Tampa – in combination with other factors at work in the Sunshine State – suggests an improving environment for developers there.
The Florida Public Service Commission on Dec. 15 voted 4–1 to let Tampa Electric Co. recover from its customers the costs of the 25-year solar contract that are above the costs of "avoided" conventional generation, or facilities that won't have to be built or contracted for as a result of the solar purchase. The vote, in which Commissioner Nathan Skop dissented, was a rare instance of the commission overruling a formal recommendation of its staff.
Sources: Regulatory and industry contacts, Solar Energy Industries Association updated Dec. 11, 2009.
The action comes in the context of renewable-resources cheerleading by Florida Governor Charlie Crist Jr., a Republican. There also has been a general upswing of solar activity in a state that, despite its latitude and meteorology, has lagged in PV development.
TECO's March 9 announcement of its contract with Energy 5.0 LLC included unusual commentary from the governor, given that the deal was subject to approval by governor-appointed regulators: "I applaud TECO and Energy 5.0 on this exciting partnership that moves Florida closer to our goal of increasing energy diversity and reducing greenhouse gas emissions. ... Two years ago, I challenged Florida to find the 'gold in green,' and we continue to see companies investing in innovative solutions that promote the use of renewable energy while saving money for consumers."
Crist's pro-solar orientation helped push through the 2008 passage of House Bill 7135, which granted full cost recovery for 110 MW of new renewable projects. That incentive was snapped up in its entirety by Florida Power & Light Co., which has contracted for a 15-MW solar facility in DeSoto County; a 10-megawatt facility at the Kennedy Space Center; and a 75-MW solar/thermal facility at an existing natural-gas power plant in Martin County. FPL didn't respond to requests for information for this article.
The solar upswing, which has defied a severe economic pullback in the state tied to residential real estate, also has roots in the February 2009 installation of feed-in tariffs by Gainesville Regional Utilities. Rachel Meek, GRU's solar program coordinator, says officials of the municipal utility expect the FIT to add 4 megawatt of solar PV per year to Gainesville's portfolio going forward.
"The sentiment was that renewables have to get in the door, even if we know they'll be more expensive" than conventional generating technologies, said a staff member, who cautioned that she was "paraphrasing" the rationale behind the vote because an approving order hadn't yet been drafted.
The commission's Dec. 15 action is significant for two reasons:
First, it departs from previous practice by allowing for payment of a higher rate than would otherwise be approved for conventional generation. According to a commission staff memorandum, the project carries a gross capital cost of $135 million prior to deduction of the federal ITC, resulting in a net capital cost of $94.5 million. Staff estimated total annual cost (O&M plus capital) of 21.4 cents per kilowatt hour to 23.52 cents per kilowatt hour over the contract term, assuming level annual generation of 48.3 megawatt hour.
Second, in going against its staff recommendation to allow recovery of costs only up to the level of available alternatives, including fossil fuel, the PSC signaled that it "gets" the fact that solar and other non-fossil fuels are more expensive at this time. Specifically, the commissioners overruled staff's advice that TECO be prohibited from recovering the costs of such non-power "attributes" as renewable energy credits.
In a search for previous cases in which the PSC was asked by Florida utilities to approve contracts for renewable-energy purchases, six decisions were found from 2008 and 2009. In all six decisions, the commissioners adopted every substantive recommendation made by its staff - including one case in which the staff explicitly recommended against the recovery of the cost of purchasing renewable attributes or certificates.
Voting with the majority on Dec. 15 was recently arrived Commissioner David Klement, who was seated on the panel in October. Klement filled a vacancy created by the resignation, under pressure from Crist, of Commissioner Katrina McMurrian.
Crist also announced that he won't renominate Commission Chairman Matthew Carter II to a new term. The governor has nominated Benjamin "Steve" Stevens to fill the vacant panel seat in January 2010. Stevens' orientation toward renewables probably won't be readable until then.
The PSC on Dec. 1 unanimously elected sitting commissioner Nancy Argenziano to succeed Carter as chairman.
While the appointments of both Klement, a policy-institute executive and former journalist – and Stevens – a Pensacola businessman and financial consultant –require approval by the state senate, Klement was seated early to finish the incomplete term created by McMurrian's departure.
While recent developments have been favorable, solar PV's momentum in Florida won't be unrestrained.
The state remains among those most hobbled by the recession. The real-estate market is wallowing in oversupply, unemployment is rising, investment capital only thinly available, and electricity sales are expected to decline in 2009 for the second year straight.
The PSC's Muir notes that the legislature has attempted to require statewide establishment of FITs, but so far no bills have made it through any committees. Although Florida has other sizable municipal utilities besides Gainesville's, to date none of them has taken the FIT plunge.
And the fact remains that PV and other alternatives retain a pricing disadvantage.
"It's a more costly source of generation," Muir says. "Unless there's a change in law, cost is the biggest obstacle."
Stephen Munro is a D.C.-based content producer specializing in the regulation of electric and gas utilities. His work has been published by McGraw-Hill Platt's, Hart Energy, Edison Electric Institute and others. He is a working reporter and a member of the Energy Bar Association. Contact him on (202) 744-8553 or email@example.com.