Special Tariffs Help Large Companies Benefit From Solar Without Hosting Capacity


Some large companies that are heavy users of electricity may be interested in using renewable energy but are unable or unwilling to install their own distributed generation on-site. Instead, some of these utility customers will opt for special rate options or tariffs.

Under this scenario, commercial customers pay a renewable energy tariff to the utility. This enables large ratepayers to obtain power from renewable energy sources without adversely affecting other ratepayers who do not want to participate in renewable energy programs. Such renewable energy tariffs might actually help solar development.

This is the main point of the N.C. Clean Energy Technology Center's new report, ‘Solar PV Deployment through Renewable Energy Tariffs: An Option for Key Account Customers.’
Policy analyst and lead author Autumn Proudlove says the goal of the report was to present renewable energy tariffs as an option for large customers and to offer some key considerations for designing these programs. The intended beneficiaries are those customers that do not have suitable sites for self-generation or are in locations that do not allow third-party power purchase agreements (PPAs).

‘Our hope was to shed light on this emerging approach to solar development and get utilities and large customers to think about pursuing this option,’ Proudlove says.

The report looked at two case studies.

In 2014, Duke Energy Carolinas began offering its pilot program, Green Source Rider, under which customers agreed to pay the full cost of renewable energy procured, a monthly administrative fee of $500 and $0.0002/kWh for procured/produced renewable energy acquired through the agreement. The program allowed customers to receive bill credits for the avoided energy and capacity rate from the monthly actual renewable energy procured.

Duke procured the energy either from third parties through three- to 15-year PPAs or through the utility's own generating facility. Non-residential customers in the general, high-load factor, and industrial rate schedules were eligible, making the program attractive to data centers, manufacturers, college campuses and big box retailers.

Also in 2014, Dominion Virginia Power began offering its Renewable Energy Supply Service Tariff for renewable energy sourced from a third party within the PJM transmission territory. Customers were able to specify the type of resource and the generator from which they wanted to purchase power.

The program involves two contracts. One is between the utility and the third-party providers through a renewable energy purchase and sales agreement. The other is between the utility and the customer for a 10-year period.

The program is capped at 100 customers, or 240,000 MWh in aggregate output.

The report notes that PV costs in general are continuing to decline. If the price of the renewable energy credits associated with the projects declines, Dominion and Duke are able to lower the customer premium. That feature, plus the off-site location of the generation, makes these programs appealing to customers.

According to the report, allowing for customer input on generation source, contract price, etc., can encourage greater customer participation and satisfaction: ‘Building opportunities for customization into the renewable energy tariff allows customers to enjoy more of the benefits of self-generation or third-party PPAs with less of the hassle involved with these options.’

Proudlove and co-author Jim Kennerly conclude that renewable energy tariffs can benefit not only utilities and their key accounts, but also the community. The tariffs offer a way for large energy users to use renewable power and also encourage other renewable generation, while not increasing costs for other ratepayers.

‘We may see more and more programs coming into effect, especially if some of the pilot programs currently being offered by utilities like Duke and Dominion are well received,’ Proudlove says.

Similar tariff arrangements are available in 10 states, mostly in the Southwest. Some are new, created by legislation. In California, for example, the California Public Utilities Commission is implementing SB.43, the Green Tariff Shared Renewables law, which requires Pacific Gas & Electric, San Diego Gas & Electric and Southern California Edison to offer a renewable energy tariff option.

In Oregon, the state legislature enacted HB.4126, which requires the Oregon Public Utilities Commission to study the prospect of allowing large utilities to sell renewable power to large customers under a special green tariff and then to decide whether to allow this.

Proudlove says it is too early to say how many companies – and which utilities – are participating in these programs. ‘Companies with large data centers, and thus electric load, such as Google are the most obvious participants, but it will be interesting to see what other types of companies are participating,’ she says.

The full report is available here.

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