My friend Reggie recently asked me for advice about installing photovoltaic (PV) panels on the roof of his boathouse on the river. It has no electricity now, but he wants just enough PV to power a...
Buying Into Solar
Rewards, challenges and options for rate-based investments.
the long term, distributed generation (such as customer-sited PV solar) will gain a certain amount of market traction,” says Owen Smith, Duke’s managing director of renewable energy. “We need to test these systems and their impacts and understand the competencies we’ll need to manage increased penetration in a cost-effective and reliable manner.”
The regulatory approaches utilized by utilities in California and North Carolina have been very similar. Both states have renewable energy standards, and utilities in both states have argued for direct investment in solar generation. After some pushback from the solar development industry and investigations of the normalization accounting issue, both the California Public Utilities Commission and the North Carolina Utilities Commission ultimately agreed that a certain amount of regulated utility investment in solar was appropriate.
In New Jersey, PSE&G faces a challenging renewable energy standard. Not only is the solar component of the standard one of the most aggressive in the United States, New Jersey’s average solar availability will require a system in Newark 25 percent larger than a system in San Diego to produce the same amount of energy in a year, according to NREL’s “PV Watts” solar calculator. But the variety and innovation demonstrated by the company’s programs are helping PSE&G respond to the challenge.
The company’s initial solar loan program is unique in that it makes loans to customers to finance PV solar system installation and classifies the loans as regulatory assets. The company has an opportunity to earn a regulated rate of return on the loans, and its customers are able to repay the loans with valuable solar renewable energy credits generated by the financed PV systems. Customer loans that can be rate-based offer utilities an opportunity to earn a return on investment while avoiding some of the ratepayer impact challenges presented by the ITC and associated normalization accounting.
In early August 2009, PSE&G received regulatory approval to invest $515 million for its 80-MW “Solar 4 All” program. The program features 40 MW of PV panels installed on utility poles in the company’s 2,600-square mile service territory, as well as 40 MW of more traditional PV solar applications—larger system installations on flat sites and brownfield development sites.
The unique pole-mounted approach was “created by necessity,” says Al Matos, PSE&G’s vice president for renewables and energy solutions. “Land is generally expensive and limited in our service territory, but we have 800,000 utility poles. Why not use them?” Throughout its service territory, the company plans to mount 200,000 200-watt PV panels, each with an efficient DC-to-AC smart micro-inverter and wireless Zigbee communications device for performance monitoring.
“The pole-mounted PV smart units will be a clear and highly visible demonstration of PSE&G’s commitment to provide universal access to renewable energy and energy efficiency to all of PSE&G’s customers,” Matos says.
PSE&G’s regulatory approach was relatively unique as it is the only regulated transmission and distribution company operating in a restructured electricity market to pursue large investments in solar generation. The New Jersey legislature, through Act PL2007, chapter 340, clarified aspects of New Jersey’s participation in the Regional Greenhouse Gas