Utilities are taking advantage of a sweet spot in the capital markets, pre-funding and refinancing at record low rates. But cheap money won’t resolve overhanging uncertainties preventing cap-ex...
Solar Leasing Shines
With meters running backwards, utilities seek a niche.
from the sun.”
Going Beyond the Meter
How do utilities themselves feel about third-party solar financing? It depends on what side of the meter it’s being considered.
Tucson Electric Power is involved in about a dozen of its own solar generation projects of different sizes, mostly 25 MW and under. “Because these are smaller projects, they are considerably easier to finance, and we haven’t had any challenges with finding financing for any of them,” says Carmine Tilghman, director, renewable energy resources. For example, he says the utility is fortunate to be included under the jurisdiction of the North American Development Bank, which has changed its focus from NAFTA-type activities to renewable development within 75 miles on either side of the U.S. border, from California to Texas. “They have been very active and willing to help with financing some of our solar projects,” he says. “They bring what most financial institutions can’t bring to the table, which is a low cost of capital and the ability to bankroll some of these projects. As they told me, since they are government-owned, they don’t have to make money on the projects; they just can’t lose money.” The low cost of capital keeps development costs down, which is a benefit to the utility’s ratepayers.
The retail-metered side is a different story, though, according to Tilghman. “Right now, it is a tough situation for utilities, because utilities are struggling or just broaching the subject with regulatory bodies with regard to lost sales cost recovery,” he says. “This is an issue that needs to be addressed.”
Tilghman believes utilities aren’t opposed to more solar at the customer premises. “However, they are concerned about issues related to cost recovery, rate freezes, and revenue requirements being predicated on a certain amount of sales,” he says.
“When there’s a mandate to lower their sales, this impacts revenue requirements, which then impacts the business bottom line.” Obviously, according to Tilghman, utilities still need to be responsible for the infrastructure to support the system, in the absence of generation, and there needs to be a fair recovery for the utility to do that.
Overall, though, Tilghman emphasizes that Tucson Electric remains a big supporter of solar, and sees a viable niche for itself even as markets change. “However, right now we believe that the utility itself has the ability to put the most cost-effective solar in place.”
One utility that’s doing just that is Reliant Energy in Houston. “Is it a good thing for customers to be generating their own electricity?” asks Gil Horning, manager of product development. “Whether it is or not, it’s going to happen, because consumers want it. So, we want to be the company that provides the solution, and help customers manage and optimize the return on their investments. We want to make it easy for them and also provide flexible options.”
In June 2011, Reliant Energy launched Reliant Solar Solutions, a program designed to encourage solar power among Texas homeowners. The program is distinguished by features in three main areas: low up-front cost; minimal installation and maintenance hassle;