If there is a company that epitomizes large, conservative power companies that are heavily invested in conventional generation, it is American Electric Power (AEP). AEP owns not only a massive fleet of coal-fired power plants in the Midwest, Texas, West Virginia and Oklahoma – including some of the largest coal-fired power plants in the nation – but also a huge chunk of the nation’s transmission grid, along with a slew of utility subsidiaries.
However, like the rest of the power sector AEP is being forced to change. The state government in Virginia has required that AEP subsidiary Appalachian Power procure its share of solar as part of a new state law, and in compliance with this the utility has let a request for proposals (RFP) for up to 200 MW-AC of solar projects.
This RFP shows a familiar pattern. When forced to procure solar, like many utilities AEP wants it at large scale – which does not threaten its very large investments in transmission. The company also wants to to own it. As such, the RFP calls for projects no smaller than 50 MW-AC, located in Virginia and connected to the PJM grid, to be sold to the company.
This could theoretically include plants that are already operational that have been put online after July 1, 2017, but there aren’t many of those in the state. More likely it will see the other option, which is Appalachian Power buying newly constructed plants upon completion, which is required by the end of 2021.
For their bids to be considered, developers must have site control and a completed interconnection study in PJM. They must also have completed the development and/or equipment procurement and construction of a project at least the capacity of the one they are bidding, in the United States or Canada.
After the first round of bids is submitted, Appalachian Power will choose short-listed bidders for further discussions. Here the project will be evaluated according to a number of criteria, including the bidder’s financial state, experience, environmental and wildlife impact, if there is a plan to procure goods and services from Virginia businesses, and more.
In both the first and second rounds of evaluation, the utility will look at what it describes as the “levelized impact on APCo Net Revenue Requirement”. Initial bids are due by February 7.
Change is afoot
This RFP is in the context of larger changes both in Virginia and for AEP. Dominion, whose service area includes more populous areas of the state, has already launched its first 500 MW solicitation under Virginia’s Transformation & Security Act of 2018.
Additionally AEP has announced that it has budgeted $2.7 billion for new renewable generation among the $33 billion in capital outlays that it is planning for the next five years, including $2.2 billion in contracted renewable energy projects. This follows on the power company announcing that it will add 8.3 GW of wind and solar to its generation fleet by 2030.
This would still be a relatively small portion of its overall generation, and is not nearly as ambitious as the plans by some other power companies. And given the trend towards higher renewable energy mandates at the state level and even the renewed call for a national standard, Appalachian Power and AEP could be procuring a whole lot more.