The solar will rise again

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Out of state observers who have been captivated by the drama of Entergy New Orleans paying actors to fake support for a gas plant (and boo solar) and then being allowed to build that gas plant anyway by the City Council may be forgiven for not noticing that there are other utilities in Louisiana.

And in fact, while Entergy continues to dig its heels in and resist solar, some of these other utilities are seeing the light. In its latest long-term plan, Cleco, which serves 290,000 customers in Central and Southern Louisiana (as well as on the North Shore of Lake Ponchartrain and along the Texas border) announced draft plans to issue a request for proposals to procure the output of as much as 400 MW of solar, along with 1 GW of wind.

This is one of the larger solicitations of solar and wind to be announced by a utility in this part of the South, and follows on significant action by Dominion, Duke, FPL and Southern Company to procure solar. However, given how much smaller Cleco is than these utilities, it may mean a significant portion of the company’s generating capacity.

In the IRP Cleco also considers procuring energy storage, including lithium-ion batteries and flywheels.

 

The ITC and dirt cheap solar

At least some of this appears to be driven by timing considerations. According to Cleco’s 2019 Draft Integrated Resource Plan (IRP):

The expected expiration of federal tax credits, namely the Production Tax Credit (PTC) and the Investment Tax Credit (ITC), has created a market favorable to developing renewable resources as potentially attractive prices.

In terms of what that means, later in the IRP Cleco evaluates a solar power contract at $35 per megawatt-hour over the course of 25 years; in other words, dirt cheap.

 

RFI vs. RFP

However, Cleco isn’t sure about many of the details. the company notes that due to “lack of firm information regarding the availability, feasibility and cost of solar, wind and battery storage resources”, it plans to issue a request for information for renewable capacity, but then expects to issue the RFP for wind and solar by the end of 2019.

In its stakeholder comments, Southern Renewable Energy Association (SREA) has recommended that Cleco forgo the RFI and go straight to the RFP, which it notes is non-binding and offers no risk to the utility.

But either way Cleco is clearly moving quickly, as the IRP itself won’t be finalized until August. This timeline will give an advantage to any plants that have already started construction at the time the RFP is issued, as they will be able to access to the full 30% ITC; for plants that start work the following year, the tax credit will fall to 26%.

It also means that these plants will need to be completed by the end of 2023 to claim higher ITC levels.

Cleco does have a backup plan, and states that if it can’t get the solar and wind it wants at the prices it wants, it plans to build two combustion turbines instead, which will likely run on natural gas.

 

MISO South

It’s also not clear where exactly these solar resources will be located. Cleco, Entergy and several other Louisiana and Texas utilities joined the Mid-continent System Operator (MISO) at the end of 2013, which allowed for the creation of the MISO South region, and Cleco is assuming that this new solar will be within its borders.

This could mean anywhere in parts of four states, from the Arkansas – Missouri border to East Texas or the Mississippi Gulf Cost, or near anywhere in Louisiana. However, the new wind will likely come from MISO North, were wind speeds are higher.