First Solar advises contracting for solar capacity, not MWh, to enable flexible operation

Nearly all solar power purchase agreements (PPAs) to date involve compensation in terms of dollars per megawatt-hour (MWh) produced—an inflexible approach of maximizing generation that needs to evolve, because a more valuable approach is to operate solar flexibly. That’s the message from a brief paper by First Solar, Evolving the Solar Procurement Paradigm. 

Operating solar flexibly—for example, operating a solar plant with headroom in the late afternoon to permit ramping—can save a utility money and permit more solar on the grid, as found in a study by the consulting firm E3 and Tampa Electric.

When a utility owns a solar plant, the utility can simply operate the solar plant flexibly, notes First Solar.  But when a utility or other off-taker contracts for the use of a solar plant, the company argues that “we must create a new contracting paradigm.” 

First Solar advocates a “solar tolling agreement” for PPAs, in which compensation is based on a fixed price per capacity ($/kW-month), perhaps with a small variable O&M component ($/MWh).

That contracting change, along with technical specifications for a new solar installation, would enable the utility or other off-taker to specify flexible operation of the solar plant.

First Solar’s paper also advocates “enhancing market opportunities” for flexible solar operation, including through ancillary services markets.  The paper reminds readers of the 2017 finding that “a utility-scale solar plant, equipped with advanced control technology, can provide essential reliability services.”  A market for ancillary services would enable compensation for those services, variously called reliability or ancillary services.

First Solar highlights two utilities—Hawaiian Electric and NV Energy—that have already issued solicitations for “dispatchable” renewables.  This shows, says the paper, that:

These utilities are latching onto something that other utilities have yet to grasp: quite simply, utility-scale solar projects are incredibly more flexible and accurate than most thermal resources.”

Adding storage to solar can achieve “firm dispatchable solar,” says the paper, for which a solar tolling agreement would also work well, as it ties a project’s revenue stream to its availability for dispatch.

A section on next steps recommends modeling renewable energy as dispatchable in integrated resource planning, paying for grid services, and improving other traditional ways of doing business.

First Solar’s report offers sample procurement language in a two-page appendix.  The technical language may be used in a solicitation to help ensure that a new solar installation may be operated in a dispatchable manner, and can also provide grid services via ramping control, frequency support, voltage support and reactive power control.