South Carolina wants Energy Freedom, but on the cheap

Regulators voted to cut the avoided cost rate paid to PURPA solar power projects in the state by ~33% to 2.134¢/kWh, while also shortening the length of the contracts to 10 years – which represents the lowest rates and contract lengths in the nation.

November 20, 2019 John Fitzgerald Weaver

South Carolina Solar Council - Jerry Zucker Solar Park

The United States recognizes that “the market” needs an opportunity to flourish, with a degree of limited government intervention, so as to allow the human spirit to deliver solutions to the masses. We recognize that individual motivation, and competition with each other, allows the market of ideas to refine themselves towards efficiency.

However, we also know that power corrupts and that the market is less able to flourish once a competitor gains significant market power, and then – in actions that are outside of honorable competition – begins to exert monopoly granted forces, and violate Antitrust Laws.

Even with this recognition of monopoly power corrupting, we have build out power grids using a model that grants geographical monopolies because we see electricity as more of a public right, and a service that needs greater stability and a broader uptake, than the market is generally prepared to deliver. And with this, we of course add additional layers to manage these politically granted monopolies – such as the Public Service Commissions and laws like the Public Utility Regulatory Policies Act (PURPA). Otherwise, we might build $9 billion holes in the ground…

The South Carolina Public Service Commission (PSC) has voted to set standard avoided cost rates for PURPA solar power purchase agreements (PPA) at 2.143¢/kWh ($21.43/MWh) for a 10-year contract. While there isn’t a written decision yet, the commissioner’s decision can be heard via video recording of the meeting found on the PSC’s website.

The Conversation of Voters of South Carolina was in attendance, and noted that 6 of 7 commissioners voted for this avoided cost value, and that only Justin Williams from the 6th District spoke out in support of solar, arguing that the South Carolina House and Senate were clear that they wanted more renewables in South Carolina.

The Solar Energy Industries Association (SEIA) noted that investor-owned utilities operating in South Carolina offer different rates and terms for large-scale solar projects in other states:

In Virginia, Dominion Energy recently executed a 20-year solar contract for about $40/MWh. In North Carolina, Duke Energy recently procured solar for $38/MWh with a 20-year contract through their Competitive Procurement of Renewable Energy Program and earlier this year, Georgia Power executed 30-year solar contracts at an average price of $36/MWh.

A PPA found on the South Carolina Public Service commission website (PDF), between energy developer D.E. Shaw and Domision, electronically filed on November 4, noted a price (below image) ranging from 2.8 to 3.4¢/kWh for a solar+gas facility.

Recent research has suggested that the locked nature of PURPA contracts, versus the free markets of markets that allow for bidding has led to an increase in the prices paid for by consumers. This research though is still very early and possibly has statistical issues.

Currently, the two lowest priced power purchase agreements in the United States for utility scale solar and solar plus storage, are at 2.4¢/kWh and just under 4¢/kWh, respectively, both prices located in the southwest United States. A judge in Montana, after a lawsuit found state commissioners were biased against solar in their public comments, set the rates and terms for solar projects under PURPA at a value of $28.68/MWh for the electricity, plus roughly $9.95/MWh paid as a price for carbon (totalling $38.33/MWh), with a contract length at 25 years.

Regarding contract lengths, we’ve seen Georgia Power sign 35 year PPAs – and Texas moving toward 10-12 year contracts, with some merchant contracts having a hedge.

SEIA puts South Carolina’s total solar power capacity at 850 MW, ranked 16th overall – with an improvement to 12th overall in 2018. That 2018 ranking is surprising considering the 2017 big bang that occurred.

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