Solar makes sense

May 31, 2011

As reported in Philadelphia Inquire May 30, 2011
With Pennsylvania
boasting the nation’s second largest number of solar-industry jobs, state
officials would be foolish to let the sun set on such a nascent but promising
industry. But that could happen due to a temporary mismatch between solar-energy
financing and market demand.

The construction of more than 4,000 solar projects has been a roaring
success, responsible for generating several thousand jobs at 600 solar
businesses. Growing that industry from scratch, with state and federal aid, also
boosted the use of nonpolluting and renewable energy. That will be particularly
helpful in meeting summer’s peak demand.

Yet, the boom in solar projects has outpaced the amount of solar energy
utilities are required to buy under the state’s alternative-energy rules. That
has depressed the value of solar-energy credits needed to provide a return on
photovoltaic solar systems, which have a steep, up-front price tag.

The best way for state officials to spur solar to new heights would be to
boost the modest solar-energy standard – now far lower than neighboring states,
at only 0.5 percent – by 2021. But last year, that idea ran into strong
opposition from Exelon and other utilities, coal producers, and business groups
– and a certain Republican candidate for governor.

Fortunately, a fellow Republican, State Rep. Chris Ross from Chester County,
unveiled a legislative proposal Tuesday that should be more to Gov. Corbett’s
liking. Ross would accelerate the amount of solar energy utilities are required
to purchase for the next few years, but leave the overall standard at just 0.5
percent. He would also follow other states by barring out-of-state solar
producers contributing to the solar glut in Pennsylvania.

The Ross proposal amounts to a tweak, but one that could be critical to
maintaining the state’s foothold in solar energy. Corbett and Republican
legislative leaders could fall back on tea-party ideological antagonism toward
so-called government mandates – or they could prove themselves progressive
enough to embrace a modest plan that makes sense for the state’s 21st-century
economy.

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By Andrew Maykuth

Inquirer Staff Writer

The Pennsylvania Public Utility Commission yesterday approved a Peco Energy Co. proposal to buy solar-energy credits for 10 years, which officials expect will substantially boost the nascent market for renewable energy.

The ruling allows the Philadelphia utility to begin buying alternative-energy credits to comply with a law that forces utilities to derive a gradually increasing portion of their power from renewable-energy sources.

PUC chairman James H. Cawley commended Peco “for taking the initiative to kick-start the process.” The state’s Alternative Energy Portfolio Standards Act requires electrical utilities to buy 18 percent of their power from alternative-energy sources by 2020.

The market for solar alternative-energy credits has been “very thin and very illiquid” because the laws requiring utilities to buy solar power are only starting to kick in, according to Mike Freeman, senior originator of Exelon Generation Co. L.L.C., the wholesale power arm of Peco’s parent company, Exelon Corp.

Peco’s planned purchase of 80,000 credits over 10 years – each credit represents one megawatt-hour of power, or about as much as a residential customer would consume in a summer – should provide a strong signal to solar builders about the value of their projects, which will assist long-term financing.

“This is a fairly significant event in the solar world,” Freeman said of the decision.

Renewable-energy credits are sold by electric generators for every one megawatt-hour of renewable power they produce, apart from the income they derive from selling the electricity itself.

Peco said it would competitively purchase the credits through requests for proposals. The energy must be generated within the area served by the regional grid, PJM Interconnection L.L.C., which covers parts of 13 states.

Though the market for the credits is not fully established, the PUC estimates their value at $230 each – and some experts say the price will probably exceed $300 each. That means Peco’s investment could exceed $24 million.