Idaho axes PURPA contract lengths in a bid to slow down solar

As cost of solar continues to fall, solar developers are finding new mechanisms to sell power, including regulatory means that were previously impractical.

One of the strongest examples of this is the Public Utility Regulatory Policies Act, or PURPA. Under this 1978 law utilities are required to buy power from renewable energy projects, but only if the price is below the rate under which the utility would otherwise procure power.

For the first few decades of PURPA, this calculation of “avoided cost” was far too low for any solar projects to qualify. However, in the last few years a flood of projects in the western United States have been winning contracts under this law.

This includes projects in unlikely places, such as the state of Idaho. However, an August 19 ruling by Idaho regulators to cut contract lengths under PURPA to two years may ensure that a boom of large-scale solar in the state is short-lived.

This was the contract length requested by two of the state’s large public utilities, who argue that contracts negotiated under PURPA were driving up customer rates, and in some cases “threaten the utility’s ability to reliably deliver energy”. After the two years, developers will be eligible to renew PURPA contracts at new rates.

The Idaho Public Utilities Commission (IPUC) has already approved 13 large-scale solar contracts with Idaho Power, the state’s largest utility. While four of these projects dropped out, seven are still viable for a total of 259 MW. The utility further reports that another 1,326 MW of solar projects have applied under PURPA.

That is a massive amount of solar for a utility that serves only one million customers, and Idaho Power’s existing non-hydro renewable energy capacity of 1,297 MW is already equivalent to 40% of its peak load and 120% of its minimum load.

“I’m not terribly surprised that the commission is doing something about it,” states EQ Research Policy Research Manager Rusty Haynes, who notes that the queue in Idaho is much larger than he has seen in other states in the region. IPUC notes that only a handful of large solar developers are behind this flood of applications.

In February IPUC had taken the interim step of reducing PURPA contract lengths to five years, the length recommended by commission staff. The further move to two years was resisted by a number of environmental organizations, who argued that this would damage the state’s solar and wind industries.

Renewable developers also noted that when IPUC had set the contract length to five years during 1996 to 2001, only one PURPA contract was executed. “This move creates more uncertainty which is not conducive to moving forward with clean, responsible energy,” states Cliff W. Gilmore, director of communication at Renewable Northwest, one of the parties that argued against the two-year term.

However, the IPUC does not seem terribly worried about this outcome, arguing that “the utilities all have ample amounts of PURPA on their systems and additional renewable generation is in the queue.” PURPA contract lengths will remain at 20 years for projects smaller than 100 kW.

PURPA is being used by solar developers in other western states. GTM Research estimates that in Utah alone 700 MW-DC of solar PV with PURPA contracts is under development, including SunEdison and Dominion’s massive 420 MW Four Brothers project.

A concern for environmentalists and the solar industry is that IPUC’s ruling may be only the first. Gilmore of Renewable Northwest notes that utilities are also seeking to reduce PURPA contract lengths under a recently opened docket before Oregon regulators.