Alabama approves up to 500 MW of renewable energy over the next five years

Alabama is not known as a renewable energy leader. Like most other states in the U.S. Deep South it lacks a renewable energy mandate or strong policy environment to encourage renewable energy, and politicans in the state are strongly critical of President Obama’s clean energy policies. However, the attitudes of utilities, their industrial customers and regulators are changing across the South – including in Alabama.

Today the Alabama Public Service Commission (PSC) gave utility Alabama Power approval to build or procure up to 500 MW of renewable energy from facilities 80 MW or smaller. The initial request by Alabama Power, a subsidiary of Southern Company, cited not only the potential implementation of President Obama’s Clean Power Plan, but also requests by its customers.

However, these projects must come in under Alabama Power’s estimates of avoided cost over the lifetime of the project, although projects will also be considered where a customer pays the difference between avoided cost and the contract price of the project.

Southern Alliance for Clean Energy (SACE), which intervened in this docket, says that all of the parties intervening supported core aspects of Alabama Power’s request. This includes not only renewable energy and environmental groups, but also Alabama Industrial Energy Consumers and a business and labor alliance focused on creating and protecting quality jobs in the state.

And while the docket only states that these facilities must be "renewable energy or environmentally specialized generation" resources, participants in the hearing note that solar has been dominant. "All of the conversation has been about solar," notes Michael Churchman, who serves as executive director of intervenor Alabama Environmental Council. "Even though they did make some mention of biomass or other renewables, everybody’s expectation has been solar."

"This is a huge result for a state where solar development has lagged behind the rest of the country and the Southeast," notes SACE Campaigns Director Amelia Shenstone. "Alabama Power asking for permission to build a substantial amount of utility-scale solar is a big step in the right direction, because it will allow Alabama residents to see solar power working in their state."

Among the first projects to be considered are two solar projects proposed for U.S. military bases in the state, and mayors of the towns where these facilities are located petitioned the PSC in favor of these projects.

GTM Research Solar Analyst Cory Honeyman notes that this move is likely influenced by other solar procurements in the South, including Tennessee Valley Authority’s recent power purchase agreement with NextEra for a 70 MW solar project in Northern Alabama. He calls Alabama Power’s proposal "strikingly familiar" to beginning of Georgia Power’s Advanced Solar Initiative, and notes that such moves are typical driven by economic considerations.

"This is one of a handful of examples where utilities are procuring centralized solar in the Southeast because they think it will be a useful hedge against natural gas price volatility, and potentially a cheaper alternative to buying wholesale power as a result," states Honeyman

This strong move for utility-scale renewable energy also contrasts with Alabama’s absence of policy support for distributed generation. There is no retail-rate net metering in the state, and Alabama Power imposes a per-kW monthly fee on its customers who install grid-tied solar, which it reimburses at the avoided cost rate. This makes the economics of distributed generation dismal.

"We hope that the utility will continue on the path to developing renewable energy by removing some of the barriers to small household and commercial-scale installations," states Shenstone of SACE.