The Public Utility Regulatory Policy Act (PURPA) was passed in 1978 to reduce dependence on foreign oil and diversify the electric power industry. Do we still need PURPA?
At a recent conference at the FERC (Federal Energy Regulatory Commission) in Washington, D.C., Christopher Mansour, vice president of federal affairs at the Solar Energy Industries Association (SEIA), commented that:
“The electric power market competition created by PURPA is more relevant today than ever. Not only does the must-purchase obligation create a level of competition that requires larger electric utilities to innovate, but the principles that led to its creation in 1978, such as the need for clean energy, energy efficiency and independent power generation, remain critical elements of any credible modern energy plan.
“FERC action and oversight is needed to ensure that states and utilities uphold their obligations under PURPA. We have already seen trends toward unworkably short contract durations, egregious interconnection costs and timeline delays that put small generators at an unfair disadvantage.”
Mr. Mansour was addressing recent attacks on PURPA by those who feel that, almost 40 years after the creation of the law, the solar industry has reached maturity and PURPA has become outdated, irrelevant, or merely too burdensome to utility companies. Let’s look at some of the history of PURPA and recent actions surrounding the law, and see what conclusions we can draw about PURPA and its relevance to the current solar industry landscape.
History of PURPA
The Union of Concerned Scientists describes PURPA as “…the most effective single measure in promoting renewable energy. Some credit the law with bringing on line over 12,000 megawatts of non-hydro renewable generation capacity. The biggest beneficiary of PURPA, though, has been natural gas-fired “cogeneration” plants, where steam is produced along with electricity.” The bill was passed in the depths of the OPEC oil crisis, during the administration of President Jimmy Carter. Up until PURPA was enacted, utility companies were virtual monopolies and only by enacting PURPA was the federal government able to open up the electrical generation market to competition.
The Public Utility Regulatory Policies Act of 1978:
- Created a market for power from non-utility producers, including wind and solar.
- Increased the use of CHP (combined heat and power).
- Ended most promotional rate structures (paying less per kWh the more you use).
- Promoted energy efficiency and conservation of electric energy and natural gas.
It hasn’t always been smooth sailing under PURPA, though. In fact, QFs (Qualifying Facilities) have been battling for their rights under PURPA continuously since the law’s creation. Utilities have been unrelenting in their willingness to outspend QFs in legal conflicts.
PURPA And Solar
Up until recently, however, PURPA was not a huge issue for solar producers. PV mostly served the off-grid or small rooftop market until recently, and the finances of PV projects depended most on interconnection standards and net metering issues. Solar was primarily a “behind the meter” generation system, designed to offset utility power, not for wholesale generation. Now, with large scale solar facilities coming online daily, the PURPA rules for under-80 mW QFs is becoming a big issue.
Let the battle begin.
Last week, PV Magazine reported that “The 2015 case was brought by Delta-Montrose Electric Authority (DMEA), which had sought to enter into a PURPA contract beyond the 5% of local power that it was allowed to procure, under a contract with generation and transmission cooperative Tri-State for the other 95%.
FERC ruled that PURPA’s guarantee of market access trumped the Tri-State contract. Tri-State came back with a proposal to recover lost revenues through a fee on DMEA, and last Thursday FERC rejected that fee, in effect clearing the way for what Rocky Mountain Institute (RMI) describes as “unlimited” purchase of renewables under PURPA.
This ruling comes as PURPA is becoming more useful to solar PV than it has been in previous decades. Due to falling costs, utility-scale solar projects have been able to use PURPA to force utilities to buy power from over 1.6 GW of solar projects as of 2015, many of which are in states without renewable energy mandates.” Sounds good, right? Co-ops can buy more solar under PURPA.
Not so fast, Rocky Mountain Institute. In Montana last week, the state’s Public Service Commission temporarily suspended guaranteed rates for solar QFs at the request of NorthWestern Energy. The rate of $66/MWh was set under PURPA. Solar developers will now need to negotiate rates on a case-by-case basis with the utility for a PPA (power purchase agreement.) This, and other state-level battles illustrate the legal ground-game strategy that utilities use to outspend opponents. However, look for this battle over PURPA to continue to heat up. Expect to see cases hitting federal courts next year.