Georgia blazing new trails with its value-based FiT

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California and New Jersey are known for solar policy innovation, while the states of the Southeast have tended to stay on the sidelines despite having abundant sunshine. Until now, that is. Georgia is quickly emerging as a solar power innovator. Over the past 12 months, Georgia Power led a stakeholder process to develop and launch the Georgia Power Advanced Solar Initiative (ASI). The ASI was constructed on the following core principles:

  1. The program could not raise utility rates. That is, Georgia Power could pay fair value for solar, but could not subsidize solar. In this case, Georgia Power calculated that distributed solar was worth $0.13 / kWh. This price represents a combination of the energy, capacity, transmission, and distribution value of the solar energy produced when viewed over the 20 year life of the power purchase agreement (PPA). The value was calculated internally at Georgia Power, and did not include environmental values.
  2. The program size was set by capacity need. In this case, Georgia Power had 70 MW of unused Proxy Qualifying Facilities (QF) capacity available that it spread over 2 program years. Because Georgia Power calculated the effective load-carrying capacity for solar at approximately 33%, 210 MW of solar could be built to meet 70 MW of peak demand.
  3. Capacity in the program would be spread over a range of system sizes. Georgia Power has allocated 60 MW to the large scale program (1 MW – 20 MW, typically utility scale systems), 33.75 MW to the medium scale program (100 kW – 1 MW, large commercial) and 11.25 MW to the small scale program (0 – 100 kW, residential and small commercial).
  4. The compensation mechanism would be carefully designed to be bankable and to minimize the cost of implementation. By working with stakeholders to ensure that ASI projects were a low-risk investment for financiers, GA Power maximized the available capital to fund the systems and minimized the cost of that capital. This increased the probability that the program would be fully subscribed at the compensation levels selected.

Georgia Power also opted to compensate solar owners in the small- and medium-scale program via a standard PPA over 20 years. This stands in contrast to the net metering plus incentive policy in place in most other states.

So far, the results of the policy experiment in Georgia are looking good. To be honest, when the team at Georgia Power came to us to procure PowerClerk® Incentives to aid in administration of their program, I was somewhat skeptical of the program’s success. While FiTs have been widely used in the rest of the world, they are uncommon in the United States. I wasn’t sure that the industry could climb the FiT learning curve quickly enough to commit the program capacity. I also wasn’t sure if the economics would support wide adoption within Georgia with a $0.13 / kWh, 20 year FiT plus the federal tax credit.

As it turned out, my fears were unfounded as the program was significantly oversubscribed. The program was well constructed to ensure that systems could be financed with a predictable return on investment and a financially solid purchaser of the electricity in Georgia Power. Georgia Power instituted a lottery to fairly allocate capacity amongst the many applicants. The lottery process was executed efficiently within PowerClerk, and has been well received by the industry.

It is too early to predict how effective Georgia’s new solar policies will be in the end, but we have seen mainly positive response from the industry. Some stakeholders have argued that the program should be significantly larger, and there is clearly demand at these prices for a larger program.

Lack of transparency in setting the tariff has also been noted. In the future, Georgia Power might consider using the Solar Electric Power Association (SEPA) to run a stakeholder process for them as they set the next set of solar tariffs. They could also consider using our DGValuator™ software to ensure that the tariff calculation is transparent to all stakeholders.

It is hard to overestimate the significance of the ASI. Georgia will soon be competing with North Carolina for the largest solar program in the Southeast, and it is blazing a trail for neighboring states. The entire country is watching the program, as it is also one of the first value-based FiTs at this scale in the United States.

U.S. Supreme Court Justice Louis Brandeis described how the states could serve as laboratories of democracy for novel policies. We are seeing some interesting results from this solar policy experiment in Georgia. Time will tell if it is successful and replicable in other states, but so far, hats off to Georgia Power and the Advanced Solar Initiative.