Best stock to invest in – How Economics Finally Brought Community Solar to IREA



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by Joseph McCabe, PE

My uber-conservative utility, Intermountain
Rural Electric Association (IREA) has been against solar since
before I moved into the service territory in 2007.  IREA’s
long-serving general manager, Stanley Lewandowski Jr., would
include climate change denial leaflets in the envelope along
with the monthly electric bills.

Now he is gone, and attitudes seem to be changing towards solar.
With a new general manager, a couple of forward thinking board
of directors and a handful of active IREA owners/members the
solar landscape has changed and now includes a large solar
project.

Currently IREA has 550 MW of installed electrical generating
capacity, about 270 miles of transmission lines and many more of
distribution.  Residential users account for about 65% of
electricity demand. Like most rural electrical utilities, there
are few customers per mile. At the end of 2014 there were 354
solar electric systems, end of 2015 had 1,087 and currently
there are 1,250 totaling 7.1 MW out of 152,300 total customers.
IREA’s perspective has been that net metering is a subsidy paid
for by other ratepayers. Unfortunately, in a mis-guided attempt
to recoup this perceived subsidy, since the beginning of the
year IREA has placed a load factor adjustment (LFA) on all new
customers including new PV.  I expect that many people will
soon be clamoring as to their unfair bottom line monthly bills
compared to their neighbors.

LFA is a penalty charged for periodic high demand. The LFA
discourages both customer sited PV and electric vehicle (EV)
charging.  It also presents further confusion to the
typical energy consumer, a tower of babble. The new, much higher
LFA rate is triggered if the average demand over the billing
period divided by the peak demand over the same period exceeds
10% for residential service.  If triggered a peak demand
charge is added to the bill. The typical load factor for an
average residential IREA customer is about 20%. But EV charging
and PV generators will almost certainly send customers into
lower than 10% LFA; EVs because of higher peak demand and PV
because of lower average demand. One more intelligent solution
would be to incentivize EV charging at night, when IREA’s
electricity supply from Xcel Energy’s (XEL) Comanche III coal
plant output and wind power produce the cheapest electricity.

For the 8 years I have been an IREA member/owner I have been
going to the microphone at the annual membership meetings and
been a pebble in the shoe of my representative to try and
implement community solar gardens (CSG, also known as community
solar or shared solar). In parallel, I was helping the state of
Colorado pass the first ever CSG legislation (House Bill
10-1342, Levy), and before that I invented and implemented the
first large scale utility owned CSG located in Sacramento
starting in 2005. It almost feels like the efforts of a few
people are helping to change the attitudes of our utility
towards cost effective solar.


The economics of CSG are supported by the Public Utility
Regulatory Policies Act (PURPA) which encourages the development
of renewable energy projects by requiring utilities to purchase
energy and capacity from qualifying facilities if at or below
avoided costs. In 2015 juwi,
headquartered in Boulder Colorado, was able to propose a solar
project at IREA’s avoided costs. IREA announced the
groundbreaking has begun by juwi on the 13 MW CSG named Victory
Solar. This is close to Denver in Adams County. It is unique in
that it is 15.9 megawatt DC but 13 MW AC, a 1.3% DC overrating
which should save on the overall project economics.  This
project has a long-term power purchase agreement with an IREA
purchase option in a few years.  IREA upgraded an
underutilized substation for the interconnection at a cost
of  $1.4M. The asset utilization for this project, the out
of pocket expense for IREA, is fantastically low compared to
ownership of other generation. Solar is now cost effective at
this scale. Currently IREA is planning a portion or all of this
project to be a CSG. I am excited to be able to charge my EV
with solar electric power from my utility by the end of the
year.

IREA obtained special approval from Xcel Energy to generate 15
MW of solar electricity in violation of their All-Requirements
contract. Smaller utilities often have such All-Requirements
contracts with larger utilities or with transmission
organizations like Tristate. Recently, FERC
has ruled against Tristate
for imposing similar
all-requirements on Delta Montrose Electric Association (DMEA).
This is a major national tipping point for smaller utilities
like IREA and DMEA to enable more distributed generation from
renewable energy.
 
The next steps for the active IREA members are to correct the
LFA to encourage EV and customer sited PV and to get an
additional 2 MW CSG on disturbed or contaminated land in IREA
territory. Electric Muni’s, Co-operatives and Associations are
perfectly suited to reap the benefits of distributed generation,
create local jobs, and revitalize land for local projects. A great
example of such a project
is located south of Boulder
adjacent to the superfund Marshal Landfill site. EPA helped
envision and spearhead
this Community Energy
Collective
(First Solar FSLR
has a 27% interest in CEC) project.

This large CSG by IREA is a watershed event, where like many
conservative local utilities, IREA has been waiting for solar to
be cost effective for their needs. That day has come, and will
be showing up at many more utilities who are more focused on
their customers than on stockholders. CSG’s are also well suited
for rural utilities who have fewer customers per mile,
justifying distributed energy from solar as opposed to central
station generation from fossil fuels.

Disclosure: Joseph McCabe is a Xcel Energy
stockholder.

Joseph McCabe is an international solar industry expert
with over 20 years in the business. He is a Solar Energy Society
Fellow, a Professional Engineer, and is a recognized expert in
developing new business models for the industry including
Community Solar Gardens and Utility Owned Inverters. McCabe has
a Masters Degree in Nuclear and Energy Engineering and a Masters
Degree of Business Administration.


Joe is a Contributing Editor to Alt Energy Stocks and can
be reached at energy [no space] ideas at gmail dotcom. 
Please contact Joe for permission to reprint.

Related article: Comparing
Community Solar Subscriptions And Yieldcos

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