By Logan Shewmaker
According to the Solar Energy Industries Association (SEIA), Florida ranks 3rd in the United States for rooftop solar energy potential. But Florida only ranks 13th in “cumulative solar capacity installed.” Some experts think that this lack of solar energy installation stems from poor policy. James Fenton, director of the Solar Energy Center at the University of Central Florida, has said, “The rules are set up so there isn’t competition right now.” One way to encourage competition would be for Florida to legalize third-party Power Purchase Agreements (PPA).
A PPA is an agreement through which a developer installs a solar photovoltaic (PV) system on a customer’s property and sells the electricity generated on-site exclusively to that customer. Rather than buy electricity from a utility company, energy users can pay for solar energy produced on their own property. With a PPA, the customer’s payments are based on the actual electricity produced, rather than a fixed rate as with a solar panel leasing agreement.
PPAs are explicitly legal in 24 states, but are illegal in Florida. To sell electricity in the Sunshine State, a company must be a public utility regulated by the Florida Public Service Commission
Groups like Floridians for Solar Choice are concerned that current rules restrict customer choice. They say solar companies should have the ability to sell electricity directly to customers. Floridians for Solar Choice is promoting a state constitutional ballot initiative for 2016 that would allow customers to purchase from sources other than a franchised traditional electric utility company.
However, utility companies worry PPAs could hurt revenue and compromise the reliability of the electrical grid (which the companies maintain). In order to recoup lost revenue, utility companies might have to raise their prices.
Utility companies are also concerned that increasing electricity produced by residential solar panels could expand “net metering.” With net metering, a household’s solar PV systems are connected to the electrical utility grid. PV systems often produce more electricity than households use. Households often sell their excess electricity to their utility companies via the grid, and receive a credit on their utility bill. This can be an appealing option for solar energy users, but it may reduce utility companies’ revenues.
A study by the Lawrence Berkeley National Laboratory (LBL) suggested the financial impacts of solar PV and net metering are minimal. Berkeley found that if solar PV rose from its current level of 0.2% of retail electricity sales to 2.5%, average retail electricity rates would only increase 0.1% to 0.2%. Utility shareholders would be only slightly more impacted. At 2.5% of total retail electricity sales, solar PV is expected to decrease shareholder earnings by 0.3% to 4.7% over 10 years. The LBL study found that the effect of net metering on electricity rates would likely be “modest,” though the effects on shareholder earnings appeared larger and more variable.
Overall, the LBL study concludes that PPA would not increase electricity rates to an unreasonable level to users. Furthermore, the gains to solar energy users and the environment could be substantial. PPAs offer a market-based solution to diversifying Florida’s energy sources, allowing consumers a greater choice in the marketplace.