ANOTHER UTILITY BUYING SOLAR

Who’s hustling who?

Lakeland Electric pushed a power purchase agreement with solar industry giant SunEdison through the Lakeland, Florida, city commission October 6.

The stated premise: SunEdison could take on the cost of installing 24 megawatts of solar photovoltaic (PV) because it was eligible for the federal investment tax credit (ITC). Under the old rules, utilities (i.e., Lakeland Electric) were not eligible for the ITC.

But the rules changed October 3, when the financial rescue plan – with an 8-year extension of the ITC and a provision allowing utilities to use it – was signed into law by the President. (See WITH RESCUE SET, UTILITIES TO MOVE ON NEW ENERGY )

Did SunEdison pull a fast one on Lakeland, Florida, grabbing a piece of the action before the utility adapt to the rule change and move to the ownership position (where it could take advantage of the tax credits)?

Or did the city, driven by pending state mandates to develop sources of electricity generated from New Energy, decide to lock the solar panel maker into the deal and let THEM worry about financing it in this tempestuous economy?

Maybe there is no loser here. The economy is hurting right now, but it will come back and solar energy deals like this one will help. More such investment opportunities will emerge, giving Lakeland Electric ample time to get into the game.

Meanwhile, assuming SunEdison has the resources to hold up their end of the deal (and they do most everything in-house so it should work out), the solar panels will be supplying low-cost electricity, to SunEdison's long-term profit, long after the causes of the current woes are finally understood by economists.

The citizens of Lakeland will, far into the future, still want the electricity. And, as the effects of global climate change become clearer and measures to fight it become more stringent, the electricity the panels generate will seem like a better and better deal to all the parties involved.

Here's how the arrangement between the utility, the solar producer and the city will work: SunEdison makes the investment, installs and maintains the solar systems all over Lakeland (businesses, public buildings, etc., no residences). Lakeland Electric buys the electricity at a fixed rate and sells to its customers, who get the price advantage.

It is an especially enticing deal because it is evident Florida Governor Charlie Crist wants a state Renewable Electricity Standard (RES), requiring utilities like Lakeland Electric to obtain a specific portion of their power from New Energy sources by a date certain. Some expect Governor Crist’s RES to have a solar carve-out, meaning a portion of the required portion must be solar.

Footnote: According to the local news report, Lakeland Electric may see solar as the solution to 2 problems, 1 short-term and 1 long-term. Short-term, the utility’s Unit 5 natural gas power generator reportedly has overproduced, forcing costly temporary shutdowns. The solar installations will not, for some time, add to the utility’s base load capacity, giving it the opportunity to simultaneously build new generation and yet not have new generation that disrupts the natural gas source. Long-term, the solar energy-generated electricity capacity will likely be more valuable than the gas power.

How’s that for synergy?

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Utility Gets OK for Solar Energy
Rick Rousos, October 6, 2008 (Lakeland Ledger)

WHO
Lakeland Electric (Jeff Curry, manager of alternative energy); SunEdison

WHAT
Lakeland’s Utility Committee and City Commissioners gave unanimous approval for Lakeland Electric to sign a power purchase agreement with SunEdison for 24 megawatts of distributed solar photovoltaic (PV) development.

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WHEN
- Deal approved October 6.
- In 10 years, it is estimated the installations will provide 1% of Lakeland's electric needs. (This seems like a long time and could be a mistake.)

WHERE
- Lakeland Electric serves Lakeland, Florida.
- SunEdison is based in Maryland.

WHY
- Utility Committee approval was a 13-0. After, the City Commissioners approved 6-0.
- 2/3 of the panels (16 megawatts) will be installed on the roofs of Lakeland businesses. 1/3 (8 megawatts) will go on city property grounds (ex: at or near the McIntosh Power Plant overlooking Lake Parker).
- SunEdison will install and maintain the panels and sell the electricity.
- Lakeland Electric will buy the electricity at a fixed price (its only cost).
- The electricity goes to the utility's grid.
- No provision for storage.
- SunEdison and Lakeland Electric will select the business rooftops: Large, new roofs w/o shade, preferably flat (ex: grocery stores).
- Roofs can be no higher than 4 stories (b/c installation would require special cranes).

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QUOTES
Jeff Curry, manager of alternative energy, Lakeland Electric: "There are hundreds of utilities that have solar programs nationwide…With this contract, Lakeland Electric will be the largest solar utility in the country on a per-customer basis."