Regulators in Michigan approved a settlement Wednesday compelling utility Consumers Energy to buy power from 584 megawatts of solar interconnected by September 1, 2023, multiplying by many times the 153 megawatts currently standing in the state.
The settlement ends a long disagreement about projects tied the Public Utilities Regulatory Policies Act (PURPA), which requires utilities to pay regulator-approved “avoided cost” rates to qualifying solar facilities. Developers and solar advocates argued the Michigan utility wasn’t approving qualifying projects in a timely manner, while Consumers said a rush of PURPA projects had “overwhelmed” the utility and forced it to pay more for solar than it would in the market.
Per the settlement, Consumers will move forward with 584 megawatts of solar from developers — including Cypress Creek Renewables, which said it would develop about 40 percent of that capacity — who had collectively sunk over 3 gigawatts into the utility’s PURPA pipeline. Some projects, totaling 170 megawatts, will receive full, existing PURPA rates while the remainder, at 414 megawatts, will get a modified avoided cost rate. Developers that signed onto the settlement include 94 percent of the more than 3 gigawatt interconnection queue, according to Consumers.
The agreement isn’t a shocking one, said Colin Smith, senior solar analyst at Wood Mackenzie Power & Renewables. Michigan’s controversy echoes similar struggles in North Carolina and Montana.
Until relatively recently, PURPA acted as a stable source of cash for the solar industry as developers jammed the queue in states with favorable rates. But many utilities, like Consumers, viewed the law as a nuisance requiring them to buy up solar they didn’t need at above-market prices. Now many utilities are pushing state policies that make PURPA projects unattractive.
“The vast majority of utilities have figured out that PURPA is a mechanism that can lead to way too many projects entering the interconnection queue,” said Smith. “Utilities have used contract length, maximum system size limitations and avoided cost rate methodologies to effectively make it impossible to develop projects through PURPA.”
Consumers had begun doing the same in Michigan.
That’s meant a downturn for some solar developers — going too big on PURPA was likely a motivator behind Cypress Creek’s huge layoffs early this year, for instance — but because of economics and other favorable policies, PURPA is no longer a huge driver for the overall industry.
That doesn’t negate the outsize impact of the settlement in Michigan, though, with Consumers agreeing to nearly 600 megawatts in coming years. The utility also has standing plans to phase coal out of its portfolio, add 6 gigawatts of solar through 2030 and cut carbon emissions 90 percent by 2040.
Consumers put forth the PURPA settlement in August after working with the solar industry on a solution. In an emailed statement, the utility said it was “pleased” with the approval and its resolution of “PURPA concerns.” In a Wednesday regulatory filing on the agreement, the utility added that the settlement will allow it to “focus its full attention on the implementation of its Clean Energy Plan.”
Smith said execution of that plan will expose the true success of the agreement. The announcement comes just days after Consumers finalized a power purchase agreement for 100 megawatts developed by Ranger Power.
“It becomes a question of whether they procure more solar,” said Smith. “Does this help them reach this goal, and how much additional procurement are we going to see in coming years?”
Source: Greentech Media