On sunny days, if you stare long enough at Brian McCoy’s power meter, you can see it slowly turning backward.
McCoy, who lives in rural southeastern Ohio, boasts his eight-panel solar array will pay for itself in three years because of the savings on his electric bill. It also buys him entrance into a unique market, intended to incentivize development of renewable resources in Ohio.
In 2011, American Electric Power was compelled to buy what are called Renewable Energy Certificates representing 6,513 megawatts from Ohio-based producers of solar energy such as McCoy. Each REC is the equivalent of 1 megawatt of produced renewable energy.
The purchase was required by a 2008 state law passed with bipartisan support that directs Ohio electricity suppliers to generate a minimum of 12.5 percent of their power from renewable energy by 2024. This year, 1.5 percent of all electricity must come from renewables, a definition that includes wind, biomass and other carbon neutral technologies. At least .06 percent of the 2012 electricity must come from the sun.
The purpose was to promote green energy, which supporters say leads to cleaner air and new jobs. Detractors note that when regulated utilities like AEP or FirstEnergy are forced to buy a more expensive fuel, that cost is passed on to their customers.
Reports made to the Public Utilities Commission of Ohio show, in the first two years, some companies struggled to meet certain benchmarks, most notably the requirement that half the solar bought must come from within the state. Companies met that threshold in 2011, but it’s unclear when, or if, they ever will exceed them because of intense competition from Pennsylvania solar producers who can offer their RECs to Ohio utilities at a lower cost.
Ohio has seen tremendous growth in solar energy in the past year or so, said Brian Kaiser, director of green jobs and innovation at the Ohio Environmental Council.
But there is nothing forcing utilities to build their own solar farms, only to supply energy gleaned from the sun. The market for RECs is such that utilities that don’t want to build their own solar facilities can satisfy the bare minimum domestic requirement and then look out-of-state for the rest at a lower price, Kaiser said.
“The only way that dynamic reverses is if the technology in Ohio is cheaper than it is in neighboring states,” Kaiser said.
A big step toward that could come for AEP if its proposed Turning Point solar array, a 49.9-megawatt facility to be located about 20 miles southeast of Zanesville, is approved by the utilities commission. Turning Point would be the biggest solar farm east of the Mississippi.
Akron-based FirstEnergy, parent company of Ohio Edison and rival of AEP, has opposed the project, arguing it is not needed. The application has been pending for almost 30 months. This past week, the commission sent out notices to both sides asking them to define what “need” means by the beginning of October.
In contrast to Turning Point, much of the existing solar generation done in Ohio is at a small scale.
There are 817 licensed solar generation facilities in Ohio, but only 304 produce enough energy to power 10 or more average homes. In Pennsylvania, there are almost 1,500 such facilities, and they all are registered to sell solar energy to Ohio utilities.
Because of this, after the in-state benchmark is met, the value of Ohio-based solar certificates tank.
Generation from McCoy’s backyard solar array in Washington County earns energy certificates that can be sold to utility companies looking to meet those energy mandates. After 16 months of operation, McCoy’s array has generated one megawatt, which is equal to one certificate, that he said he could sell to AEP in the spring.
In the meantime, he’s listed the certificate for sale on regional grid operator PJM’s website for $275.
McCoy’s had no bites yet, and it could be a while, said fellow small-time solar seller Scott Hammond.
Hammond, whose system produces nearly a megawatt a month, said he’s gotten no response for his five certificates, which he priced at $100 each.
“I think I procrastinated too long,” the Washington Court House man said. “They’re pretty much worthless now, or almost worthless anyway.”
There’s market pressure from both sides. Utilities can be fined $350 for every certificate of solar they fall short this year, but that drops to $300 in 2014 and another $50 every two years after that.
Obviously, utilities aren’t going to pay more than the penalty, and the flood of certificates from Pennsylvania pushes that price further down once the domestic-production threshold is met. The average listed price of Pennsylvania solar certificates on the PJM bulletin board was $135.
FirstEnergy spokesman Doug Colafella said the introduction of mandates puts the whole renewable energy market out of whack, not just for Ohio producers.
Most directly, the higher cost of renewables is passed on to the customer. A typical Ohio Edison customer pays about 65 cents more per month to cover green energy.
Colafella argues that the savings might even be greater if the forced investment in solar and wind was freed up for investment in natural gas, which appears to be in abundance below much of eastern Ohio.
“We simply don’t believe that further subsidies should be provided for those type of facilities,” he said of renewable energy. “We believe that will impede private investment. … The competitive market should determine what type of generation is best to serve our long-term needs.”
The Ohio Consumers’ Counsel, which advocates on behalf of residential utility customers, notes that the development of huge deposits of natural gas led to lower bills for heating during the winter and for electricity where gas-fired plants operate.
“However, (natural gas) prices could fluctuate in the future, so we should not eliminate new technologies, such as renewables, from the generation mix as these can be important for protecting consumer energy costs over the long term,” counsel spokeswoman Beth Gianforcaro said.
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