Developers Struggle to Find a Way In as Florida’s Utility-Scale Solar Market Shines

The Sunshine State is finally owning its nickname when it comes
to large-scale solar energy, with Wood Mackenzie Power &
Renewables
forecasting
 9 gigawatts of utility-scale installations between
2019 and 2024.

That will likely make Florida the top state market for
utility-scale projects during that timeframe, knocking off
long-time leader California.

But the two states’ markets are evolving in quite different
ways. Florida’s regulated utilities are driving the state’s future
capacity additions, but they’re typically choosing to develop and
build projects in-house.

That’s pushed third-party solar developers towards the sidelines
in one of the country’s hottest markets.

Utilities own the market 

Florida may lack a renewable portfolio standard, but these days
its utilities are pulling the solar market forward anyway.

Tampa Electric has plans for 600 megawatts of solar across its
territory by 2021, Duke Florida is working towards 700 megawatts of
solar by 2022 and Florida Power & Light, a subsidiary of
NextEra that serves upwards of 10 million people in the state, is
working on more than 8 gigawatts by 2030.

In Florida, projects under 75 megawatts don’t need the same
regulatory approval as larger projects. Utilities can also recover
costs on solar investments through the state’s Solar Base Rate
Adjustment, approved in 2017, as long as projects come in under a
cost cap approved by the utility commission . 

Natural gas produces more than two-thirds of the state’s
electricity, according to the Energy
Information Administration
, but utilities say adding solar is
now an economic choice. (That’s not to say
natural gas
is no longer on the table for capacity
additions). 

Those dynamics provide economic and regulatory incentives for
Florida’s utilities to move towards solar, and build it
themselves. Utilities also point to environmental benefits and
customer demand as drivers. 

“In Florida, to the utilities’ credit, the development of
solar has been led primarily by the utilities themselves,” said
Sean Gallagher, vice president of state affairs at trade group the
Solar Energy Industries Association.

Though California’s renewable portfolio standard has been key
to spurring the solar market there, voluntary procurement accounted
for 72 percent of total U.S. utility-scale contracts in 2017 and 65
percent of contracts in 2018, according to WoodMac.

Gallagher said the self-ownership trend will grow as more
utilities grapple with the energy transition and look to acquire
solar. “We’re going to see more and more utilities looking to
own renewable facilities.”

A tougher ride for developers 

Florida’s solar surge hasn’t benefitted all in the industry
equally, though.  Advocates say the state remains a tricky
environment for third-party developers, even as its market
balloons.

The combination of utility expertise and economic benefit
associated with self-building has resulted in somewhat of a
“closed market” for third-party developers, according to Myles
Burnsed, vice president of strategic developments at EDF
Renewables. 

While some utilities say they’re open to working with
developers — Tampa Electric told Greentech Media it’s working
with Invenergy and First Solar, for instance, and Jacksonville
Electric Authority recently
signed
a deal with EDF — Florida’s utilities aren’t
playing solar development catch-up in the way some less-experienced
utilities might need to. Florida Power & Light’s parent,
NextEra, is among the largest wind and solar developers in the
U.S. 

“In Florida, we’re a bit unique because we do have NextEra
and Duke as two of the big anchors,” said Burnsed. “They’re
both very experienced in solar, so they don’t have a learning
curve. They’ve been able to just do it in-house.” 

That’s helped boost WoodMac’s forecasts, but solar advocates
say it creates an unhealthy environment for competition, which can
hurt ratepayers.

“For our members it’s a little bit of a mixed bag. … The
utilities in Florida are developing these solar installations on
their own as opposed to going out to the market for a competitive
procurement to return the best price for the utility and their
customers,” said SEIA’s Gallagher. “We want to praise the
Florida utilities for seeing that solar is the best way forward for
the customers, but [also] encourage them to look to the market to
get an even better deal.”

The latest data from WoodMac puts utility fixed-tilt system
pricing at $0.93 per watt and utility tracking system pricing at
$1.04 per watt, quite a bit lower than Florida’s cost caps
assigned at $1.50 per megawatt for Tampa Electric Company and $1.75
per megawatt for Florida Power & Light, for example. If
utilities were required to sign projects through a request for
proposal, Burnsed said it would likely result in more
competitively-priced projects.

“The [utilities] are very competent and good solar developers,
but it would be a better source of project competition [and]
potentially lower rates for in-use customers since the projects are
being rate-based,” said Burnsed.

Gallagher also noted the potential for partnerships, with
third-parties beginning the development process and utilities
buying a project at a certain stage. 

“Our efforts in Florida are really about introducing more
competition to that market,” Gallagher said, adding that SEIA is
currently determining whether the utility commission or the
legislature is the best place to lobby for changes. 

The most concrete opportunity may come when the Solar Rate Base
Adjustment is up for renewal, which each utility pursues separately
for new projects. The public service commission will consider a
proposal from Duke on July 9. Tampa Electric filed a petition in
late June to rate base two projects expected to come online in
January 2020.   

Source: FS – GreenTech Media
Developers Struggle to Find a Way In as Florida’s Utility-Scale Solar Market Shines