Cost-Cutting Renewable Energy Projects

Owners of small renewable energy systems below 3kW in Rhode Island will now be able to escape an extra cost on their utility bills every month. On September 28, the Rhode Island Public Utilities Commission ruled that on-site, behind-the-meter renewable energy systems be exempted from the “Back-up Rates” that previously covered all on-site generation, and will continue to cover non-renewable on-site generation, according to People’s Power & Light (PP&L), Rhode Island’s non-profit energy consumers’ alliance.

The ruling was part of a five-year comprehensive rate settlement with Narragansett Electric, which is the distribution utility and standard offer provider serving essentially all of Rhode Island. Under Narragansett’s Back-up Rate, an on-site generator can avoid energy charges for self-generated electricity used on-site, but is required to pay transmission and distribution charges. The exemption for renewables is limited to the first 3 MW nameplate capacity installed within the Narragansett Electric system. “This is great news for the numerous large scale, behind-the-meter wind projects that are under consideration around the state,” said Erich Stephens, Executive Director of PP&L. “Now, these projects will be able to obtain the full economic value of the energy that they generate on their premises, and make the project financing that much easier.” Narragansett Electric argues that the Back-up Rate is needed to recover costs associated with providing service to on-site generators during periods of equipment outages, or when renewable systems aren’t generating. PP&L intervened in the settlement, and argued that because of the variable nature of most renewable technologies, there is little difference in cost between serving a customer that installed renewable generation and one that undertook efficiency or conservation measures. PP&L also argued that Narragansett was not taking into consideration the value of the potential savings from on-site generation, such as deferral of distribution system upgrades, reduction of localized congestion, increase of system reliability, and reduced costs in meeting the state’s recently passed renewable energy standard. Rhode Island’s Renewable Energy Standard (RES), signed into law June 29, 2004, requires retail electricty providers, including nonregulated power producers and distribution companies, to supply 16 percent of their retail electricity sales from renewable resources by the end of 2019. The requirement begins at 3 percent by the end of 2007, escalates by 0.5 percent per year through 2010, then by 1.0 percent per year from 2011 through 2014, and finally by an additional 1.5 percent per year from 2015 through 2019. In 2020, and each year thereafter, the minimum renewable energy standard established in 2019 must be maintained unless the Rhode Island Public Utilities Commission (PUC) determines that the standard is no longer necessary. The 3 MW system-wide cap and the implementation of a “Distributed Generation Working Group” to study actual costs and benefits from the first systems installed was the compromise between these two positions, according to PP&L. The DG Working Group will study the costs and benefits of all on-site generation that might be installed before the system wide cap is met, and that information could be used by interested parties to go before the Public Utilities Commission to request an expansion of the 3 MW cap. State law specifically allows the Public Utilities Commission to allow or order discounts to the Back-up Rate if there are demonstrable public benefits, so such an exemption is possible even if the DG Working Group finds there are additional costs to the system by having on-site renewable generation. The ruling references the state’s renewable energy standard law in determining which technologies are eligible for the Back-up Rate exemption. Rhode Island’s existing net-metering rules, which allow net-metering for renewables up to 25KVA, remain unchanged.
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