Clean energy advocate sees signs of life in Southeast renewables 'dead zone'

Tuesday, January 21, 2014 11:36 AM ET Exclusive
Clean energy advocate sees signs of life in Southeast renewables 'dead zone'

By Mark Hand

Renewable energy advocates are seeing glimmers of hope in the Southeast, with Georgia jumping on the solar energy bandwagon and the Tennessee Valley Authority making further inroads into renewables. But the region could be doing so much more with solar and wind power development, according to Stephen Smith, executive director of the Southern Alliance for Clean Energy.

The region has the opportunity to be a huge player in renewable energy because outside of the desert Southwest, it has the best solar energy resources in the U.S., Smith said in an interview. From wind off the Atlantic coast to opening up the Florida solar market, the opportunities for investment in renewable energy production in the Southeast are tremendous, he asserted.

"Whereas the South has been a dead zone on renewables by and large compared to other parts of the country, the potential is great," he said. "What's missing is the political will and the policy, and utilities that are willing to rethink their business models and let some of these renewables flourish, instead of being impediments."

Smith, who holds a doctorate in veterinary medicine from the University of Tennessee, has served as executive director of Southern Alliance for Clean Energy, or SACE, since 1993. He also serves on the U.S. Climate Action Network board of directors and previously served as board chairman. SACE, which is based in Knoxville, Tenn., with offices across the Southeast, works closely on climate change issues, including reaching out to businesses and governments to promote clean energy policies.

In 2009, SACE performed a study, "Yes We Can: Southern Solutions for a National Renewable Energy Standard," which evaluated the potential for renewable energy in the region. The analysis indicated that states in the region have enough bioenergy, solar, onshore and offshore wind, hydroelectric and geothermal resources to meet a renewable energy standard of 25% by 2025 and that the Southeast has sufficient renewable energy resources to meet high interim targets, such as 20% by 2020.

Since SACE issued that report, there has been some movement on building out renewables in the Southeast but not as much as clean energy advocates would like.

The record on renewables in the states where Southern Co.'s utility subsidiaries operate has generally left much to be desired, according to Smith. The regulatory environment in Alabama, for example, is "absolutely abysmal," while Mississippi is only slightly better, he said.

In 2012, the Alabama PSC approved a power purchase agreement between Southern Co. subsidiary Alabama Power Co. and Buffalo Dunes Wind Project LLC in Kansas. The PPA brought the utility's total wind generation portfolio to more than 400 MW. The utility company had already secured a 200-MW agreement with an Oklahoma wind farm under construction. "Our jaw dropped when they did that," Smith said about Alabama Power's wind energy contracts.

Georgia emerges as bright spot

Georgia is one of the few bright spots in this "dead zone" for clean energy, according to Smith. "The Public Service Commission has certainly transformed the debate in Georgia," he said.

"Georgia has always had a strong solar potential, but they've never exercised it," Smith said. But then PSC Commissioner Lauren "Bubba" McDonald became "passionate" about solar and convinced some of his colleagues that the technology should become a part of Georgia Power Co.'s energy mix.

In July 2013, the Georgia PSC voted to require Georgia Power to add 525 MW of solar through the end of 2016. That comes on top of the 210 MW already included in the company's Advanced Solar Initiative. "This is the perfect storm for solar in Georgia with technology having advanced, interest rates favorable [and] panel prices down 40% in the last two years," McDonald said in an August 2013 statement released by the Environment Georgia Research and Policy Center.

Georgia Power recently added 250 MW of wind generation to its portfolio and will soon have nearly 800 MW of solar capacity under contract, company spokesman Tim Leljedal said.

"Southern Company is developing the full portfolio of energy resources — nuclear, 21st century coal, natural gas, renewables and energy efficiency — to best meet customers' energy needs with clean, safe, reliable and affordable power," Leljedal said in an email. "A diverse portfolio helps protect customers from volatility in any one market, and renewables are an important part of our long-term energy strategy."

In the Southeast, North Carolina is the only state that has implemented a mandatory renewable portfolio standard, and renewables advocates were able to rebuff attacks against the standard in 2013. Industry observers contend that groups such as the American Legislative Exchange Council failed in their attempt to roll back the RPS in North Carolina due to the favorable economics of renewable energy.

"What won the day is that there has been tremendous economic development in North Carolina that has come from renewable energy," Smith said. "It hasn't caused any significant impact on rates for customers. You get a lot of benefits with very little downside."

North Carolina has experienced a period of dramatic growth in solar power capacity. The sector saw its capacity grow from about 1 MW in 2007 to more than 120 MW of registered projects in late 2011 to about 745 MW of proposed and constructed projects through mid-September 2012.

In South Carolina, SACE and other groups have been pushing Duke Energy Corp.'s utility subsidiary to incorporate a greater amount of solar into its portfolio. They want South Carolina regulators to direct Duke Energy Carolinas LLC to solicit developer interest in a 375-MW solar facility near its W.S. Lee plant to take advantage of potential synergies between the company's proposed natural gas-fired, combined-cycle plant at the site and solar generation.

"We believe that when you look at the real costs associated with a combined-cycle gas plant over the life of the plant, the majority of those costs are fuel," Smith said. "If you can back down a plant during the times that the sun is shining and save customers that fuel, over the course it actually comes out to be cost-effective to marry a gas plant and solar plant together."

Southeast operating and planned biomass, solar and wind capacity (MW)

*Planned capacity includes only units in advanced development or under construction.
A hyphen indicates a value less than 1 MW.
As of Jan. 15, 2014.
Source: SNL Energy

response to a request by SACE and the South Carolina Coastal Conservation League that Duke Energy Carolinas add 375 MW of solar energy at the
Lee project site, Janice Hager, vice president of integrated resource planning and regulated analytics for Duke Energy Business Services LLC, noted
in testimony filed with South Carolina regulators that the largest solar facility in the world is under construction in Arizona and will provide 290 MW of
capacity.

But Smith suggested that even if Duke Energy Carolinas built a smaller solar plant — 100 MW or perhaps even 50 MW — the company would still get
some experience with operating solar near a combined-cycle plant. "If you can couple a gas plant with a zero-fuel resource like solar and you can get
the scale up to where the solar is as cheap as a lot of people are saying they can build these things now, then over the life of the plant, the solar pays
for itself and actually saves customers money," he said.

TVA runs 'hot and cold'

In its expansive service territory, the TVA has been "hot and cold" on renewables, and the utility is "probably more cold right now," Smith said. The
federally owned power company was one of the first utilities to have a voluntary renewables program for which customers could sign up.

The TVA has completed some solar projects and has additional solar capacity under development. It also recently announced that it will expand its
renewable energy incentive programs in 2014. The changes, the company said, could significantly increase its total solar capacity from 2013 levels.

The TVA has also contracted for about 1,500 MW of wind from projects in the Midwest and Plains states, "which is a sizeable investment for any utility
in the Southeast, so they deserve some credit there," Smith said.

The TVA recently established a Regional Energy Resource Council, a panel designed to debate energy issues and then advise the TVA's board.
Smith, who is a member of the panel, said it has had one meeting and is scheduled to have another one in the next couple of weeks. "It's still to be
determined how much they're actually going to let us deliberate on these issues," he said.

This is an important period for the TVA, according to Smith, because it is going through an integrated resource process that could set the course for
how the utility invests in renewables over the next 10 to 15 years. "We're cautiously optimistic that it may set some goals in the renewable
development area over the foreseeable future that could get TVA back in as a player in the renewable space," he said.

Smith expressed optimism about two proposed high-voltage, direct-current transmission lines that could deliver renewable power into the Tennessee
Valley. The Plains & Eastern Clean Line project, proposed by Clean Line Energy Partners, could bring up to 3,500 MW of wind into the TVA region.
The TVA could offtake some of the power and then wheel some of the remaining electrons into other utilities in the Southeast. The project has a
second phase that could bring another 3,500 MW into the TVA region.

"It could be as much as 7,000 MW of low-cost, high-capacity factor wind power out of the Great Plains and Oklahoma," Smith said. "TVA's acceptance
of this and participation in this is critical. But it also has larger, national policy implications for whether we're actually going to take advantage of this
enormous resource we have in the Plains and get the electrons to load centers."

Another transmission project proposed by Southern Cross Transmission LLC, a subsidiary of Pattern Energy Group LP, would deliver Texas wind
energy to load centers throughout the Southeast. "It could also load up a lot of wind, but in a different way than Clean Line because it is tied to the
[Electric Reliability Council of Texas Inc.] system," Smith said. "This is a really interesting contest of connecting these large reliability regions across
the country through these high-voltage DC lines. It would allow more balancing and movement of potential wind resources into the South."

Despite the progress made by the federal utility, Smith wonders why President Barack Obama has not done more to push the TVA in a clean energy
direction. "The Obama administration doesn't seem to realize they have the nation's largest public power utility and that they can actually put people
on the board and get things done," he said. "They seem to be completely oblivious to it."

If the Obama administration started looking at what it could do to advance climate policy, without having to get congressional approval, heading into
the 2015 climate talks in Paris, the TVA is a "prime tool in their tool box," Smith said. "As they scour what they have at their disposal, they will discover
they actually have the nation's largest public utility that can be a true living laboratory of how to lead energy production into the 21st century."

Election could blow Fla. market open

In 2014, Smith believes Florida will be the most compelling story in the Southeast, as future energy policy there could hinge on the outcome of the
state's gubernatorial election. The election is likely to pit former Gov. Charlie Crist against Republican incumbent Rick Scott.

Crist, a former Republican who joined the Democratic Party in 2012, is vowing to open the Florida market and unleash a lot of renewable energy
development, Smith said. "He was going in that direction as a Republican. Now, he's going to have a longer leash as a Democrat to do a lot, and he's
going to have much more favorable economics. This race is going to be a very important one to watch and could open and transform Florida from
being a laggard at some level to being a leader on clean energy," he explained.

Renewable energy accounted for 2.2% of Florida's total net electricity generation while the state, which does not have a renewable portfolio standard,
ranked third in the U.S. in 2011 in net electricity generation from solar energy, according to U.S. Energy Information Administration data.

NextEra Energy Inc. subsidiary Florida Power & Light Co. has built two solar photovoltaic projects, the DeSoto Next Generation Solar Energy
Center, with a capacity of 25 MW, and the Space Coast Next Generation Solar Energy Center, with a capacity of 10 MW. The company also built a
hybrid solar thermal facility, the Martin Next Generation Solar Energy Center, capable of producing 75 MW.

At a September 2013 conference, FPL Senior Director of the Office of Clean Energy Buck Martinez said, "We are fans of utility-scale solar. We feel
like we know what we are doing and the costs are significantly lower than on the distributed generation side."

In October 2013, FPL's Office of Clean Energy announced that it will offer about $9 million in rebates to residential and business customers who
wish to install solar water heater or solar PV systems. This was the fourth year that FPL offered solar rebates as part of a five-year program
authorized by the Florida Public Service Commission. The utility also said it plans to install solar arrays at nearly 100 public schools and other
educational facilities throughout its service territory.

According to Smith, though, Florida still has plenty of room for improvement. It is the largest market in the U.S. that does not have a "coherent energy
policy" in place at the state level, he said. "You've got this great solar resource. You've got this great population center and you've got this huge

untapped market," Smith said. "If Crist is elected, you will see some really rapid things happen that would blow that market open."