The remarkable transition that utilities in the Southeast are undergoing is a powerful indicator of the profound changes happening in the nation’s power sector.

The Southeast had 200 MW of solar capacity in 2012, but led by North Carolina’s Duke Energy utilities and Georgia Power, it had 6 GW at the end of 2017, according to Solar in the Southeast, released in February by the Southern Alliance for Clean Energy (SACE). Even utilities not aggressively building solar now realize customers want solar — it is affordable, and there are ways it can serve utility purposes.

Utilities in the Southeast are responding to rising customer demand for renewables by capturing the economic opportunity in a solar resource second only to sun in the desert Southwest in the United States. Existing contracts and commitments promise over 10 GW of solar capacity in the Southeast by 2019 and as much as 15 GW by 2021, according to SACE. The growth has been and will continue to be almost entirely in utility-scale solar.

Utilities in the conservative Southeast have taken little notice of solar beyond its ability to meet growing residential and commercial customer demand at increasingly attractive prices. A third factor, which has emerged only recently in the wake of climate change-driven extreme storms and power outages, is solar's potential resilience value. While the overall national trend for solar installations is upward, there have been some hiccups recently.

Total solar installations across the U.S. fell from 15 GW in 2016 to 10.6 GW in 2017, driven partly by uncertainty over tariffs on solar cells and modules that were eventually imposed in January by the Trump Administration. Other factors impacting solar growth include changes in state incentives and net metering policies, according to a new report from GTM and the Solar Energy Industries Association.

Due to the tariffs and recent tax changes, GTM has lowered its forecast for total photovoltaic installations in the U.S. from 2018 to 2022 by 13%.

2017 installations across the U.S. were still about 40% higher than the number in 2015, but the biggest obstacles to growth are the absence of supportive policy and diminishing utility load. They are reasons only about an eighth of today’s 6 GW is distributed solar, according to SACE Solar Program Director and report lead author Bryan Jacob. Many of the region's utilities, facing flat or declining load growth, oppose strong supports for customer-sited solar.

But new laws and policies, put forward by lawmakers responding to popular demand, are laying the groundwork across the region for more changes.

Solar watts per customer

The report’s key metric is watts of installed solar per customer (W/C), SACE’s Jacob told Utility Dive. It allows a fair comparison between large utilities like the Tennessee Valley Authority (TVA) or Florida Power and Light (FPL) and small municipal utilities and cooperatives (co-ops).

At the end of 2017, Duke Energy Progress was the W/C leader with 1,117 W/C. Duke Energy Carolinas (474 W/C) and Georgia Power (364 W/C) were second and third among larger Southeast utilities, SACE reports. Some smaller utilities also ranked high. Cobb EMC, a small Georgia co-op, had 635 W/C and Mississippi Power had 455 W/C. Many of the region's very small utilities remain in single digits.

"Strong public policy direction” in the Carolinas and Georgia has been determinative, SACE reports. But Tennessee and Alabama “lack supportive public policies, leaving those states with projections at less than half of the region average through 2021.”

North Carolina’s HB 589, passed in 2017, will grow the state’s solar to almost 6,000 MW by 2021. As a result, Duke Progress will likely reach 2,315 W/C and Duke Carolinas will reach 821 W/C.

South Carolina’s Act 236, passed in 2014, is expected to move South Carolina Electric and Gas from 2017’s 182 W/C to 1,216 W/C in 2021. The Georgia Public Service Commission’s new rules governing solar procurement and contracting is expected to help Georgia Power grow from 364 W/C to 794 W/C by 2021.

The Georgia commission’s leadership also “catalyzed” growth in Southern Company subsidiaries Alabama Power, Mississippi Power and Florida’s Gulf Power, SACE reports.

Ballot initiatives in Florida created new laws and led to regulatory settlements that, combined, are expected to grow FPL from 109 W/C to 389 W/C and Duke Energy Florida from 65 W/C to 679 W/C. Tampa Electric is projected to go from 37 W/C to 818 W/C. Seminole Electric Cooperative is projected to almost triple from 17 W/C to 50 W/C, all by 2021.

The projected growth to 15 GW in 2021 would make solar only 3% of total Southeastern retail electricity sales, “considerably below levels that could trigger changes in grid operation practices,” SACE reports. Penetrations in North and South Carolina will, however, “offer real-world opportunities to observe how solar power contributes to system reliability,” the report adds.

Utility-scale projects, with the advantage of economies of scale, made up 87% of 2017’s installed capacity in the Southeast and could be 90% by 2021, SACE’s Jacob said.

The momentum seems to be away from rooftop solar. “In several states, utilities can and do impose inefficient or unnecessary constraints on distributed generation,” SACE reports.

Only Florida, North Carolina and South Carolina will have “appreciable” growth in distributed solar, it adds. There is almost no retail rate net energy metering (NEM) and other compensation, like the TVA Green Power Providers program, which has provided an above-retail per-kWh compensation to solar owners, is being reduced.

​A new demand factor beginning to capture utilities’ attention is the opportunity for economic development in helping corporate off-takers meet renewables and climate goals, according to Jacob.

Battery energy storage and community solar are also emerging in the region. “If storage prices continue their current decline, solar-plus-storage will soon be cost-competitive with what the utilities call baseload resources,” he said. Community solar appeals to utilities because it gives them control and allows them to offer solar to residential customers without solar suitable roofs.

Duke and Georgia Power build big numbers

North Carolina’s 2007 renewables mandate was the first in the Southeast. With it, and subsequent policies and laws, the state has built the second biggest solar installed capacity in the U.S., SACE reports.

The Duke Energy utilities supplied 83% of North Carolina’s solar in 2017. Spokesperson Randy Wheeless said the Carolinas’ policies, including the mandate and generous state tax credits, created “motivated utilities.”

A less often mentioned policy was North Carolina’s interpretation of the 1978 Public Utility Regulatory Policy Act (PURPA), he told Utility Dive. It guaranteed the success of much of the state’s smaller utility-scale solar by requiring the state's major utilities to buy project output if offered at a competitive price.

In South Carolina, “solar was pretty nonexistent” until the 2014 law was implemented, Wheeless said. “In 2014, we had 700,000 customers and less than 100 net metering customers in South Carolina. Today, we have around 5,000 net metering customers.”

In both the Carolinas and Florida, Duke participated in collaborative, stakeholder-led processes that resulted in policies that are “good for the utility, its customers, the solar industry, and customers who want solar,” Wheeless said. “That is the best way to go.”

Those processes led to the laws in South Carolina and North Carolina and the agreement in Florida that all promise important new solar growth.

Subsidy limits

Renewable growth will continue in the Southeast because “there does not appear to be anything that will stop the momentum and customers want solar,” Wheeless said. “But is it sustainable to keep subsidies in place forever? And, if not, when do they sunset?”

Georgia Power has built its renewables portfolio without a state renewables mandate, spokesperson John Kraft emailed Utility Dive. 

The utility’s 970 MW of operating solar capacity is “the largest voluntary renewable portfolio in the country,” Kraft said. And there could be as much as 1,600 MW of new renewable capacity by 2021.

The utility’s success with solar is based on two key factors, Kraft said. The first is a “constructive regulatory environment” without legislative or regulatory mandates. It allows the utility “flexibility to design, implement and improve programs at a rapid but thoughtful pace.”

The second is solar’s “improving efficiency and declining technology costs,” he said. That made it possible for the utility to take advantage of the state’s rich solar resource and grow its installed solar capacity “without putting upward pressure on rates.”

Duke and Georgia Power have found solar to be affordable, but other utilities are not sure.

Are TVA and Santee Cooper sunblockers?

Both TVA and Santee Cooper, though public utilities, should find current solar economics as appealing as the investor-owned utilities (IOUs) have, Jacob said. But they are among the utilities SACE calls “Sunblockers” for “sticking with outdated plans.”

TVA, with 4.7 million customers, recently solicited offers for 200 MW of solar at the same time that Jacksonville Electric Authority, with 454,000, solicited bids for 250 MW of solar, Jacob said. FPL, the same size as TVA, plans to have 2 GW of solar by 2023, he added. “TVA is an order of magnitude too low and needs to get in the game.”

TVA Vice President for Distributed Energy Resources Jay Stowe responded that TVA’s plans are not "outdated” and it will add solar "at a significant pace," contrary to the SACE report’s assertions. But the utility must balance “flat or declining load growth with customer demand,” he told Utility Dive.

TVA's recently commissioned 2 MW Music City Solar community solar project is an indication of where the utility is headed, he said. “Over the next 20 years, we plan to invest approximately $8 billion into our renewable energy portfolio.”

TVA does not "operate in a public policy vacuum, as SACE asserts, Stowe said. But its focus goes beyond solar. “54% of our current generating sources are carbon free but, because electricity sales are not growing, we have to be cautious about stranding assets.”

Of TVA’s 7,400 MW of installed renewables capacity, about 500 MW are solar and about 100 MW of those are distributed solar, according to Stowe. The remaining 6.9 GW are hydropower, biomass, biogass and wind.

SACE argues that TVA has "failed to respond to customer demand” and is “restricting solar choice” in its territory. It is doing this by “aggressively using a self-regulated rate design process to undercut solar penetration and dis-incentivize distributed solar.” The disincentive is a reduction of compensation for its Green Power Providers program, SACE adds.

Stowe acknolwedged that the Green Power Providers program compensation rate has been lowered progressively over the last several years. “As the cost of solar has decreased, we've decreased the incentive,” he added. “A retail rate compensation would be higher than the value of solar to the TVA system.”

SACE reports that TVA’s 2015 Integrated Resource Plan (IRP) includes “a very low solar ambition." Stowe responded that the 2015 IRP is not an accurate representation of TVA’s current intent. “The utility world is very different than it was just a few years ago,” he said. “The IRP to be released in 2019 will call for more solar over the next few years.”

Santee Cooper is also “not planning to add significant generation of any kind for the foreseeable future," spokesperson Mollie Gore emailed Utility Dive. If current load growth projections are accurate, its current capacity is adequate through the mid-2030s.

But it will add both “utility-owned and customer-owned” solar capacity, she said.

Santee Cooper will go from 2017’s 14 W/C to 34 W/C in 2021, according to SACE. But SACE calculates a customer base for Santee Cooper of almost 950,000. That includes the customers of the member co-ops to which Santee Cooper provides generation," Gore said. For its own customer count of “about 180,000,” Santee Copper has an installed utility-scale solar capacity of almost 6 MW, she added. 

In 2017, Santee Cooper added the 1.56 MW Bell Bay project to its 33 solar sites and added 245 distributed solar customers, Gore said. It plans to add 150 distributed solar customers per year from 2018 to 2020, she said. “We are looking at cost-effective solar opportunities on an ongoing basis.”

Two perspectives

Jacob said the Southeastern utilities slowest to grow solar seem to be using outdated economic assessments. “They argue solar costs are too high, but the utilities going gangbusters on solar wouldn't be building it if they couldn't make a profit,” he said. “Solar is competitive in the Southeast and should have a bigger portion of the generation portfolio.”

Southern Company VP for Energy Policy Bruce Edelston said solar is growing at all four Southern Company IOU subsidiaries. “As the cost of solar has declined, we have begun taking advantage of it,” he told Utility Dive. “But there is less interest in distributed solar because it is still not cost-competitive.”

And, like other utilities in the region, “we have enough capacity for probably the next decade of load growth in most of our states,” Edelston said. “We are not building anything other than our nuclear plant and renewables right now. But if we can buy solar and use it to replace more expensive coal or gas, we will.”