Dive Brief:

• Tampa Electric Company (TECO) received approval on Monday from the Florida Public Service Commission (PSC) for its cost recovery agreement of five solar projects totaling 260 MW, as part of the second phase of its plans to install more solar power.
• The investor owned utility (IOU) struck a rate agreement with consumer representatives in 2017 to be able to shift an additional cost to its rate base in order to fund these five projects. The projects will increase monthly bills for residential customers using 1,000 kWh by $2.46 starting January 2019, to make up the additional $46 million required for the installations.
• Solar generation is anticipated to increase 44% over the next decade, according to the Florida Reliability Coordinating Council, given that PSC annual 10-Year Site Plans indicate the installation of 7,125 MW, of which 5,551 MW would be utility-owned solar. As one of the state's five IOUs, TECO is working toward adding 600 MW of solar by 2021.

Dive Insight:

As the state's population grows, the PSC observed a large projected growth of solar power in the current 10-year planning cycle, with the resource poised "to become the second highest installed capacity source in our state," according to a statement from PSC Commissioner Gary Clark.

Prior to announcing the 600 MW plan, TECO had 27 MW of solar on its system. The plan is estimated to cost about $850 million and result in an approximately 1% increase to bills. 

In May, the PSC approved  the first phase of the project, two TECO-owned solar projects worth a total 150 MW, set to go online this September. The five new projects, expected online in January 2019 in the Hillsborough and Polk Counties, will be followed by two more phases of installations to build the rest of the 600 MW of solar capacity, expected online in January 2020 and 2021.

TECO worked with consumer groups on its stipulated agreement, freezing its base rates until the start of January 2022 while allowing for cost recovery of added solar generation. The process sped up solar developments while allowing the utility to take advantage of the federal investment tax credit (ITC) before it begins to sunset from its 30% rate.

The five solar projects will lead to $17 million in fuel savings, which will offset bill increases along with the PSC-approved tax reform savings, according to a release from the commission.

Duke Energy Florida and Florida Power & Light (FPL) have used similar mechanisms to the one TECO used to approve these projects, a Solar Base Rate Adjustment (SoBRA). The SoBRA mechanism allows the PSC to approve solar project additions into a utility rate base without a full rate case, which has been driving the recent growth of utility scale solar in Florida, according to Bryan Jacob, solar program director at Southern Alliance for Clean Energy (SACE).

"I see it being used for the short-term future," Jacob told Utility Dive. He said IOUs would benefit from owning and operating installations while the ITC is still at its peak. "I think the SoBRA mechanism allows the utilities to take advantage of that. Because they're for-profit, tax-paying entities, the investment tax credits are valuable to them. "As that winds down," he suggested, "more opportunities will exist for independent power producers."

"Right now, there's not a lot of opportunity for competitive bids for developers to own and operate the assets and do power purchase agreements with the utilities, which is what we see in a lot of other states where the utilities don't want to own the solar," Jacob said.

"Florida is starting to live up to its reputation as the Sunshine State. There are still opportunities for them to enhance that legacy and the distributed solar market is becoming stronger," Jacob said, adding an emphasis on "starting," given the amount of "potential that's not being captured." He highlighted that potential in an April SACE report on solar in the Southeast, which he expects to update with a 2018 version in the coming months.

Florida remains committed to natural gas despite an increased push to grow its renewable energy supply. Duke expects its 1.6 GW combined cycle gas plant in Citrus County to be operational by the end of the year, and FPL said its 1,200-MW Dania Beach Clean Energy Center is being pushed through the development process, with plans for commercial operation in 2022. In May, the PSC approved a pair of new gas-fired plants expected to serve electric cooperative customers' demand starting in late 2021 and 2022.