My View on New AEP Ohio Renewable Energy Programs (Solar)
July 22, 2011 by green energy bird
Is 0.5% a big number? When I first saw this Ohio Solar RPS (Renewable Portfolio Standard) goal by 2015, I was thinking, we Buckeyes are setting low expectations for ourselves. I forgot to give my magic answer, “It Depends.”
In fact, big utility company AEP Ohio felt great pressure to meet this goal, as the energy consumption in Ohio’s industrial sector ranks among the highest in the Nation. The Ohio Solar Renewable Portfolio Standard goal is the 3rd toughest to achieve, after New Jersey and Florida. On average, AEP would need to add about 8MW to 10MW of solar installations per year to keep up. And the penalty for AEP’s non-compliance is quite high, about $40 per Megawatt-Hour.
AEP Ohio, like other utility companies, relies on utility-scale solar installations [to meet the RPS mandate], a lowest-cost solution compared to residential and [small commercial] installations. AEP will invest $20 million to build a 50MW solar power farm in Noble County, Ohio. AEP has already met its 2010 and 2011 SREC requirements, primarily from a 10MW facility built in Upper Sandusky, OH. However, AEP announced two new solar incentive programs last week to keep its solar power portfolio balanced and support the community.
1) The Renewable Energy Credit Purchase Program allows AEP customers to sell their own solar RECs to AEP at $300/SREC for year 1 and $262.50 for year 2. I doubt many people will sign up for this program–why sell SRECs to AEP at the price of $300 when I can sell at the spot market price of $345? For an average family house, this means about an additional $200/year revenue, an amount good enough to allow you to have Starbuck experience vs. a vending machine experience. However, some people might still sign up, as they just don’t know where to sell their SRECs so if AEP buys, they sell.
Going solar is can be cool yet confusing. Some may bet that the SREC spot market price will drop dramatically. I’m not sure this will happen. AEP Ohio still has a big gap to fill to achieve its Solar RPS goal. In addition, some states are already moving toward limiting utility-scale installations to protect the infant SREC market and non-utilitity installation market. High demand might help with keeping SREC prices in these two years.
The second AEP program is Renewable Energy Technology (RET) Program, which allows AEP customers to sell their own RECs in the next 15 years to AEP at the price of $1.5/watt now. I think this program is quite attractive. Let’s face the reality: although people have good intentions to go solar, we are still recovering from the worst financial tsunami since WWII and our pockets are not deep yet. The AEP RET program can potentially lower the initial installed price of a solar energy system by 25% on top of Federal Tax Incentive of 30% and cash grants for non-residential customers. If you want to go solar, you may want to act quickly. Remember, AEP Ohio does not rely on this type of SRECs to meet their RPS obligations. It has only only set aside $2 million in the pool for this program. Even though AEP Ohio only promotes the program through installers and word of mouth, the fund may not last very long. Before you rush to submit application, I have one more number to help you make an informed decision. $1.5/watt is equivalent to about $100/SREC, only 1/3 of its current AEP SREC price. Are you willing to accept the deal? If you believe that SREC value will drop dramatically over a long period time, the answer might be Yes. But I don’t have a crystal ball. This program is a good deal if you want to install Solar PV NOW.
A word of caution is that these two AEP programs are financing tools. They are different from cash grants like the Ohio Advanced Energy Fund Grant (AEF). It is still uncertain if Ohio AEF that expired last year will come back. If so, installers will be more than thrilled, as the AEF helped boost the solar industry in Ohio.
A REC (Renewable Energy Certificate) is a tradable, non-tangible energy commodity that represents the environmental benefits of the power produced from renewable energy projects, and is unbundled from the generated electricity itself. One REC is equal to the environmental attributes of one megawatt hour (MWH) of electricity from a renewable or environmentally friendly generation source. SREC means Solar REC.
RESPONSE FROM GEOFF GREENFIELD:
This is a great overview of the solar situation here in Ohio. Third Sun Solar has come to the same conclusion as you in the analysis of the new AEP programs (in comparison to the “spot” market for SRECs). We have several customers that have wanted solar for a long time, and are excited to take the RET option in order to move their power from a polluting, distant source that goes up in cost annually to the new rooftop power systems I expect we will see on every roof someday. We would be happy to put some on YOUR treehouse too! call us at (877) own-solar to chat! – Geoff