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Santee Cooper policies cast cloud over solar

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Santee Cooper policies cast cloud over solar

The 3-acre Jerry Zucker Solar Park that opened in North Charleston in 2016 will pale in comparison to the state’s first major utility-scale solar farm slated for 800 acres in Jasper County, providing 72 megawattts of electricity to SCE&G, enough to power 12,200 homes. (File)

William Moore sees the future in a scrub pine-covered former hunting preserve that borders the Jasper County wetlands along the meandering Coosawhatchie River.

The 1,500-acre tract is marginal for farming. It bakes in the sun much of the time. And it’s Lowcountry flat.

“The conditions in South Carolina are perfect,” and the Jasper tract is about as ideal as possible for what he wants to do, Moore said.

Later this year or early the next, his company, Adger Solar, plans to start building what is expected to be the first major-capacity, solar electricity generation farm in the state.

The 72-megawatt solar farm would cover 800 acres of the tract, produce enough electricity to power 12,200 houses and create an instant, fivefold jump in the state’s solar electricity capacity.

It and many more “utility”-scale solar farms on the drawing boards signal the state’s belated entry into the nation’s solar energy boom.

But South Carolina faces an unexpected hurdle to continued progress: Santee Cooper, the power company the state created and owns, has hindered the state’s two-year-old goal of expanding solar energy and promoting a potential billion-dollar new green industry.

A Post and Courier analysis shows that Santee Cooper has effectively deprived its more than 170,000 direct customers of the energy savings and environmental benefits that the state’s new reusable energy law made available to residents served by South Carolina Electric & Gas and Duke Energy.

Santee Cooper denies this is the case, insisting that it has a strong solar- and renewable-energy record and policies that treat all of its customers fairly.

But Hamilton Davis, energy and climate director for the Coastal Conservation League, said this just isn’t true. He and other conservationists accuse Santee Cooper of obstructionism while “greenwashing” policies “to make it look like they support solar.”

South Carolina still ranks low nationally in solar generation capacity — 35th among states. But thanks to the 2014 passage of the renewable energy law, known as Act 236 or the Distributed Energy Resources Program Act, the state is rapidly moving to take advantage of one of its most abundant resources — sunshine.

The state’s rate of growth in solar capacity now ranks first nationally and the state is second in the growth rate for solar jobs, 1,800 at last count in 2015.

That growth has bypassed Santee Cooper’s direct customers, largely in Berkeley, Georgetown and Horry counties.

The reason lies in a provision of Act 236 that requires the state’s power companies to allow for solar leasing by independent companies that rent rooftop systems to homeowners.

Homeowners essentially pay the rent by selling excess solar electricity back to the power company.

Solar leasing allows more people to use rooftop solar by removing the hefty up-front cost of buying and installing a system, which can be upwards of $15,000.

Homes with rooftop solar typically need to remain connected to power company lines in order to get electricity when solar does not produce enough, such as on stormy days or at night. But homeowners with rooftop systems also can reap additional benefits by selling electricity back to the power company when their solar system produces more than the home needs.

In most states, the financial compensation formula for that give-and-take of electricity is called one-to-one net metering, under which the homeowner sells excess solar at the same price the power company charges for its electricity.

Both SCE&G and Duke have such arrangements, worked out with state utility regulators.

Santee Cooper rejected net metering as “not practical” because it requires non-solar customers to foot the bill for keeping rooftop users tied to the grid when solar doesn’t provide enough electricity.

However, a detailed cost analysis conducted last year for state regulators found that any such cost would have “a minimal economic impact” on non-solar customers.

Nevertheless, Santee Cooper developed a formula that makes it financially impractical or virtually impossible for many of its customers to install rooftop solar, a Post and Courier analysis shows.

To do the analysis, the newspaper compared the formulas of Santee Cooper, SCE&G and Duke for a basic 4-kilowatt rooftop system. It revealed the following:

Santee Cooper customers receive far less compensation for their excess solar energy than Santee Cooper charges them for its electricity.

After 10 years, a Santee Cooper customer would pocket just $165 in savings.

It would take Santee Cooper customers 9.5 years to break even on their solar investment, compared with 8 years for SCE&G customers and 6.5 years for Duke’s.

Santee Cooper’s low payment for excess power also is a killer for most solar leasing businesses.

One of those is Sunrun, which bills itself as the nation’s largest dedicated residential solar business.

Tyson Grinstead, the company’s public policy manager, told The Post and Courier, “we do not operate in Santee Cooper’s territory due to their current solar policy,”

In areas of the state served by SCE&G and Duke, Sunrun has gained more than 1,000 rooftop customers since solar leasing went into effect last year, Grinstead said.

“At the end of the day, we want our customers to save money and easily make the choice to go solar and they cannot do so with Santee Cooper’s current plan.”

So far, no customers using solar leasing have connected to its grid. But the program didn’t start until March and formal marketing and advertising won’t begin on it until mid-May, the company said.

Rooftop solar became a viable option in the state after the reusable energy law removed many of the state’s legal barriers to solar and other renewable energy sources. Those barriers were designed to protect the near-monopolistic hold major power companies providers are afforded in order to provide reliable service.

Renewable energy — solar in particular — poses a threat to the existing structure of the electricity industry which relies on massive, expensive, centrally located power plants to produce electricity for distribution over extensive transmission lines.

Solar energy can be generated on a home’s roof. And as solar systems grow cheaper and the ability to store excess electricity in batteries improves, the need for the existing power grid declines.

Some power companies have attempted to deal with the rooftop issue by bringing more solar farms on line. They see it as one way to discourage customers from installing rooftop solar while still providing clean energy to an increasingly green-conscious public.

In March, Santee Cooper announced it would begin a “community solar,” in which the company hooks up homeowners to a several-megawatt solar farm from which they buy a share of the solar power. However, the only such solar farm Santee Cooper has is a 3-megawatt Colleton County array near Walterboro from which it’s been buying power since 2013.

To make it easier for power companies to adjust to Act 236, the law requires that they must have only a relatively small portion of renewable energy in their systems — just 2 percent.

That requirement does not apply to Santee Cooper. Nevertheless, the company points out that its renewable capacity far exceeds that from various sources, including biomass, landfill methane, wind and hydroelectric, such as the electricity generated at Lake Moultrie.

Santee Cooper also continues to boast of its solar accomplishments.

The company’s latest quarterly journal features Chief Executive Officer Lonnie Carter listing them again:

Santee Cooper was the state’s first utility to put solar on the grid.

The company launched a solar education program installing 2-kilowatt solar arrays at public schools.

It initiated a Solar Homes loan effort.

It constructed the Grand Strand solar demonstration station.

It buys enough electricity from the Colleton Solar Farm owned and run by a subsidiary of North Charleston-based InterTech Group to power about 300 homes.

The list seems impressive.

However, the actual amount of solar power installed on Santee Cooper’s system remains miniscule, just 3.4 megawatts out of the more than 5,000 megawatts the company can generate.

Unlike SCE&G and Duke, which have agreed with several private companies to bring more solar generation farms on line, Santee Cooper has no current plan for any significant new solar farm generation capacity, Mollie Gore, Santee Cooper’s corporate communications manager, told The Post and Courier.

SCE&G has signed to buy 144 megawatts from eight independently owned solar farms planned or under construction in the state, including the 72 megawatt Jasper County farm. That’s 41 times the solar power Santee Cooper has installed.

And in documents filed in February with state regulators, SCE&G said it expects to have 278 megawatts of solar generation capacity by 2019, far more than the minimum 84 megawatts required by the renewable energy law.

Duke is headquartered in North Carolina, one of the nation’s top solar electricity generating states, and holds agreements to buy 35 megawatts of power from proposed South Carolina solar farms, with more expected.

At Santee Cooper, Gore said, “we have been approached by a few solar developers, and so far their proposals have not made sense cost-wise for our customers.”

The difference in the approaches to solar power by the state’s three main power companies lies in how the companies are regulated.

Santee Cooper is a self-regulating authority created by the state during the Great Depression to bring power and development to rural areas.

SCE&G and Duke Energy are investor-owned utilities that must follow state regulations overseen by the Public Service Commission. Santee Cooper’s status makes it largely exempt from these rules.

Consequently, SCE&G and Duke rapidly enacted programs to meet Act 236’s goals and Santee Cooper did not.

Just why Santee Cooper has taken a different approach to solar remains unclear, but it comes amid several factors including:

A $7.1 billion bond debt. Moody’s Investor Service, one of the major national bond rating companies, recently characterized that debt as “one of the highest amounts of total outstanding debt of any U.S. public power electric utility.” Nevertheless, the power company continues to rank high in bond credit ratings, mainly because it can make customers pay for the debt with higher electricity costs.

The burden of paying for its $4.9 billion, 45 percent, share for building two nuclear power reactors with SCE&G at the V.C. Summer station north of Columbia.

Slower than expected growth in power consumption due to the Great Recession of 2007-2009.

The capability to generate more electricity than it can sell, a capability expected to grow bigger when the two new nuclear reactors go online in 2019 and 2020.

More solar power would just add to the company’s ability to produce power it can’t sell.

Internal company communications and reports reviewed by The Post and Courier through the Freedom of Information Act hint at the company’s attitude toward solar.

In emails sent late last year as the company formulated its plan for dealing with solar leasing, the company’s renewable energy manager wrote that the planning team realized solar electricity held no value for Santee Cooper.

In another email, the company’s chief financial officer cautioned CEO Lonnie Carter that “we will under collect revenues by $3-7m in 2016 and 2017.” He then wrote, “I point it (out) because every additional dollar we give to appease the solar folks will push us further in the red.”

Asked about the emails Gore, Santee Cooper’s communications manager, repeated the company’s list of solar accomplishments as a clear sign that the company values power from the sun.

She then explained that the company’s renewable energy manager meant “solar power has no value to us in helping meet our peak customer demand,” which typically occurs in the predawn winter when solar doesn’t work.

As to the chief financial officer’s comments, Gore said, “This email in no way reflects an attitude about solar. Rather, it shows our CFO doing his due diligence by noting that any additional solar incentives under consideration at that point would be outside of our working 2016 budget and 2016-2017 rate recommendations.”

Going into the red is a growing issue for Santee Cooper which, so far, has borrowed $3.4 billion to build its share of the new nuclear reactors.

It borrowed partially to delay passing on costs to its customers through rate increases, which is what SCE&G has done repeatedly since 2009 to pay for the nuclear power plants, raising rates more than 25 percent.

Santee Cooper didn’t tack on its first nuclear construction rate increase of 3.5 percent until 2012 and 2013.

But last month, the company began what is expected to be annual rate increases through 2021 to fund the construction.

Rob Hochstetler is head of Central Electric Power Cooperative, which buys more than half of Santee Cooper’s electricity at reduced rates through a long-term contract. He told The Post and Courier he expects Santee Cooper’s rates to be 20 percent higher in 2020 than they were last year.

Central transmits the power it buys to the state’s 20 electric co-ops. The largest of those is Berkeley Electric Power.

The Jasper solar farm and others in the works became possible by the combination of a decades old federal law and a continuing drop in the cost of solar energy.

The federal law didn’t work well for solar until recently because solar energy cost too much to efficiently produce. Under that law a small renewable energy producer has the right to sell its electricity to a major power company if it costs basically the same as electricity the utility needs to generate.

Now, the cost of solar energy has plummeted to what industry officials call near parity with other forms of generation.

As a result, a growing number of independently owned solar farms, most 10 megawatts or less, are vying to flip on the switch and sell electricity to South Carolina power companies.

Moore of Adger Solar sees the falling price tag as enhancing solar electricity’s other advantages. Those are:

The fuel costs nothing.

Solar farms are modular and relatively fast and cheap to install.

Solar electricity generation produces no greenhouse gas or other pollution.

“This is the cheapest source of new generation. Cheaper than all else,” Moore said.

Solar farms of the size proposed in Jasper would cost $125 million to $130 million to build, and take just six to eight months to install, he said. Coal and nuclear power plants can cost billions of dollars and typically take years to build.

The Jasper facility, still awaiting local permits, is one of several Adger is looking to build in South Carolina, including a second 72-megawatt solar farm planned for the Jasper site, Moore said.

Electricity from that farm could be sold to either SCE&G or Santee Cooper, but Santee Cooper has shown little interest, Moore said.

“I have no idea why we haven’t been able to arrive at an agreement with Santee Cooper.”

Moore’s not the only solar energy entrepreneur wondering that.

Paul Fleury is president of the SC Solar Business Alliance, an organization of several dozen solar companies set up to improve the solar business climate in South Carolina.

Fleury also serves as a business development specialist for Charleston-based Southern Current, which installs residential and commercial solar systems.

His company has installed about 250 rooftop systems in the state, but none in Santee Cooper service areas.

Deals in their territory “don’t pencil” financially, he said. “We’re having much more traction with SCE&G and Duke right now.”

David Slade contributed to this report.

Reach Doug Pardue at (843) 937-5558.

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