In Salt Lake County’s push to increase its solar power capacity, it followed the recommendations from a financing study, which determined that the best model for developing a commercial-scale project was to have a private third party own the system. However, Utah’s regulatory barriers to third-party ownership of power-generating property stood in the way of the project’s initial development.

The local utility was able to suggest a solution, however. Under federal requirements, the utility had filed a tariff rate for qualifying facilities (QF) that were operating commercial-scale renewable energy projects. This calculated tariff rate reflected costs the utility had been able to avoid by showing what the utility would have had to pay to acquire power if the QF were not in operation. Still, from the county’s perspective, the proposed agreement had several disadvantages.

The county had anticipated that a solar power project would result in several kinds of financial benefits. First, the project would result in a price for power that would remain fixed and predictable over a 20 – 25 year period, insulating the county from dramatic increases in utility rates. The second benefit would be a reduction in the utility’s "demand charge." Peak-energy consumption that normally demands a premium rate would be partially covered by the energy generated from the solar power project.

Unfortunately, a QF agreement would not provide the county with either benefit; only the solar project owner and the utility would be party to the agreement. The county would host the system, but would receive no other direct benefit from the power it generated. Additionally, under the QF agreement, the utility sought to retain the value of the renewable energy certificates—revenues that the county was counting on to help financially support the project.

Because of these limitations, the county sought another solution. Working with a broad coalition of interest groups, the county urged the Utah Public Service Commission to allow public-private arrangements for renewable energy projects. The county and interest groups prevailed in amending the Utah statute so that third-party ownership of renewable power generation equipment would no longer be subject to regulation as a public utility.

The Renewable Energy Financing Provisions, which were finalized during the 2010 legislative session, enabled tax- exempt power customers to enter into power-purchase agreements with third-party system owners. Upon the bill’s passage, the county finalized and issued an RFP, selected a partner, and executed a power-purchase agreement with a private developer to construct a 2.6 MW rooftop solar system on the Salt Palace Convention Center.

Thanks to this updated Utah law, a system owner is no longer at risk of being considered a public utility, and the county benefits directly from the system that is generating power on its own roof. Energy transferred from the system will maintain a predictable, fixed rate and the county can help meet its own demand in times of peak-energy consumption.

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Content for this Blog post courtesy of the Center for Climate Strategies