Blocking Out The Sun

[June 11th, 2008]

The explosive growth in Oregon solar-power projects has lurched to a halt, thanks to objections from a utility that has ironically been a strong proponent of developing renewable resources.

PacifiCorp, the state’s second-largest electricity provider, led the legislative charge last year for a new Oregon law that calls for 25 percent of the state’s electricity to come from renewable sources by 2025.

But on June 5, PacifiCorp asked the Public Utility Commission to clarify whether the solar installations popping up like dandelions around the state are legal.

That filing put all pending and potential solar projects on hold. And it has advocates of renewable electricity worried that PacifiCorp could halt solar’s momentum.

PacifiCorp’s PUC filing takes issue with a popular business model in which a third-party investor buys, installs and owns the solar generation typically located on land or on a building owned by a nonprofit or public-sector owner.

In return for its investment, the third-party owner qualifies for state and local tax credits and incentives. The third-party owner also sells the solar-generated electricity to the nonprofit “host,” which is where PacifiCorp says things become confusing.

Scott Bolton, a PacifiCorp lobbyist, says the utility supports solar generation and doesn’t see the new installations as competition. But Bolton says PacifiCorp wants answers to some key questions before the solar boom goes any further.

For instance, Honeywell International Inc. has solar projects going with the cities of Pendleton, Hillsboro and Cottage Grove, as well as Lewis & Clark College and Mt. Hood Community College. But the City of Pendleton is a PacifiCorp customer, and if Honeywell installs solar panels on city buildings, PacifiCorp and Honeywell’s roles will overlap.

That creates a question for PacifiCorp and Honeywell about whether third-party owners effectively become what are called “Electricity Services Suppliers” or mini-utilities by selling electricity. Such a classification subjects Honeywell and other developers to a prohibitive level of state and federal regulation.

“We’re trying to figure out who is the utility, what is their obligation to the customer and at what price do they provide electricity,” Bolton says.

But Kacia Brockman, solar program manager for the Energy Trust of Oregon, countered in a PUC filing that treating system owners as Electricity Service Suppliers “would kill the market for third-party ownership in Oregon.” Brockman and others note that PGE, the state’s largest utility, has not raised similar questions as PacifiCorp.

“Energy Trust is not aware of any other states considering ESS treatment of system owners,” Brockman wrote.

The Energy Trust, which provides subsidies for renewable-power projects by collecting money from a 3 percent public-purpose charge on utility bills, says PacifiCorp’s filing comes at a time when at least 22 active solar projects are in development in Oregon.

“The combined capacity of these projects, more than 13 [megawatts], is more than twice the capacity of solar installed in Oregon to date,” Brockman wrote the PUC.

Brockman says the imbroglio is particularly troubling because federal incentives for solar projects expire at the end of 2008 and developers must commit to projects by the end of this month to qualify for those incentives.

“This issue is coming at the worst possible time,” she wrote. “If the ESS treatment is not decided quickly all 2008 third party owned projects will be cancelled for this year.”

The PUC’s three commissioners voted Tuesday to open an expedited investigation into the questions PacifiCorp has raised. Robert Stephens, a lawyer for Honeywell, says agency staff hope to provide answers by the end of July.