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Ten years ago, in 1998, New Mexico’s largest investor-owned utility, PNM, solicited bids to build a 5 megawatt solar electric power plant. Had the project gone forward, it would have been the world’s largest operating solar-electric power plant. But the project was stopped when 28 small solar companies in New Mexico, including my own, filed an objection.

As members of New Mexico’s Solar Energy Industries Association, each of us had mixed feelings about stopping a project that would surely bring attention to our state’s solar industry. But the more we learned about the project, the clearer it became that we needed to intervene.

The $50 million dollar price tag for the project was to be paid by ratepayers – financed over 20-years. But the cost of solar equipment at that time was falling every year, so we showed that by building smaller plants each year, we would end up with three times the installed solar capacity. Taking out a 20-year loan on equipment that falls in price every year makes no sense, but the project marched on anyway.

PNM was moving into the solar business – our business – with no risk, we argued, because they were allowed to bill all of their costs to ratepayers. This, while we were building solar power systems that needed PNM’s permission before they could be interconnected – permission that could be denied at any time, including after a system was built and ready to operate. Again, our objections were cast aside.

We filed a freedom of information request for the bids that had been submitted on the project, and found that the contract for the power plant had been awarded to the company that had received the lowest score on technology. It turned out that that company already had a contract with one of the members of the evaluation committee, but even this conflict of interest was not enough to stop the project.

So what finally put an end to PNM’s quest to build the world’s largest solar power plant?

We asked one, final, simple question about the project: What was PNM planning to do with the solar energy produced by the plant? It turned out that after collecting money from ratepayers to cover 100 percent of the costs for the plant, PNM was going to sell the solar energy to back to us. That did it – the project was mortally wounded when news of the double-billing hit the streets.

Now, ten years later, investor-owned utilities are contemplating another solar power plant – this one about 20-times the size of the last one. It’s too early to tell whether the same mischief will take place, but we can say with certainty that this project is based on the same, poor premise of putting investor-owned utilities in control of renewable energy.

This, while Denmark and other countries nationalize their power grids, modernize them to eliminate central control so that they can accept more renewable energy, and then promulgate feed-in tariffs to encourage small, independent companies to build renewable energy.

We can, and we must, do the same in the United States.

A video newscast containing this story is posted here.

Here are some questions I recently received regarding feed-in tariffs. You can download a flyer of this post here.

QUESTION: Who measures the kWh produced and pays out the appropriate feed in tariff amounts earned to the multiplicity of green producers? Who collects the money from other utility customers which are redistributed via feed-in tariff payments? Finally, is there any regulatory oversight?

MS: I believe the prevailing practice in Europe is to task the utilities with reading the meters and making tariff payments. Utilities are, after all, the ones signing the 20-year power purchase agreements at the tariff rate. Utilities are also responsible for billing and collecting the monthly charges that fund the tariff payments. Paying generators for kilowatt-hours and adding surcharges to bills are things that utilities do in their normal course of business anyway, so the regulatory oversight of these activities under a feed-in law isn’t really an added burden.

I can think of several ways to improve on the European tariff model. First, the funding to cover tariff payments should not be collected using throughput-based surcharges on utility bills unless it can be done in a way that isn’t economically regressive. Given the widespread economic benefits that result from the tariff, there may be a good case for collecting the revenues for it via the tax base rather than the rate base.

Second, the tariff rate offered should be based on the locational strategic value of the generator to the grid. If it’s downstream of a bottleneck such that it frees up needed capacity and delays or obviates a line upgrade, it’s worth more. At the end of a long feeder that sags under load, or in a place that needs VAR support, it’s worth a lot more. The Electric Power Research Institute has software models and reports showing how to assess the value of strategically placed resources.

Finally, the tariff should be used to meet other objectives, rather than just being a tool to promote renewable energy. This can be done by setting qualifying standards for the tariff program. For instance, the tariff language could require that each generator be owned within the community where it is located, which would increase local retention of energy dollars. As another example, biomass generators could be required to have an independent certification showing that the wood was sustainably harvested. The possibilities are endless.

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