Published on January 31st, 2015 | by David Pomerantz9
Laws In Southeast Make It Hard For Military To Go Solar (Part 2 of 2)
January 31st, 2015 by David Pomerantz
Part I of this two-part series asked the question of whether the military should be getting credit for a new solar project that utility Duke Energy is building at Marine Corps Base Camp Lejeune in Jacksonville, NC.
This post explores why the military finds itself in a situation where it can’t just buy renewable energy in North Carolina and take unambiguous credit for it, as it has done expertly in so many other states. The irony is that the military probably wishes it could do exactly that, and likely isn’t thrilled with this Camp Lejeune deal. Having spent billions of dollars on renewable energy already, the Pentagon knows that it gets a significantly better deal when it buys the electricity directly using an instrument called a third-power Power Purchase Agreement, or PPA.
In a third-party PPA, the military (or any electricity customer) contracts to buy renewable energy from a third party – not the utility – at a set rate for a number of years, offering key financing for a new solar or wind farm to be built on or near its facilities. Using PPAs, the military is currently saving millions of dollars by locking in set rates for renewable energy, rather than paying constantly rising utility bills.
That’s why “up to 80 percent of future DoD renewable energy projects will be financed in this way [via third-party PPAs],” according to a Pew report. In fact, the military is using third-party PPAs for the entirety of a $7 billion renewable energy buy to save the most money for taxpayers.
As an example, a 16 MW solar array at the Davis Monthan Air Force Base in Tucson, AZ, will reduce the base’s utility bill by an estimated $500,000 per year.
If the Navy were to buy the solar energy for Camp Lejeune from a third party, it would not only be better for its bottom line (which, remember, is taxpayers’ bottom line), but also for ratepayers in North Carolina, since they wouldn’t pay a cent for it. In the current deal, Duke will pass through the solar installation costs to ratepayers.
So why didn’t the military enter into a third-party PPA in North Carolina too, as it has done in much of the rest of the country, instead of arranging a land-for-cash swap with Duke Energy?
The answer is that third-party PPAs, which have saved the military and countless other institutions so much money in other parts of the country, are illegal in North Carolina. North Carolina is one of only five states that expressly outlaws third-party PPAs of electricity (the laws are unclear, or laden with obstacles, in 21 additional states). This restrictive market condition was set up by legislators to protect Duke Energy from having to compete with other electricity generators.
Two of the other five states with clear PPA bans are Georgia and Florida, where the military also announced deals last week ($ub only), in those cases with utilities Georgia Power and Gulf Power, both subsidiaries of the Southern Company.
Efforts are underway in all of these restrictive states to open up energy markets to remove the ban on third-party PPAs so that anyone, the military included, can buy renewable energy from someone other than a monopoly utility, saving them, taxpayers, and ratepayers money. Georgia’s move to open up the market seems most likely to happen first, but there is hope in the other states too. A ballot initiative in Florida, led by a strange bedfellows coalition of free-market conservatives and environmentalists, seeks to open up the market to third-party PPAs there.
The military will be in the best position to save money and increase force security if those efforts are successful. Until then, deals like the one at Camp Lejeuene reflect the irony that, no matter the might or purchasing power of the US armed forces, it’s hampered by the same barriers as public schools, churches, universities, businesses, and homeowners in many parts of the country: regressive energy markets, manipulated by monopoly utilities, can make it nearly impossible to buy renewable energy.
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