A Chance to Boost Small Scale Solar Power

By John McFerrin

The is a move afoot in the West Virginia Legislature to change the law so that it will be easier for small scale electrical power generation to operate in West Virginia.  The change would come about by changing the law on who can enter into a Power Purchase Agreement.

            Power Purchase Agreements (PPAs) are contracts for the sale of electricity, whether that electricity comes from the solar panels, wind turbines, coal fired steam turbines, or other electricity producers.  Big utilities need them because financiers of electricity generating facilities won’t loan any money unless they know that there is a market for the electricity.  The Power Purchase Agreements are assurance of the market.

            Under existing West Virginia law, only licensed utility companies can sell electricity on a retail level to a consumer of electricity. This means that electricity sold at retail (directly to consumers) in West Virginia is only sold by subsidiaries of either American Electric Power Co. or of First Energy Corp.  Currently Power Purchase Agreement contracts are exclusively wholesale level power sales contracts between electricity producers (for example owners of steam generated power plants like First Energy Corp) and their subsidiary retail marketers such as Monongahela Power Co.  Power Purchase Agreements are also used by, for example, the owners of a wind energy facility (such as Invenergy Corp., the owner of the Beech Ridge Wind Farm in Greenbrier County) that generate electricity for the wholesale electricity market.  When that producer agrees to sell the electricity to a public utility electricity retailer such as Appalachian Power Co. or Monongahela Power Co. it uses a Power Purchase Agreement.

            Right now there are businesses who would like to offer individual households, businesses, schools, public buildings, and apartment buildings the chance to have solar power.  Under their business model, they would install solar panels on homes, schools, public buildings, businesses, or apartment buildings and then sell the power generated to the home, business, school, public building, or owner of the apartment building.  The homeowners, etc. would get the benefits of solar power with no up-front investment.  The company installing the solar power would make money from the sale of the electricity.

A major flaw with this business model is that it is illegal, at least for now.  Retail level Power Purchase Agreements are not allowed in West Virginia.  Power Purchase Agreements are only allowed between producers of electricity and designated public utilities who then sell the electricity to individuals and businesses. A homeowner cannot make a Power Purchase Agreement (PPA) with XYZ Solar Co. to put solar panels on the roof of his or her home in order to sell the homeowner the electricity generated.  XYZ Solar Co. is not a legally designated public utility that is set up to serve all customers in a designated service area.  

            The Legislature is considering fixing this.  By statute, it could allow a solar power company to install solar panels on a home and sell the electricity (a Power Purchase Agreement) to the homeowner without being considered a public utility subject to the requirements of the Public Service Commission.

            Retail level Power Purchase Agreements would, of course, be voluntary.  Those who wished to continue buying electricity from public utilities would continue to do so.  Neither would allowing retail Power Purchase Agreements introduce retail solar power to West Virginia.  There are already people in West Virginia who have chosen to buy their own solar panels and produce some or all of the electricity they need.

Changing the law on retail level Power Purchase Agreements would change the way the equipment to change sunlight into electricity is financed.  Now anyone who wishes to pursue that option must pay for the equipment and installation.  If retail level Power Purchase Agreements are authorized, a company could pay for the equipment and installation and then sell the electricity to the homeowner, school, etc.

  This would be a revolutionary approach to how electricity is produced, distributed and marketed.  The big utility companies currently display no interest in furnishing their customers rooftop generated electricity.  Each person who chooses rooftop solar power is one fewer customer.  As a result, the existing electric utility companies fight against legislation to allow contracts (Power Purchase Agreements) between consumers and rooftop solar panel leasing companies.  

            This will not be the first attempt to allow retail Power Purchase Agreements.  There were bills in both the 2019 and 2020 session of the Legislature that addressed this problem.  Neither of these was able to make it across the finish line.

This time around the prospects may be better.  Many new ideas need a year or two or three to get introduced, get talked about, etc. before they finally pass.  

The times are also different.  Not that long ago solar power was thought of as a niche product, suitable for lighting remote road signs and heating some hippy’s hot tub.  Things have changed.  While it is still not common, solar power is more mainstream.  As more and more people get it, or think about getting it, allowing a new way to finance it starts to seem like the sensible things to do.

There is also more interest in the West Virginia Legislature in addressing climate change.  After all, the words “climate change” were first spoken on the floor of the West Virginia House of Delegates in 2019. The West Virginia Legislature being the West Virginia Legislature and all, there may be almost no interest but almost none is still more than none.  Allowing retail Power Purchase Agreements will not fix the problem of climate change.  It is, however, a small, concrete step we can take in that direction.  

Note:  Frank Young contributed to the writing of this article.  This is a roundabout way of saying that when I sat down to write I pilfered shamelessly from something Frank wrote last year.