Renewable energy demand rises, rate hikes come into focus

Consumer demand for renewable energy continues to play a key role in the development of the energy sector in Arkansas as the state’s regulatory body expects to review several rate changes in 2019 for utilities operating across the state.

Southwestern Electric Power Co. (SWEPCO), a utility company of Columbus, Ohio-based American Electric Power (AEP), plans to seek a rate change in Arkansas for the first time since 2009, said Donna Gray, executive director of the Arkansas Public Service Commission. The utility declined to release details of the rate change until the application for the change is filed with the commission. The utility is expected to file the change request in February or March. SWEPCO notified the commission on Dec. 10 that in the next 60 to 90 days the utility would file the application for the change in its Arkansas retail rates.

SWEPCO might look to receive approval for a formula rate plan, which the following utilities use: Entergy, Oklahoma Gas & Electric and CenterPoint Energy, Gray said. The five-year plans allow for increases up to 4% annually. Other rate changes are expected in 2019, as the commission has received informal notices of rate changes from utilities providing service in Northwest Arkansas and Pine Bluff. Also, Entergy looks to offer an optional rate to allow customers to purchase solar energy. Customers would purchase the energy at a charge in addition to a customer’s existing rate. A commission hearing has been set for March 12.

Other items to come before the Public Service Commission in 2019 include telecommunications and renewable energy projects of Electric Cooperatives of Arkansas companies, including Ozarks Electric Cooperative and Today’s Power Inc. Renewable energy projects have become more prevalent as pricing declines, and the commission has established a team to address the projects that generate at least 300 kilowatt hours of electricity, Gray said. Projects that generate less don’t require commission approval.

Renewable energy projects are pending in Lonoke and at Southern Arkansas University Tech in Camden and Batesville School District. These projects were filed under existing net metering rules, and the commission is expected to update the rules in 2019, Gray said. Net metering addresses the rate structure for renewable energy generation.

A $23 million project that’s yet to come across Gray’s desk are the two proposed 5 megawatt solar arrays that will be used to power the existing sewer plants in east and west Fayetteville. Combined, the 10 megawatt solar panel system is expected to increase the city’s renewable energy consumption from city operations to 72%, from 16%. The city, Ozarks Electric and Today’s Power are working on the project that’s slated to be completed by late summer 2019, said Peter Nierengarten, sustainability director for Fayetteville. As part of the project, it will have 24 megawatt hours of on-site battery storage for when electricity generation exceeds demand and as a power source for when demand exceeds generation. And, Ozarks Electric can draw from the storage during peak use periods instead of having to purchase electricity to meet demand.

“The size of the arrays is such that it should come pretty close to net zero in terms of electricity consumption and production,” Nierengarten said. “We’re estimating that the array is going to produce 103% of the total electricity consumption of the wastewater treatment plants, and that may vary year to year depending on how much sun and cloud cover we have.”

The city will pay $560,818 on the project and expects a return on investment in a little more than three years.

“This is the largest municipal solar project in the state,” Nierengarten said. “The battery storage component is the first and only that I’m aware of in Arkansas, and it’s pretty unique even in the country in terms of the scale of the battery storage. Solar is beginning to be more mainstream, but solar with battery is certainly unique and innovative.”

Katie Niebaum, executive director of Arkansas Advanced Energy Association (AAEA), said solar generation capacity in Arkansas has risen more than 130% to nearly 200 megawatts at the end of 2018, from 1.5 megawatts in 2015, and will continue to rise in 2019 as innovation leads to decreased costs and consumers demand renewable energy.

“AAEA crunched the numbers and found that the number of net metering systems increased by a dramatic 56% over the past year,” Niebaum said. “That figure is double the rate of growth over each of the previous three years and the largest year-over-year increase in the actual number of systems ever. As a result, advanced energy companies have added new positions to meet growing consumer demand, and new companies have entered the marketplace in the last few years alone.”

A $4.5 billion project that was expected to have broad implications on the energy industry was the proposed 2,000-megawatt Wind Catcher project. It would have been the largest wind farm in the United States and the second largest in the world, but AEP canceled it the day after the Public Utility Commission of Texas denied it. When asked about SWEPCO’s next renewable energy project now that the Wind Catcher project is canceled, spokesman Peter Main said SWEPCO will request proposals for new or existing wind energy projects with a minimum capacity of 100 megawatts that can be operational by Dec. 31, 2021. The projects would be located in and connected to regional transmission organization Southwest Power Pool’s grid in Arkansas, Louisiana, Texas or Oklahoma. SWEPCO would seek regulatory approval on the projects in the third quarter of 2019.

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Editor’s note: This article first appeared in Talk Business & Politics State of the State 2019 magazine, which you can access here.