| | | | | | | | | | Item 6.
COMMITTEE MEMORANDUM | | | |
| | | | | | | | | TO: | Sustainability Resiliency Committee Meeting |
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| FROM:
| Jimmy L. Morales, City Manager
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| | DATE: | November 28, 2018
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| | SUBJECT: | DISCUSSION ON FLORIDA POWER & LIGHT INCENTIVES FOR SOLAR PROJECTS |
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| | | | | | | | RESPONSIBLE DEPARTMENT:
Alyssia Berthoumieux, Sustainability Specialist | Flavia Tonioli, Sustainability Manager |
| | | | | | | | LEGISLATIVE TRACKING:
Item C4F - July 25, 2018 Commission Meeting |
| | | | | | | | SPONSORED:
Commissioner Michael Gongora |
| | | | | | | | BACKGROUND:
At the City Commission meeting on July 25, 2018, the Mayor and City Commission referred a discussion to the Sustainability and Resiliency Committee (SRC) regarding the incentives offered by Florida Power & Light for solar projects. The item was sponsored by Commissioner Michael Gongora.
In terms of solar installations in the United States, Florida ranks 18th with 2,984 total solar photovoltaic (PV) systems installed but ranks 3rd in terms of the total amount of solar PV that could potentially be installed on rooftops, also called rooftop solar potential. States and utilities across the country have different policies and programs regarding solar and other renewable energy sources. These policies and programs offer different levels of incentive for solar installations. Florida Power & Light (FPL) promotes the installation of solar energy in the region through their FPL SolarNow program and net metering. There are also federal and state policies along with other programs that incentivize solar system installations.
FPL
The FPL SolarNow program offers FPL customers the option to add $9 to their monthly bill to help fund solar energy projects in local public areas. These projects are installed, operated, and maintained by FPL through the funds collected for the SolarNow program. Some projects that have been funded through the FPL SolarNow program include: solar trees and a solar pavilion at Zoo Miami; solar trees and a solar canopy at the Imaginarium Science Center in Fort Myers; and solar trees at the Philip and Patricia Frost Museum of Science (Pictures 1-3).
In addition, FPL has engaged in solar partnerships with cities and counties around the state to showcase solar energy in public spaces. The solar trees produce between one and three kilowatts (kW) of electricity and cost between $50,000 and $70,000 including installation, depending on the structure and style of the solar tree. A 200 kW solar canopy costs about $950,000. The price for a 200 kW solar rooftop system would cost about $630,000.
Customers that install an eligible renewable energy system (up to two megawatts (MW)) can be qualified to enter a net metering agreement with FPL. Net metering allows the customer to save on their monthly electricity bill because FPL deducts the electricity produced by the renewable energy system that is sent to FPL’s grid from the customer’s monthly bill. At the end of the year, if there is a surplus electricity balance on a customer’s account, then FPL will provide the customer a credit on their January bill based on the costs of generation rate (COG – 1) which is based on the rate of avoided-cost. Although this number varies, it is usually less than the electricity utility rate paid by the customer.
FPL residential customers pay one of the lowest rates for electricity in the country. According to the Edison Electric Institute, during the winter of 2018, the average 1,000 kWh residential bill for a FPL customer was $102.72 ($0.103/kWh) compared to the average 1,000 kWh American residential bill which was $137.62 ($0.138/kWh). The return on investment (ROI) for solar systems is longer in regions with lower electricity rates therefore there is a lesser incentive for customers with lower electricity rates to install solar.
City of Miami Beach
The City of Miami Beach has been awarded the SolSmart Bronze designation for work to reduce barriers to solar. SolSmart is a national designation program, funded by the U.S. Department of Energy SunShot Initiative designed to recognize communities that have taken key steps toward addressing local barriers to solar. To move up to the next highest designation, the Silver designation, the city would need to allow solar by-right and as an accessory use in all major zones without requiring a conditional use permit. To receive Gold designation, the city would then need to provide a streamlined pathway for small rooftop solar PV systems that ensures a three business day turnaround time for permitting these systems.
The City has adopted policies to reduce the soft costs related to installing solar systems. Ordinance 2017-4130 waives fees related to Land Use Board approval for renewable energy systems including solar systems and Ordinance 2017-4153 waives building permit fees for solar PV systems.
The City currently has four Property Assessed Clean Energy (PACE) programs in place. PACE is a financing platform that allows property owners to pay off renewable energy installations and other energy efficient improvements through an assessment on their property bill. Miami Beach residents have access to the following programs: Alliance|NRG (Florida Pace Funding Agency), Clean Energy Corridor (Ygrene), RenewPACE (Renew Financial), and Renovate America. From the implementation of the program back in August 2016, over 50 projects have utilized PACE financing, representing more than 1.2 million dollars in renovations. The majority of the projects (over 75 percent) were hurricane prevention/wind resistance measures and the remaining were mostly under the category of energy efficiency projects.
Another option for residents interested in installing solar is to join a solar co-op. Solar co-ops work by grouping together interested members in a common geographic area and educating them about the process of installing solar. The co-op then reviews proposals from qualified installers and vote to select one installer for the group. This process ensures competitive pricing and has found to save participants up to 20 percent on their solar system by facilitating bulk-purchasing. Solar United Neighbors of Florida is the Florida branch of a non-profit organization that has been working throughout the country to help people go solar through solar co-ops and will be holding an information session about the process of joining a solar co-op at the Miami Beach Library on November 10th, 2018 at 10:30 AM. |
| | | | | | | | Analysis
There are many factors that affect decisions regarding the installation of solar but policies have a vital role in shaping the market. The state of Florida has passed a few policies that seek to encourage solar installations but still has many policies in place that create barriers to the market.
Incentives:
The Solar Sales Tax Exemption, Florida Statutes 212.08, exempts solar energy equipment from state sales taxes. The Florida Solar Energy Center (FSEC) certifies what equipment and hardware are considered to be a solar energy system or component.
Florida Statutes 193.624 provides a 100 percent property tax exemption for residential renewable energy source devices including solar PV systems and an 80 percent property tax abatement for non-residential renewable energy source devices.
The Florida Public Service Commission (PSC) has recently clarified that solar leases do not violate state law and several solar companies have joined the Florida market since the ambiguity regarding the legality of solar leases has been addressed. A solar lease works by leasing the solar equipment to a customer for a set monthly price compared to a Power Purchase Agreement (PPA) where a third party sells the power produced by a solar system installed on the customer’s roof to them for a set unit price.
Barriers:
The table below (Table 1) outlines all of the state policies that have an impact on the solar market and present barriers to solar installations. The table also provides examples of how these types of policies are implemented in other parts of the country.
Table 1. Other state policies and their impacts on the solar market in Florida.
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Description
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Policy Impact
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State of Florida Context
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Examples
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A Renewable Portfolio Standard
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Renewable Portfolio Standards require utilities to meet a certain percentage of their electricity sales through qualifying renewable energy. Utilities in states with an RPS have a mandate to further incorporate renewable energy into their electricity supply and tend to incentivize their customers to do so as well. The State of Florida does not have a Renewable Portfolio Standard.
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None
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Some examples of states with an RPS are Arizona, Nevada, and California which have an RPS that sets a requirement of 15% renewable energy by 2025, 25% by 2025, 50% by 2023, respectively. Florida is one of thirteen states that do not have an RPS or renewable energy goals.
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Aggregate Net Metering (or Virtual Net Metering)
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Allows a single customer to apply credits from excess generation from the site where electricity is generated to another off-site account. It also allows customers without space for solar on their building to purchase renewable energy through “community solar” arrangements. Currently, businesses or campus-type facilities must physically aggregate meters and then offset with a solar installation nearby. In Florida, regulated utilities can offer community solar arrangements and allow subscription services (similar to the Orlando Municipal Utility model) but private developers or homeowners cannot do this. This is not allowed in the state of Florida and would require state-level action.
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Not allowed by private citizen or company
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One example is the Massachusetts policy which allows for virtual net metering with two ways to participate. The first path to virtual net metering is for a solar system, for example, to allocate excess electricity generated to other customers in the same distribution service territory. The other way to participate, called neighborhood net metering, is for multiple customers, at least ten, to own a solar system together and receive net metering credits for their portion of the electricity produced.
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Shared Renewable Energy
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This allows a renewable energy installation to be owned by multiple customers and provides an option for renewable energy to customers who are unable to install on-site systems. This is not allowed in the state of Florida and would require state-level action.
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Not allowed
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One example is the Delaware policy which allows for shared solar systems so multiple owners or subscribers can pay or subscribe to a portion of a solar system and receive credits for their portion of the electricity generated by the system.
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Feed in Tariffs
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Policy that guarantees a long-term contract for renewable energy producers to sell electricity generated back to the grid at a fixed price over a set time period. Net metering is subtracted first from the customer’s monthly energy consumption, but a feed-in tariff is a separate arrangement where utility pays for all electricity generated. Usually it’s sufficient to recover costs plus a reasonable profit. There is currently no policy in Florida that encourages or prohibits. Only one regional municipal utility has ever implemented (Gainesville).
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No policy
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One example is the U.S. Virgin Islands Renewable Energy Feed-in-Tariff. The public services commission was required to create a feed-in-tariff for solar PV systems through a contract of 10 to 30 years. The initial rate offered is $0.26/kWh and will be reviewed periodically.
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Community Choice Aggregation
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Community choice aggregation is a state policy that allows municipalities to aggregate electricity demand within their jurisdictions in order to procure alternative energy supplies while maintaining the existing electricity provider for transmission and distribution services. Not all CCA’s incorporate renewable energy but many do. Only 7 states allow. There is currently no policy in Florida that would allow this and it would require state-level action.
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Not allowed
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The states with approved Community Choice Aggregation legislation are California, Illinois, Massachusetts, New Jersey, New York, Ohio, and Rhode Island. Most of the CCA’s have an opt-out provision so that customers may choose to continue receiving electricity from their current provider instead of the CCA.
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Third-party ownership (power purchase agreements)
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Allows a developer to build, install, and operate a renewable energy system on behalf of a host customer. The host (say a City) then purchases electricity generated by the system usually at a rate less than what their utility bill would have been and also avoiding upfront costs. Hosts can usually rent or lease system from developer after PPA expires. The developer has access to federal and state tax credits and can therefore leverage this to achieve savings. Florida is one of five states that prohibit third party ownership by homeowners and businesses (but can be done by utilities) and would require state-level action. Investor-owned utilities or municipal-owned utilities can utilize power purchase agreements for financing large installations.
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Not allowed by private citizen or company
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States that authorize PPA’s or currently have PPA’s used in some of their jurisdictions are Arizona, Colorado, Connecticut, Delaware, Georgia, Illinois, Iowa, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New Mexico, New York, Nevada, Ohio, Oregon, Pennsylvania, Rhode Island, Texas, Utah, Vermont, Virginia. Some states limit PPA’s to certain sectors, system size, and/or system capacity.
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State requires electric decoupling
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A customer’s electricity bill is divided into two parts: 1) the cost of operating, maintaining, and delivering the electricity and 2) the cost of electricity generation. Decoupling legislation removes the disincentive involved in tying a utility's revenue directly to electricity sales and instead ties the utility profits to the transmission and distribution portion of the bill. Utilities in states with electric decoupling can have a better incentive structure in place to collaborate on energy supply transformation. The state of Florida does not have electric decoupling.
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Not allowed
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Washington D.C. and 23 states have decoupling policies. Out of these states, 14 extend decoupling to both electric and gas utilities, 4 states offer decoupling to natural gas utilities, and 5 states and Washington D.C. provide decoupling to electric utilities only.
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A Regulated vs. Unregulated Utility
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Means the state controls most aspects of the utilities rates and services, including incentives for renewable energy. Cities can participate by commenting on state regulatory proceedings, but do not have much direct control over utility policies.
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Regulated
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Texas and Oregon have unregulated electric utility markets. California, Connecticut, Illinois, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Virginia, and Washington D.C. have unregulated gas and electric utility markets.
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Vertically-Integrated vs. Retail Competition Utility
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Utility customers have only one utility from which they purchase electricity. Means the utility owns its power plants. For example, FPL owns plants, transmission, and distribution lines. In states with ‘retail competition,’ utilities are not permitted to own and operate the power plants that generate electricity and retail customers can generally purchase energy from competitive power suppliers. Utilities in these types of states are more of a transmission and distribution service provider.
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Vertically-Integrated
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Thirteen states and Washington D.C. have retail competition utilities: Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, and Texas. Some states have partial retail electricity choice: California, Georgia, Michigan, Oregon, and Virginia.
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Federal incentive
The federal government offers a Federal Investment Tax Credit for 30 percent of a solar system cost installed by residential and commercial owners. The tax credit will incrementally decrease starting in 2020 when it will go down to 26 percent. In 2021, it will reduce to 22 percent. In 2022, it will decrease to 10 percent. Starting in 2023, the 10 percent tax credit will only apply for commercial solar systems.
In part due to some of the barriers at the state level, the total solar capacity installed remains below the potential solar capacity in Florida. Many municipalities have implemented policies and incentives in order to encourage solar installations in their area and throughout the state. In the City of Dunedin, an ordinance has been proposed that would offer incentives of up to $2,500 for residential and commercial solar installations. The City of Dunedin has budgeted $50,000 from their general funds to fund the first year of this incentive program. The City of Boynton Beach, through its Energy Edge Rebate Program, provides rebates up to $1,500 to homeowners and small businesses who install solar, among other energy efficiency improvements. The City of Boynton Beach collects a Green Building fee on all building permits and that money funds the rebate program. In the City of South Miami, it is mandatory to install solar collectors on new single-family residential construction. Directing policy at the local level is fundamental to support the solar market. Providing investments in renewable sources of energy may have a longer ROI than other projects, but these investments would not only produce renewable energy but would also help to advance the solar market in the city and region. |
| | | | | | | | CONCLUSION:
The following is presented to the members of the Sustainability and Resiliency Committee for discussion and further direction. | | |
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