Power Plays: Utilities, solar firms ebb and flow with renewables

For City Utilities of Springfield, the answer to meeting growing power needs is blowing in the wind – specifically, the wind blowing near Blackwell, Okla.

Duke Energy Renewables operates the Frontier Windpower Project in the small, north-central Oklahoma town, and CU is preparing to purchase 200 megawatts of the wind energy. Under terms of the agreement reached in December, the cost is about $17 per megawatt hour with an estimated annual spend of $12.5 million.

Utility officials Sept. 20 made their first visit to the Frontier Windpower site, and CU Electric Supply Associate General Manager Steve Stodden said when the project is complete at year’s end, the 61 turbines would generate about 25 percent of CU’s power needs. That adds to CU’s 10 percent renewable energy portfolio currently including wind power purchased from Enel Green Power’s Smoky Hills Wind Farm in Kansas, plus CU’s own solar farm, the Noble Hill Landfill methane convertor and hydroelectric allocation from Southwest Power Administration.

The mix comes with advantages, namely cost, and disadvantages particularly in reliability. Stodden said the price for Frontier’s wind is roughly 25 percent less than it takes to produce power at John Twitty Energy Center Unit 2.

“There’s a bit of an apples to oranges comparison there, because JTEC can produce 24/7, whether the wind is blowing or not,” Stodden said. “You have to have some backup available when you’re buying renewables, because when they aren’t working we still have to produce power.”

The limitations haven’t stopped Empire District Electric Co. (NYSE: EDE) from diversifying its energy portfolio. Empire’s mix also leans toward wind, about 18 percent that is renewable and aided by smaller components of hydro and solar.

“We’re going to see more renewables brought on to the system in the future,” Empire spokeswoman Julie Maus said. “It’s not going away.”

Rise, crash, rise
Renewable energy is the backbone of Caleb Arthur’s business, Sun Solar, which debuted this year at No. 156 on Inc. magazine’s list of the 5,000 fastest-growing private companies in the United States. Sun Solar posted $9.8 million in 2015 revenue, and the company is on track for $26-$27 million, according to Arthur, with $19 million already registered this year.

However, it’s been a roller coaster ride for Arthur’s business, riding the wave of solar rebates that eventually dried up and brought growth to a crashing halt.

Arthur started his company in May 2012 amid a solar boom, and his was one of many companies that chased opportunity in St. Louis, where nearly $92 million in solar rebates were offered by utility provider Ameren UE. During the summer and into the early fall, Arthur said the company was able to book roughly $1.5 million worth of projects per month.

“It was shooting fish in a barrel – as fast as you wanted to grow and as much as you wanted,” Arthur said. “It was easy, and it went away overnight.”

Then, in October 2013, Arthur said the full amount of funds from Ameren was allotted and the industry’s plug was pulled. Costs of installation were no longer feasible for most prospective clients. Arthur scaled back his employees to 15 from 70, and returned to his Houston, Mo., headquarters to figure out a plan toward sustainability. He found it in the form of a loan program to help finance residential solar projects – about 75 percent of the company’s current business.

“That was really the turning point, saying we could compete with the utility company,” Arthur said, adding the average residential job is about $25,000 for solar panel systems plus energy efficiency upgrades. “It’s turning a utility bill into an ownership payment.”

Staying power
Arthur knows rebates won’t last forever, but he’s counting on rising utility rates to take over as the motivator for new customers. The company also is branching out revenue streams, such as energy efficiency upgrades, and in new markets Kansas City, Columbia and Charleston, S.C., where the 30 percent federal income tax credit for solar power systems can receive a maximum match at the state level.

South Carolina’s Energy Office also offers rebates up to $2,000 on the purchase of hybrid electric vehicles. Maus said Empire is trying something similar in its Evolve initiative to broaden the adoption of electric cars, offering customers rebates of $1,000 on hybrids and $2,000 on all-electric models, in addition to building free-to-use charging stations in Joplin, Branson and Ozark so far.

Shawn Pingleton, senior manager of business and community development at Empire, said the utility plans to install 100 chargers within five years. The company seeks businesses to partner with in high-visibility areas where customers or employees will be spending an hour or more of their time. In exchange for the parking spaces and paying the electric bill, Empire covers the equipment and installation.

Maus and Stodden agree that efficiencies, along with improving their companies’ renewable power mix, better positions them for pending change when mandates such as the Environmental Protection Agency’s presently stalled Clean Power Plan come down the pike.

“How we view this is a hedge to our carbon risk,” Stodden said. “As a coal-fired utility, the potential cost of this carbon legislation – whether it’s the Clean Power Plan or a carbon tax or however it is finally envisioned – that’s a huge risk to us and what the costs will be to consumers.

“By diversifying the portfolio, it minimizes the impact of those rules on us,” Stodden added. “With 35 percent less emissions, it positions us well.”

At Sun Solar, business spiked again at the end of 2015, when Empire’s own rebates ticked down to 50 cents per watt from $1. Arthur said the company hired about 30 temporary employees to handle the jobs, which tapered off in July.

With a present roster of 122, the lessons learned from St. Louis are fresh in Arthur’s mind.

“The utilities that are figuring it out – the ones that will be around in 50 years – are becoming energy management companies rather than energy producers,” Arthur said. “They’re building battery storage, transmission lines, updating grids to become smart grids and we’ll play the middlemen. Battery manufacturers are going to be a bigger disruptor for utilities than solar ever will be.”