Green Energy

FirstEnergy Solutions will get its $150 million a year bailout from the state’s electricity customers to save its two northern Ohio nuclear power plants.

The House, by a 51-38 vote Tuesday, agreed to changes in House Bill 6 approved by the Senate last week. Gov. Mike DeWine immediately signed the bill into law, completing the biggest overhaul to the state’s energy laws in more than a decade.

“This is something that needed to be done, and the legislature rose up and took care of business,” House Speaker Larry Householder, R-Glenford, said after the vote.

House leadership arranged on Monday — with the approval of DeWine’s office — to dispatch a State Highway Patrol airplane to Chicago to pick up some House members attending a conference to ensure their return and presence for what was expected to be a close vote.

However, after research determined the cost of the state plane was $5,677, the flight was canceled hours later by House officials late Monday and the members drove back or took commercial flights to make the House session.

The House action and the governor’s signature brought a quick end to an intense and bitter months-long fight that featured a multimillion-dollar statewide television, radio and mail campaign. Unlike other bills, the legislation didn’t break along party lines; supporters and opponents included a mix of legislators from both parties.

After the vote, visitors in the gallery applauded. Workers from both power plants, along with other supporters, have been fixtures in legislative hearings on the proposal.

Public officials and a cadre of industry lobbyists pushed for the bill along with a variety of trade unions looking to save the 1,400 jobs at the plants. Environmentalists, some business groups, and oil and gas interests fought the legislation.

“House Bill 6 is still a very bad bill that puts Ohio on the wrong track,” said Trish Demeter, advocate for the Ohio Environment Council Fund.

The new law will impose a fee of 85 cents a month on residential ratepayers from 2021 through 2027, generating about $170 million a year.

Most of the money, about $150 million a year, will shore up the Davis-Besse and Perry nuclear plants, which generate about 15% of Ohio’s electricity. Without that aid, FirstEnergy Solutions, the former power generation arm of Akron-based FirstEnergy that is working through bankruptcy protection, has said that it would have to close the plants.

The money for the plants is subject to an annual review, so the subsidy could be reduced or eliminated in future years should it no longer be necessary.

The company did not respond to a request for comment Tuesday.

The rest of the money will go to help the development of six solar projects being developed in the state.

Proponents say a key aspect of the legislation is that it will cut the average residential electricity bill by $2.77 a month in 2021, leading to a savings of $1.3 billion over nine years. The savings come from gutting fees consumers pay for energy efficiency and renewable energy programs.

Utilities will be required to get 8.5% of their power from renewable sources by 2026, but then that requirement will be dropped. Opponents say that will hinder development of renewable energy in the state. Previously, utilities were required to get 12.5% of their power by that date.

The move is in contrast to several surrounding states, which have increased their renewable energy requirements. Michigan, for example, has set a 35% requirement by 2025.

Householder said the old legislation, enacted more than 10 years ago, has failed to lead to a surge of renewable projects as had been projected at the time. He noted that the state gets just 3% of its power from renewable sources today.

“That mandate has failed miserably and it has cost millions and millions of dollars to the ratepayers of this state,” he said.

Even though the Senate version of the bill delayed the enactment of the fee by a year, Householder said it was important to act now.

“This is all about the folks that are going to finance these nuclear plants and the message that we’re sending to those people (is that) we want to be a partner with them to keep those plants in the state of Ohio and benefiting the ratepayers of the state of Ohio,” he said.

But the bill’s opponents said that the old legislation has led to the creation of 112,000 clean-energy jobs and that energy-efficiency programs such as the sale of energy-efficient appliances and light bulbs have saved consumers $5.1 billion in the form of lower utility bills.

They say the result will be dirtier air, higher utility bills and fewer incentives for businesses and homeowners to add rooftop solar arrays.

They also are angered by the bill’s bailout of two coal-fired, money-losing power plants, one in Ohio and one in Indiana, owned by a group of power companies that include American Electric Power. Electricity customers will pay a fee of as much as $1.50 a month through 2030 to support those plants..

“We should be investing in our communities and putting Ohio first and not forcing Ohioans to spend over a billion dollars bailing out bankrupt nuclear facilities and an Indiana coal plant,” said Rep. David Leland, D-Columbus. “Our goal here should be to solve the issues surrounding the nuclear facilities without destroying Ohio’s opportunity to be a part of the clean energy industrial revolution.”

One company, New Jersey-based LS Power, already has warned it will cancel a $500 million expansion project of its natural gas-fired plant in Luckey in northwestern Ohio if the bill became law.

Ohio has become the next state to bail out its nuclear plants with fees on ratepayers’ electric bills.

On Tuesday, Gov. Mike DeWine signed the controversial House Bill 6, which will add new fees to Ohioans’ electric bills for two nuclear plants owned by the bankrupt FirstEnergy Solutions in northern Ohio.

Ohio lawmakers pitched the legislation as a cost-saver for ratepayers, saying they offset the new fee with cuts to incentives for renewable energy, such as wind and solar, and the elimination of fees used to push companies becoming more energy efficient in making and delivering energy by 2020.

Lawmakers in the Ohio House of Representatives sent the bill to DeWine Tuesday afternoon with a narrow, 51-38 vote. The governor signed it shortly after.

“Our goal all along has been to save the nuclear plants, save the jobs but also to keep the cost of energy down for the ratepayer,” DeWine told reporters Thursday. “I think House Bill 6 does that.”

The bill passed less than a week after House Speaker Larry Householder said he didn’t have enough support present to pass the legislation. On Monday, House leadership even asked to borrow a state-owned plane to fly lawmakers back from a Chicago conference for the vote. That plan was later ditched, according to a Dayton Daily News report.

Here’s what it would do: Starting Jan. 1, 2021, a fee would be tacked onto Ohioans’ electric bills of 85 cents a month for residential customers. That would raise about $150 million a year for two nuclear plants outside Toledo and Cleveland owned by FirstEnergy Solutions, which has filed for bankruptcy. Without help from state lawmakers, the plants are slated to close by 2021.

“This is all about the folks that are going to finance those nuclear plants and the message that we are sending to those people: we want to be a partner with them to keep those plants in the state of Ohio and benefiting the ratepayers of the state of Ohio,” Householder told reporters after the vote. “And that is why it’s needed in an expeditious manner.”

That new fee would also generate $20 million for solar energy. Just six solar business locations will be eligible for the money, including two in Southwest Ohio’s Brown County. That fee would continue until the end of 2027.

Another change would guarantees that utilities can charge customers up to $1.50 a month for two coal plants operated by Piketon-based Ohio Valley Electric Corporation until 2030. The plants are located in Gallipolis and Madison, Indiana. That fee is already on most customers’ bills right now.

To pay for those new or recurring fees, Ohio lawmakers slashed renewable energy requirements – eliminating them after the end of 2026 and lowering the percentage of energy that must come from those sources before then – and effectively ended energy efficiency mandates after 2020.

That frustrated some lawmakers.

“We cannot save one group of jobs on the backs of another,” said Rep. Sedrick Denson, D-Bond Hill.

Still others emphasized the millions that Ohio customers would save from the changes.

“It cannot bare overemphasis enough that this is a bailout for the ratepayers,” said Rep. Bill Seitz, R-Green Township. “So who benefits from this bill? Ratepayers.”

In the end, 15 Republicans lawmakers, including Middletown Rep. Candice Keller, voted against the energy changes and nine Democrats, including Mount Auburn Rep. Cathy Ingram, voted for the bill.

Opponents to the bill include the state’s ratepayer advocate, the Ohio Consumers Counsel, environmental groups and the Ohio Manufacturers’ Association. They say efforts to make homes and businesses more energy-efficient were saving customers money.

The vote comes after months of advertisements flooding Ohioans’ airwaves. Dark money groups with ties to FirstEnergy or Householder, spent millions on advertisements supporting the legislation. Opponents, such as the oil and gas industry trade group American Petroleum Institute, launched ads attacking the proposal.

Ohio is one of a handful of states to pass ratepayer-funded assistance for nuclear plants, but it is the first to do so while cutting renewable energy and energy efficiency standards at the same time.

After launching into orbit aboard SpaceX’s Falcon Heavy rocket last month, The Planetary Society’s LightSail 2 satellite has now entered the most critical phase of its mission. The spacecraft has successfully unfurled its solar sail and begun surfing through space on the power of the Sun, a milestone moment for a technology with interstellar potential.

The idea of the Sun propelling things through space dates back as far as the 17th century, when Johannes Kepler observed comet tails being blown about by what he believed to be a solar breeze. Centuries of science since have confirmed that the German astronomer was onto something, but rather than wind, sunlight actually exerts tiny amounts of pressure in the form of photons that can be harnessed for propulsion.

One noteworthy example of this was NASA’s Mariner 10 spacecraft, which ran out of fuel en route to Mercury in 1974 but was able to use its solar arrays to harness these tiny forces and control its orientation.And in 2010, the Japan Aerospace Exploration Agency (JAXA) launched IKAROS toward Venus, which would become the first spacecraft to demonstrate solar sailing technology in interplanetary space.

The Planetary Society’s plans for the LightSail 2 don’t involve such distant destinations, but the organization hopes to reinvigorate interest around the technology by making Lightsail 2 the first spacecraft to use sunlight alone to alter its Earth orbit. Mission control today confirmed that the bread-loaf-sized spacecraft successfully deployed its solar sail, which is around the size of a boxing ring, and completed its first orbit in solar sailing mode.

GE Renewable Energy, a subsidiary of General Electric based in Paris, revealed “the first manufactured components” for its gigantic Haliade-X 12 megawatt (MW) offshore wind turbine.

On Monday, the firm displayed the first nacelle for the turbine, which will now be shipped from Saint-Nazaire in France to Rotterdam-Maasvlakte in the Netherlands. A nacelle sits directly behind a turbine’s blades and is a shell-like structure that contains crucial pieces of kit. These include the turbine’s gearbox, controller, generator and brake.

GE Renewable Energy said that a prototype of the Haliade-X 12 MW would be installed onshore in the Netherlands in order to “simplify access for testing.” Another nacelle is being assembled with a view to testing it in “actual operational conditions” at a site in the U.K.

John Lavelle, the CEO of GE Renewable Energy Offshore Wind, said the firm was “on track to start commercializing this new product very shortly.”

As technology develops, the size of wind turbines is increasing. In September 2018, MHI Vestas Offshore Wind, a major player in the sector, launched the first commercially available double digit turbine, the V164-10.0 MW. The turbine has 80-meter long blades which weigh 35 tons each, and a tip height of around 187 meters.

The scale of GE Renewable Energy’s Haliade-X 12 MW turbine is also considerable. It will have a capacity of 12 megawatts, a height of 260 meters and a blade length of 107 meters. The turbine will generate 67 gigawatt hours of gross annual energy. The company has repeatedly described it as “the world’s largest offshore wind turbine.”

Brazil’s latest A-4 auction, held on June 27, in theory produced the lowest electricity price bid ever recorded for large scale solar power projects in an energy auction – an astonishing $0.0173/kWh. That result, however, has not had the same resonance as other records registered in Latin America and the Middle East and has raised concerns within the Brazilian solar sector.

Domestic PV association ABSOLAR said the auction produced average prices outside reference levels for solar power in Brazil and the organization also highlighted the lower volumes of contracted solar power secured by the procurement, compared to previous auctions.

The main reason for questioning the validity of the ‘world record’ is the fact the two PV projects concerned will sell at least half the power they generate to the Brazilian Free Electricity Market – the Mercado Livre de Energia Eléctrica – where electricity is traded among generators and offtakers free of the contracted rates set in the auction. That record low figure applies only to the proportion of energy generated by each project which is supplied to the Regulated Electricity Market – the Mercado Regulado de Energia Eléctrica.

The winning projects

One of the record-setting projects was the 40 MWac Jaibes solar facility planned for the state of Minas Gerais and owned by Chinese-Canadian solar module maker Canadian Solar, which offered a final bid of BRL73.60/MWh ($19.60). That price, however, will concern only half the generated power, with the balance sold under a long-term private power purchase agreement (PPA) to an unspecified client – probably at an higher price.

The second headline-grabbing project – the 163 MWac Milagres solar plant for the state of Ceará – was selected by virtue of a bid of BRL64.99/MWh ($17.30). That plant will sell only 30% of its output at the tariff agreed in the auction, the remainder will be sold on the Free Electricity Market.

Whilst beneficiaries which receive power at the low tariff will be satisfied – and the government will boast of its achievement – it is unclear whether the global solar industry will consider $17.30 ($0.0173/kWh) a genuine new landmark.

A combination of factors

According to Marcio Takata, CEO of Brazilian consultancy Greener, the low final prices were the result of a big rise in competitiveness observed in the auction, which saw the power generation volume of pre-selected projects rise from 20 GW in last year’s A-4 auction to 26 GW. At the same time, the amount of solar power generation capacity allocated fell significantly, from around 800 MWac to about 200 MWac.

“These two factors combined were very important for the price reduction which led to such low bids,” Takata told pv magazine. Such bids were only sustainable because of the large proportion of generated power which could be sold on the free electricity market, added the CEO. “This is giving the project owners the opportunity to work with pricing levels that can guarantee the project bankability,” he said.

Takata added, the fact successful projects in the auction would secure grid connection priority also enabled the record low energy tariffs. “These facilities have a four-year term to begin commercial operations and now grid-connection priority is very important, while projects that are planned to operate exclusively in the Free [Electricity] Market are never given this certainty,” he said.

But the Greener CEO did not discount the importance of continuing rises in output from ever more efficient solar modules. “The evolution of the solar modules, but also of the PV supply chain, is enabling the installation of more [better performing] solar power plants with more efficient capex [capital expenditure costs],” he said. “The auction’s fierce competitiveness and the possibility of selling power outside of the auction’s PPA, however, must be considered the main reasons for the low bids of the procurement exercise.”

When asked if the lowest bid could be considered a world record, Takata said the subject was controversial. “It is indeed the lowest price for solar ever recorded worldwide and the lowest price ever recorded in A-4 auctions here in Brazil,” he said. “But it must also be taken into account that the largest part of the plant’s generated energy will be sold to the Free Energy Market at higher prices, which means that the project’s average selling price of the produced energy will be significantly higher than the auction final price.”

As to whether the two solar projects selected in the auction would be bankable, Takata said much will depend on pricing in the Free Energy Market; the duration of contracts project owners will be able to secure; and the quality of the off-takers. “The rating of the buyer of the energy will be crucial to define risks and costs of financing,” he said.

Another factor that may have contributed to the energy price fall was the possibility the two projects may not be entirely new developments.

“We have information that part of the contracted projects will be the expansion of existing projects,” said ABSOLAR chief executive Rodrigo Sauia immediately after the auction. “This has made possible that a more daring price in the competition was possible.” In an earlier interview with pv magazine, Sauia had highlighted how developers in Brazil were attracted by the possibility of combining auction contracts with PPAs at higher prices on the free market. The CEO pointed out that combination had already been seen in the wind industry in Brazil. “This is great for the financiers, they love that,” added Sauia. “They have a vision of how much return they will have for 20 years. And this helps to finance the project.”

Developers get creative

According to Manan Parikh, a power and renewables analyst for market data company Wood Mackenzie, the fact the two landmark projects will sell 30% and 50% of their power through the A-4 contract would put capacity factor assumptions for each facility above 28%. “When accounting for the fact that the total megawatt-hours figure offered is over a 20-year period – and incorporating a conservative present-day capacity factor of 23% – Jaiba and Milagres would be selling 66% and 40% of their output via the PPA, respectively,” Parikh told pv magazine.

With efficiency increases and the use of bifacial modules it is entirely possible capacity factors by 2022/2023 could reach 28% in both projects, said the WoodMac analyst, given the solar resources in both states. “This would mean that Jaiba sells only half of its output via the PPA while each Milagres section would contribute one-third of its capacity to the yearly PPA,” he said.

When asked if $0.0173/kWh constitutes a world record, Parikh was equivocal. “Yes in the sense that it is the lowest contracted price we have seen through an organized procurement round like the A-4,” he hedged, “and no in the sense that not all of generation will be sold at this price.”

The analyst pointed out Mexico’s record bid of $18.93/MWh – made in a 2017 auction – was also for a project which planned to sell part of its generated power outside the PPA awarded in the procurement exercise – the Pachamama PV scheme by Neoen.

Parikh said the bottom line is that the true value of such projects cannot be accurately quantified because it is tough to gauge developer intentions until the asset is operating and offtakers are revealed – something which does not always occur. “Even then, the pricing terms of a bilateral agreement may be kept confidential,” added Parikh.

TerraForm Power announced Monday it will take over ownership of a portfolio consisting of 291 megawatts of commercial and industrial solar projects and 21 megawatts of residential solar.

The portfolio, sold by Canada-based energy infrastructure company AltaGas for $720 million, also includes 10 megawatts of fuel cells.

The yieldco formerly connected to SunEdison, and now managed by Canada’s Brookfield Asset Management, said the purchase would grow its distributed generation portfolio to over 750 megawatts. It adds projects in 20 states and Washington, D.C., on which Terraform expects equity returns of between 9 percent and 11 percent.

Because the projects began service several years ago — their average age is 3.5 years old — those returns are likely realistic, according to Michelle Davis, a senior solar analyst at Wood Mackenzie Power & Renewables. She said the range of the portfolio is also a boon, as TerraForm looks from wind generation to more distributed solar.

“The makeup of this portfolio is super diverse, so it’s no wonder that TerraForm wanted it. It’s a great addition to an investment portfolio,” said Davis.

“This is starting to change, but of all the ways to invest in solar, [commercial and industrial] is typically viewed as the most risky. Having such diversity to the portfolio across so many…markets is certainly a way for TerraForm to have a good portfolio structure that could yield good returns.” 

Squeezing out additional value

John Stinebaugh, the company’s CEO, said TerraForm sees “commercial and operational upside” from the projects. 

“This demonstrates our strategy of recycling capital from stabilized assets with limited opportunities for further value creation into newly acquired assets that meet our return targets,” Stinebaugh said in a statement on the deal.

The company plans to squeeze additional value from the new assets by offering tack-ons like storage and backup generation to the more than 100 commercial and industrial customers associated with the portfolio.

Davis said it’s unclear whether that approach will yield success.

“It’s yet to be seen whether or not that strategy of trying to sell multiple services to the same customers is really a big advantage in the C&I space,” she said.

“There have been other asset owners or developer owners in the past who have tried to do the same type of business strategy, where they sell solar and then they offer other services with the hopes of being able to have customers already at the ready. […] That strategy hasn’t necessarily led to any sort of significantly better success.”

The new scale of TerraForm’s portfolio, at over 7 gigawatts, should allow it to take advantage of reduced operation and maintenance costs, the company said.

For AltaGas, the sale is part of a larger effort to shed assets. The company said this agreement brings its total 2019 asset sales to $1.3 billion, as it looks toward an annual target between $1.5 billion and $2 billion.

The deal is expected to close in the third quarter of this year.