Southern Co. subsidiary Georgia Power has for years enjoyed a privileged place in the market. The government gives Georgia Power the almost-exclusive right to sell electricity to almost all customers in its state-defined territory.
People can buy solar panels, but the law prevents solar companies from directly selling electricity to Georgia Power customers. The law could even prevent solar companies from leasing panels to customers if the payments reflect a charge for using energy.
Now developers are challenging that model by using local government authority to build a $3.8 million solar project to power Dublin High School, which serves a rural town about 130 miles southeast of Atlanta. Such workarounds for obtaining solar power — and potential conflicts between solar developers and utilities — will become more common as solar panels get cheaper and more efficient, encouraging more use.
“They don’t like solar,” said Peter Micciche, CEO of REEL LLC, a financial broker for the Dublin project. “They don’t like any renewable project that they don’t own. They like to collect money on moving power through their transmission lines.”
Laws in Georgia and five other states — Florida, North Carolina, Kentucky, Iowa and Oklahoma — could prevent third-party energy providers, including solar firms, from directly selling electricity to those already served by a traditional power company, according to a database of renewable energy incentives funded by the U.S. Department of Energy. At least 22 states allow non-utility players like solar firms to sell electricity, while the legal issue remains unclear in the rest of the states.
Electric monopolies have reasons to worry. If sales decrease, utilities collect less money to support the critical infrastructure — power plants, transmission lines, repair crews — that everyone uses. Dublin High School will still need power from Southern Co. to supplement what it gets from its solar panels, though the school will be contributing less to the infrastructure’s upkeep.
A relatively small project, the revenue lost at Dublin High School is a drop in the bucket considering Southern Co. earned almost $3.3 billion in retail sales last quarter. But it could be the start of a trend. Project developers say they have discussed the Dublin deal with government officials from larger communities — and bigger electricity users — in metro Atlanta.
That’s the long-term problem for Southern Co. When disclosing risk factors to investors, the utility warned this year that the costs of solar and other distributed technology may fall in the future and threaten its business model, which uses a small number of large power plants to churn out lots of power.
Southern Co. CEO Tom Fanning said in an interview that he does not expect the cost of solar energy to fall enough to really compete until the end of the decade. Still, he has ordered a company team to draw up proposals for incorporating those technologies into the larger system.
One big question: How does Southern Co. get reimbursed for running the larger electricity network? Fanning said one answer may be charging solar users a special fee.
“You shouldn’t pay as much as somebody else that’s relying on it 100 percent, but you should pay a backup charge because you’re relying on it,” Fanning said. “If we weren’t there ... you’d have candlelight.”
Georgia Power reviewed the Dublin deal, but it never challenged the project. The financing arrangements walk a careful line. For example, the school is not paying the developers for energy. Instead, local government agencies issued almost $3.6 million in bonds to pay for the equipment, in the same way governments finance roads, bridges or courthouses. School officials will then lease the panels for 25 years. The school can buy the equipment when the lease ends.
Initially, the combined expense of roughly $300,000 in annual lease payments for the solar equipment and the school’s remaining Georgia Power bill will be more expensive than if the school system bought all its electricity from the utility.
However, in six to eight years, developers expect the solar project will prove the cheaper option, saving taxpayers money. That’s because financiers expect the cost of electricity sold by Georgia Power to rise, while the cost of the solar arrays remains fixed for more than two decades. Developers are applying for more than $1 million in federal subsidies, and financial records show the project would not turn a profit without that support.
Schools Superintendent Chuck Ledbetter said he estimates the arrangement will initially free up a minimum of $100,000 in the school system budget, or enough cash to spare two teachers during a round of layoffs. The extra cash is freed because the school can use unspent money raised by a special tax to pay off the bonds, Ledbetter said. Normally, that tax money cannot be spent on the school power bill.
There are other motivations, too. Dublin sits in a rural region where 10 percent of workers are unemployed. The German-based MAGE Solar recently set up its headquarters for North and South America in Dublin, taking advantage of the city’s location halfway between the Port of Savannah and the county’s busiest airport in Atlanta. Its solar panels are being used at the high school.
“The bottom line is the bottom line,” said Ledbetter, who said he only considered the project after determining it made financial sense. “Does this save us money? Does this help us and we can be a good community partner, that’s one thing. If it doesn’t help us, it’s another.”