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Landmark Law That Spurred U.S. Renewables Growth Gets Revamp

Sept. 25, 2019
What happens to Purpa now will shape the future of the clean energy boom

(Bloomberg) -- A 40-year-old law that’s been key to the growth of renewable energy in the U.S. is set for a major overhaul that could change the way small solar and wind projects are developed.

U.S. regulators on Thursday proposed setting new limits on which energy projects fall under the Public Utility Regulatory Policies Act, known as Purpa -- a landmark law that helped spur an entire generation of solar and wind farms across the U.S.

What happens to Purpa now will shape the future of the clean energy boom that propelled renewable power generation past coal on America’s grid for the first time ever this year.

Purpa requires utilities to purchase power from renewable energy projects under certain circumstances. If a developer can build a project for less than a utility can, then they can request a contract to sell power to the utility.

Long Sought Change

Utilities have long sought changes to the law, which they say saddles consumers with expensive contracts and power they don’t need. Solar and wind developers, meanwhile, say Purpa’s critical to giving renewables a leg up in states that aren’t green-leaning.

The Federal Energy Regulatory Commission, which oversees wholesale power markets, argued on Thursday that Purpa should be updated to reflect changing market conditions -- namely, an abundance of natural gas and falling renewable energy costs.

“Updating our PURPA regulations has been one of my main priorities since coming to the commission two years ago,” commission Chairman Neil Chatterjee said at a meeting on Thursday in Washington. The aim is to ensure they reflect “today’s markets rather than the energy landscape of the 1970s,” he said.

Lower Threshold

The proposed changes include lowering the mandatory purchase obligation for utilities to 1 megawatt from 20 megawatts in some markets, and giving states more authority to set the price at which small generators sell their power. The “one-mile rule,” which determines whether generation facilities should be considered to be part of a single facility, would also be amended.

While the proposal could cause some decline in renewable power build out, according to Washington-based Clearview Energy Partners, it likely “would not be a material negative policy development for renewables on a national basis.”

The Edison Electric Institute, which represents investor-owned power utilities, welcomed the proposals. Duke Energy Corp., which plans to at least double its renewables portfolio by 2025, said the current law requires customers to purchase energy at a premium from third parties that is not needed. However, the solar industry was less enthusiastic about the planned changes.

“Rather than focusing on PURPA’s goal of ensuring competition, this proposed rule will have the effect of dampening competition and allowing utilities to strengthen their monopoly status,” said Katherine Gensler, vice president of regulatory affairs for the Solar Energy Industries Association. “We hope FERC rethinks the most harmful portions of this proposal.”

Commissioner Rich Glick, the sole Democrat at the Republican-led agency, voiced opposition to some of the changes, saying they represent an attempt to “administratively gut” the statute.

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