The Modernization of the Public Utility Regulatory Policies Act of 1978 and its Effects on Solar Power Generation: An Analysis of the Implementation of PURPA in South Carolina

Abstract

The Solar Energy Industry Association has dubbed the past 10 years as the ‘solar decade’. As countries across the globe strive to meet the Paris Climate Agreement, investments in renewable energy sources are made at increasing rates. While there is a drastic need to increase the share of renewables in our energy generation mix, well-defined and equitable policies should guide it. The Public Utility Regulatory Policies Act of 1978 has undergone many revisions but always aimed to increase competition at the generation level and increase the energy security of the United States. While the Investment Tax Credit has been acknowledged as a large driver of renewable energy investments, less-known policies such as PURPA have also contributed. PURPA is a complex Act, however, with many nuanced sections which are implemented differently in every state. The Act plays an important role in regulated energy markets across the United States. Thus, it should be revisited and modernized to adequately account for the ever-increasing need for renewable energy generation as PURPA and the avoided costs set for solar facilities have the potential to influence the incorporation of solar PV plants heavily. Using South Carolina as a case study, this study found that one utility has primarily driven the incorporation of solar in the electricity grid of South Carolina, meaning that state policies could push other utilities in the region to do the same. The complex differences between the utilities, however, decrease the transparency of rates, fees, and contract structures despite being regulated by the same state-level institution. An analysis of the avoided cost rates, their implementation, and the contract terms reveal that not all aspects of the standard offers are equally well regulated, resulting in utility-scale solar projects being located in one utility’s territory in South Carolina. Fractions of cents have thousands of dollars worth of consequences and allow for a distortion of the power dynamics between utilities, independent power producers, and consumers. The new changes to PURPA place more power in the hands of the utilities by increasing the tools available to them to set avoided costs and by decreasing the certainty of returns on investments for solar investors and developers, thus decreasing the competitiveness of solar.