State Capitol Week in Review – November 12, 2021

LITTLE ROCK –Solar power is growing in popularity in Arkansas, in large part because of passage of Act 464 of 2019.

Last year solar energy accounted for six percent of the electric power generated in Arkansas, according to the U.S. Energy Information Administration. That is 60 times more solar power than was generated in the state in 2015.

Nationwide, the amount of electricity generated from renewable resources has quadrupled since 2011. Wind power and geothermal springs are other sources of renewable energy, but neither is growing in Arkansas as fast as solar power.

Act 464 allows third-party financing of solar projects, which is especially helpful to tax-exempt organizations and government entities that otherwise would not qualify for federal tax incentives for installing solar panels.

Colleges, universities, school districts, counties, churches, prison units and non-profit organizations have taken advantage of Act 464 to sign leasing agreements with third parties that install solar power systems.

When the legislature passed Act 464 in 2019, Arkansas joined 26 other states that allowed third party financing of solar projects.

Act 464 made another significant change in regulations governing the production of electric power. It raised the limit for commercial customers of electric utilities that have solar systems, from 300 kilowatts to 1,000 kilowatts. That provision helped Senate co-sponsors of Act 464 recruit support from a range of private companies.

An estimated 16,000 Arkansans work in renewable energy, according to an estimate by a trade association that represents solar power installers.

The state Public Service Commission regulates utilities, and its rate cases and policy decisions are very complex. A Senate co-sponsor of Act 464 credited the chairman of the PSC with helping to shepherd the bill through the legislature.

As Act 464 was going through the legislative process, an issue that had to be resolved was the impact on net-metering customers. Those are customers who generate their own electricity, sometimes in excess of what they need. They send the excess power to the electric utility and get credit for it.

A point of contention between utilities and net-metering customers is the value of the excess electricity that the customer sends to the utility’s power grid.

Utilities have fixed costs beyond the expense of operating power plants. For example, they have to maintain a power grid with transmission lines. Those fixed costs are spread out to all the utility’s customers, both residential and industrial.

Act 464 allows net-metering customers to send electricity to the utility’s power grid. At the same time, it allows utilities to take steps to prevent inordinate shifts in their fixed costs to other types of customers.

The legislature also promoted more efficient energy use by passing Act 507 of 2019, which allows government entities to issue bonds for energy savings projects. School districts can choose to participate.

It allows energy performance contracts to extend beyond 20 years if the project is guaranteed to last more than 20 years, and if the project’s useful life is more than 20 years. Many solar projects meet the criteria.

More than 9,000 jobs have been created because of the incentives in the energy performance contract program.