We reviewed a variety of news stories discussing new solar projects in states – Kentucky, West Virginia, and Pennsylvania – that have traditionally relied heavily on coal and carbon-emitting fuels. The articles reveal lessons that may be learned from these examples.

State Policy Can Encourage Renewable Energy Development

In light of the substantial tax incentives unlocked by the Inflation Reduction Act (“IRA”) and the Infrastructure Investment and Jobs Act (“IIJA”), the focus turns to state policies, which may be useful in unlocking the potential of solar (and other renewable energy technologies). As an example, while this article claims the installation of solar panels in a Pennsylvania School District generated “between 90% and 95% of [the school district’s] power,” this is likely not the entire story.

Intermittent resources like solar can produce power only when the sun is shining. While this likely covers large swaths of the school day, sun is less abundant in the early morning hours (when school is starting), in the winter, at night, and on poor weather days. Quite simply, it is not likely that sun is available to power the school 90-95 percent of the time. While the school district may be producing energy representing 90-95 percent of the total power used by the school, it is unlikely the hours in which the solar energy is actually being produced align nearly perfectly (i.e., 90-95 percent of the time) with the periods when the energy is used by the school district. So, this begets the question, how does the school district estimate $9 million in savings? What is most likely happening is the school district is generating a large amount of power during the day, even more than it needs for its own use, and it is selling the excess to the grid/utility and being compensated by a process known as “net metering.”

Most states, Kentucky, West Virginia, and Pennsylvania among them, have statutes governing net metering. Statutes and regulatory proceedings related to net metering essentially set the level of compensation a solar owner can receive for the excess power it returns to the grid. How those incentives are set can either encourage or discourage solar development. These incentives are also subject to change as renewable development increases.

In Pennsylvania, this article seems to confirm there is substantial headroom for more solar to be developed; however, as this development accelerates, it can also have an impact on the value of that excess solar to the grid, which could result in a reduction in net metering credits. Simply, if more solar is being produced during the day than is being consumed, the value of that solar is reduced because the excess is unneeded. Unless there is a mechanism, like batteries or pumped storage hydro, to store that energy for use in a later period (like the early morning or nighttime) when solar is not abundant, steps will need to be taken to reduce the amount of energy on the grid. Many states are grappling with how to harness the benefits of renewable resources during periods when those resources are less/not abundant. State policies will likely need to be flexible enough to adjust as the value of solar (or other renewables) and the impacts on the system change.

The Market Will Drive Investment in Renewables

While state policies can encourage renewable development, market forces are also a huge driver of solar (and other renewable resource) development. The role of the market is evident in this article discussing the largest solar array – 160 MW – ever to be constructed in Kentucky, which broke ground in December 2023. Kentucky is heavily dominated by coal and lacks any state mandates or targets for renewables. Notwithstanding the lack of state policy, Big Rivers Electric Corporation, a member-owned generation and transmission cooperative serving 22 counties in western Kentucky, entered into a power purchase agreement (“PPA”) with a National Grid subsidiary (as discussed in this article) to bring this project to Kentucky.

Utilities have a statutory duty to provide safe and reliable electricity at the lowest cost to consumers. To the extent solar resources become more competitive, even utilities in coal-dominated jurisdictions will select renewable resources like solar with increasing frequency not only because there are no fuel costs, but also because increasing the mix of renewables vis-à-vis carbon-emitting generating resources can meet customer demand at the residential and manufacturing levels. In that regard, as this article related to the construction of five solar sites in West Virginia by First Energy subsidiaries notes, renewable energy resources also provide economic benefits in the form of construction, jobs, and tax revenue, and these projects support economic development as many companies are often selecting new sites based on the availability of renewable energy to serve some or all of their load in that jurisdiction. These are market driven outcomes.

Customers May Benefit from a Diverse Mix of Resources

Customers whose energy mix is often largely dependent on coal and gas are often impacted by the costs of that fuel. Throughout the region, utilities have sought massive rate increases stemming from increased power costs in the post-COVID recovery period when fuel prices spiked exponentially due to a variety of factors. Customers are normally on the hook for these expenses, which are often highly volatile and subject to substantial fluctuation from year-to-year. For businesses operating on budgets set during the prior year and residential customers on fixed or low incomes, these significant increases and fluctuations in rates can have devastating impacts. As this article notes, solar (and wind and other renewable resources) may serve to mitigate these fuel price risks by providing fuel-free power because no fuel source (i.e., gas or coal) is needed to power these energy resources.

On the other hand, a renewable resource cannot do what a base load resource can: provide power at all hours of the day (provided fuel is available), at least not without being paired with some type of storage. Ensuring customers have adequate and reliable power 24/7/365 at the lowest cost requires a balanced mix of resources, both renewable and (at least under current technology) carbon-emitting. Operating at the extremes with heavy reliance on coal and natural gas, or alternatively, on renewable resources each presents risks. Coal and natural gas have fuel price risks, and with the aging infrastructure of many of these coal and natural gas plants, the risks of non-performance and outages. By contrast, solar resources present reliability issues because they can only produce power when the sun is shining and the wind is blowing. The risks of overreliance on either type of resource is balanced by having an efficient mix of both types of resources.