Update on Solar Power Plant Development in Florida

Solar photovoltaic (PV) generation projects continue to grow in Florida. Although Florida's net metering rule¹ has fostered smaller customer-owned rooftop solar projects, the most dramatic growth has been in large scale², utility-owned solar PV projects proposed by Florida's investor-owned electric utilities (IOUs).

The predominance of utility-owned projects can be traced to a combination of four factors. First, Florida law does not permit a third-party solar developer to make retail sales of electricity to others³, which essentially relegates the developer to making wholesale sales to IOUs and other electric utilities via wholesale power purchase agreements (PPAs). Second, current regulatory policy in Florida does not permit IOUs to earn a return on payments made to third-party solar developers pursuant to a PPA, so there is little incentive for IOUs to enter into PPAs with third-party developers. Third, although Florida law encourages the development of solar and other renewable energy projects⁴, those laws are aspirational and do not mandate renewable portfolio standards for Florida's electric utilities. Fourth, and perhaps most importantly, regulatory signals out of the Florida Public Service Commission (FPSC) have encouraged utility-owned project structures.

These signals stem from three FPSC orders – issued between December 2016 and November 2017 – approving a series of rate case settlement agreements between Florida's Office of Public Counsel (OPC) and three of the state's largest IOUs. All of the settlement agreements include similar provisions that enable the IOU to include its own solar projects in rate base and, once in service, recover the revenue requirements associated with the projects through a solar base rate adjustment (SoBRA) mechanism. To qualify for cost-recovery, the cost of the utility's solar project must fall below utility-specific cost caps as specified in the settlement agreement. Those cost caps range from $1,500 per kilowatt alternating current (kWac) to $1,750 per kWac, depending on the IOU. These FPSC-approved settlement agreements have authorized the three IOUs to construct a total of 2454.5 megawatts (MW) of solar PV generation before Dec. 31, 2021. The FPSC orders approving the settlement agreements can be reviewed using the following links:
http://www.psc.state.fl.us/library/filings/2016/09338-2016/09338-2016.pdf; http://www.psc.state.fl.us/library/filings/2017/09951-2017/09951-2017.pdf; http://www.psc.state.fl.us/library/filings/2017/10089-2017/10089-2017.pdf

Additional growth in utility-owned solar PV generation projects is expected to continue into the foreseeable future. Over the next 10 years, 13,303 MW of solar generation is projected to be installed in Florida. Of that total, 11,077 MW is expected to be utility-owned solar.⁵ Those projections appear to be on track. Indeed, on Jan. 11, 2021, Florida's largest IOU notified the FPSC of its intention to file for a base rate increase along with authority for a new SoBRA mechanism to recover the revenue requirements of up to 1,800 MW of utility-owned solar projects through the end of 2025 (up to 900 MW in 2024 and another 900 MW in 2025).

For more information regarding the solar power project development in Florida, please contact Bruce May at bruce.may@hklaw.com or 850.425.5607.

Notes

¹ R. 25-6.065, Fla. Admin. Code.

² To date all of the utility-owned solar plant projects in Florida have been sized just below 75 megawatts (MW). This is largely because solar power plants with a capacity at or above 75 MW are subject to rigorous Florida Public Service Commission (FPSC) need determination review and permitting under the Florida Power Plant Siting Act (PPSA).

³ PW Ventures, Inc. v. Nichols, 533 So.2d 281 (Fla. 1988). Note the prohibition against retail sales does not prohibit a solar developer from leasing solar generating equipment to another so long as lease is structured so as not to involve the sale of electricity. See e.g., Order No. PSC-2019-0065-DS-EQ, 2019 Fla. PUC LEXIS 62, *2 (Fla. P.S.C. Feb. 21, 2019).

⁴ See §§ 366.91, 366.92 and 377.601, Fla. Stat.

⁵ See the FPSC's Review of the 2020 Ten-Year Site Plans of Florida's Electric Utilities, issued in October 2020