An Innovative Business Model Makes Solar Accessible to All
In late March 2015, RMI hosted the second annual eLab Accelerator (applications are now being accepted for eLab Accelerator 2016). Described as a bootcamp for electricity innovation, the four-day intensive work session brought together 12 teams from across the country—from New Mexico to Alaska and California to New Jersey—working on new business models, energy innovation districts, and new customer solutions. Together with RMI facilitators, Reos Partners, and a panel of expert faculty, they sped progress on their respective efforts. This is one of their stories.
New Mexico is officially known as the “Land of Enchantment.” However, before 1941, the state’s license plates declared New Mexico “the Sunshine State.” It’s the third sunniest state in the U.S., behind Arizona and Nevada. With that abundant sunshine, it’s no wonder that the people of Taos County (pop. 33,035), in northern New Mexico, want to use more solar energy.
In 2009, the Town of Taos received a stimulus grant from the federal government for five renewable energy and energy efficiency projects. One of the projects was to perform a greenhouse gas emissions inventory for the region. The report found that in 2009 the fossil-fuel-based electricity system in Taos County produced 138,458 tons of CO2 equivalent greenhouse gases. “The report was the beginning of our realization that we could head in a different direction,” says Bill Brown, principal investigator and author of the report. “People who later read my report decided we could economically produce energy from renewables instead of fossil fuels.” That led to the 2012 formation of Renewable Taos, a nonprofit organization dedicated to promoting a full transition to renewable energy and energy efficiency in Taos County and the surrounding region.
Renewable Taos set a goal of generating 100 percent renewable energy for north-central New Mexico by 2030, and put together a joint resolution on renewable energy signed by Municipal and County governments; Kit Carson Electric Cooperative (KCEC), the region’s utility company; the Taos Municipal School Board; and the Intergovernmental Council of the Enchanted Circle that represents county, town, and village governments around the scenic road loop that circles through Taos and Colfax Counties. There is only one problem, and the problem is a big one. KCEC receives its power from Tri-State Generation and Transmission. Under a contract that doesn’t expire until 2040, KCEC is only allowed to generate 5 percent of its total energy from local renewables, a cap that it expects to reach next year.
Beyond Behind-the-Meter Solar
So with RMI’s assistance, Renewable Taos decided to send a team to RMI’s second annual eLab Accelerator to see how to move forward with their goal in spite of the obstacles. The team consisted of Jay Levine of Renewable Taos, Luis Reyes and David Torres of KCEC; Doug Danley of the National Rural Electric Cooperative Association (NRECA); Andrew Gonzales, Town of Taos council member; and Valerie Espinoza of the New Mexico Public Regulation Commission.
The team began Accelerator looking at what stakeholders thought would happen if the 5 percent cap barrier wasn’t addressed quickly. Some of the group felt that if customers can’t get solar energy from the utility, third-party providers could come in to develop behind-the-meter solar installations, which would decrease revenue for KCEC. This could eventually raise rates for the remaining customers who can’t afford to install their own PV systems.
While people putting solar on their own roofs, behind the meter, helps Taos get to a higher percent of renewable energy, that solution only reaches a small percentage of KCEC’s customers. “Since Taos is a tourist town, there’s a perception that it’s wealthy. It’s not; there are actually a lot of blue-collar workers,” says Luis Reyes, CEO of KCEC. “About 25 percent of our customers I would consider low income, and we also have a lot of people on fixed incomes.”
While KCEC has about 250 solar net-metered customers, being a cooperative, it wants to be responsible to all its customers, not just the affluent ones. “Part of our goal is affordability,” says Reyes. “If a schoolteacher, police officer, firefighter, or other more middle-income folks want solar, under the current way, behind-the-meter, they couldn’t do it. We needed to understand what creative options we had to enable the entire community to reap the benefits of solar energy.”
So the Accelerator team came up with three questions they felt were critical to address.
- How can the contract between Tri-State and KCEC be restructured, or can KCEC negotiate a new contract with another wholesale electricity provider?
- How can we create a business model that generates the revenues KCEC needs to support the grid, while accelerating adoption of renewable energy?
- How can we determine solutions for low-income and fixed-income households’ adoption of renewables?
Creating a New Business Model at eLab Accelerator
To address those questions, the team discussed three options:
- Partner with Tri-State and establish a new contract that eliminates the local generation cap
- Have KCEC leave Tri-State and contract with a new wholesale energy provider
- Develop a new entity that supplies the renewable energy and that would work in parallel with KCEC, which is still responsible for managing the distribution grid and billing
An important FERC ruling that occurred shortly after Accelerator could have a big impact on how Renewable Taos and KCEC move forward. The Delta-Montrose Electric Association (DMEA) is a Colorado rural electric cooperative that faced the same 5 percent cap from Tri-State. DMEA argued that the Public Utility Regulatory Policies Act (PURPA)—passed in 1978 to promote energy conservation and greater use of domestic and renewable energy—allowed, and even compelled, them to purchase power from other renewable energy providers. This past June FERC agreed, stating that “the mandate of PURPA to encourage… small power production supersede[s] contractual restrictions on a utility’s ability to obtain energy” from small renewable producers.
KCEC filed for a clarification on how this ruling will affect its operations, and FERC confirmed that Kit Carson, like Delta Montrose, can contract with independent power producers under PURPA. This important ruling affirms that the distribution co-op (and not Tri-State) has the right to negotiate for terms of that contract and to determine “avoided costs.”
Renewable Taos is moving ahead on all options as the outcome of the ruling becomes clearer. “Our work is moving along on parallel tracks as we recognize it’s a rapidly changing environment,” says Brown. “Things like this FERC decision come into play and change everything. We have to be nimble enough to respond intelligently to that.”
Moving Ahead towards the 100% Renewable Goal
The team came out of Accelerator with a lot of work to do to make their dream of 100 percent renewable energy for the region a reality. Renewable Taos is currently working on a joint powers agreement (JPA) among the local governments to formalize support and show a region-wide commitment to a renewable energy economy. Renewable Taos is also assembling a local steering committee to provide education and direction, and an advisory committee of experts from across the U.S. to oversee the project’s progress.
One of the most important next steps is to put together a cost study to show how far the region can go with local solar energy, what other resources might be needed (including wind and storage), and what it would cost to make the transition. There is also an attorney looking into legal issues, and a messaging campaign being developed to keep the public informed.
Besides conceiving the new business model, many people agreed another important aspect of eLab Accelerator was the networking. “One of the best things we got out of Accelerator was the input from all the people that RMI brought together,” says Levine of Renewable Taos. “It was incredible to be in a room with so many knowledgeable people, and as we discussed all the innovative ideas, it was gratifying to see the level of interest that other people had in seeing what Renewable Taos is trying to do.”
“eLab Accelerator was extremely helpful to us because we met a large group of professionals that have the same mission when it comes to energy,” says Reyes. “It made me realize that we’re not alone in wanting to move energy forward environmentally and economically. Whether it was residential energy or electric vehicles, we got a whole gamut of ideas and networking opportunities at Accelerator.” And Brown believes the collaboration with KCEC is critical to moving forward. “A great thing to come out of Accelerator was the commitment from our local utility, KCEC. That really confirmed for us that our non-profit, Renewable Taos, was moving in the right direction and was consistent with the ultimate direction of the local co-op.”
Rocky Mountain Institute continues to support KCEC and Renewable Taos in their efforts to make low-cost renewable energy accessible to all. KCEC is participating in a cooperative solar pilot organized by RMI’s solar practice. In that pilot, RMI is aggregating demand for community-scale solar projects from multiple rural electric cooperatives and municipal utilities and issuing a collective request for proposals for those projects. By aggregating demand and facilitating community-led development RMI expects that KCEC and other participants will procure electricity for 2016 date of commission projects at between $0.05 and $0.06/kWh.
As Renewable Taos moves forward to its goal of a 100 percent renewable Taos, it has some creative solutions to research and build out. But one of the key aspects the entire team wants to keep in mind is making renewable energy accessible to all. “It comes down to making sure everyone who wants to participate can participate,” says Reyes. “We focus on those that are less fortunate. We don’t want to just pick the low-hanging fruit of those who can afford behind-the-meter solar. But if we can reach the fruit on the top of the tree, the program will be successful.”