(CN) – After several years of strong growth, the renewable energy market is showing signs of slowing down, as the United States revels in cheaper electricity from natural gas. And the slowdown is causing ripples of change across the nation, with some state utility commissions drastically cutting the contract lengths of green energy companies.
The Montana Public Service Commission slashed the price paid to renewable energy providers from $66 per megawatt hour to $31 and cut the contract length between renewable energy suppliers and the state’s main utility, Northwestern Energy, from 25 years to 15 years.
Idaho has cut its contract lengths from 20 years to just 2 years.
The Montana Public Service Commission’s decision resulted in a lawsuit filed late December by the Montana Environmental Education Center, Cypress Creek Renewables and Vote Solar against the commission and Northwestern Energy. The suit claims the commission and Northwestern Energy violated federal regulations and Montana law, which requires the commission to establish long-term contract rates that are sufficient to enhance the economic feasibility of third-party power facilities.
The commission defends its position by saying that shorter-term energy contracts are better for the Montana consumer, who should not foot the bill for green energy.
“Out-of-state developers were perched at Montana’s borders, ready to rush in and take advantage of these inflated rates, reaping windfall profits at consumers' expense,” Montana Public Service Commissioner Roger Koopman said in a statement.
Koopman said shorter contracts can be periodically adjusted to the market, rather “than be locked into 25-year contracts based on sheer guesswork and the silly assumption that markets never change.”
A 1978 federal law to increase U.S. renewable energy development is at the heart of the change that the energy sector is undergoing. Congress passed the Public Utility Regulatory Policies Act (PURPA) in 1978 as part of the National Energy Act. PURPA was meant to diversify the U.S. fossil fuel energy portfolio with renewable energy, increase clean power development, and to promote energy conservation during a time when there was a genuine energy shortage.
Brian Fadie, clean energy program director for plaintiff Montana Environmental Information Center, said monopoly utilities see third-party energy developers “as threats to their monopolies and profit margins, so they have been fighting against the PURPA law in states across the country,” notably in North Carolina and Idaho, where renewables have taken a strong hold in those states’ power portfolio.
PURPA is left mainly to state energy commissions to regulate the individual states’ power industries, which are often ruled by a single power monopoly. The state commissions also set rates for power purchased through the monopoly or through a qualifying facility such as a wind or solar farm.
But after decades of growth in energy production, including electricity from natural gas harvested through fracking and rampant growth in renewable energy, the United States is awash in power.
Prices for electricity from renewable energy sources have fallen dramatically in the last two years, as solar and wind projects have advanced technologically, allowing more energy to be produced for the same or less cost, Fadie said.
