Renewable energy projects stalled in 2018 among Tri-State member co-ops

By Joe Smyth | [email protected] | @joesmyth

Electric cooperatives in Colorado and New Mexico have built a growing number of renewable energy projects over the last several years as prices declined, but new data show that local renewable energy growth stalled in 2018 among the 43 co-ops that buy power from Tri-State Generation and Transmission Association.

The stall in growth comes even as prices for solar projects have declined, and highlights the key role that Tri-State policies play on member co-ops. Some co-ops like United Power and La Plata Electric are restricted from pursuing more projects, because they reached the 5% limit that Tri-State imposes on local energy development. And Tri-State has also repeatedly changed the pricing for member co-ops' renewable energy projects in recent years under its Policy 115, in ways that have discouraged projects. In 2018, Tri-State also changed Policy 115 to include energy storage projects, which United Power said would cut in half the expected savings for its members from its 4 megawatt Tesla battery project. Overall, the recent policy changes show how Tri-State has moved to discourage its member co-ops from pursuing local solar and battery projects, just as those resources have become most economically attractive.

According to Tri-State's 2018 10-K, which was filed with the Securities and Exchange Commission last month, 21 member co-ops had contracted for a total of 139 megawatts of local energy projects by the end of 2018. That marked a decline from the 143 megawatts noted in Tri-State's 2017 10-K, a significant change after years of growth. Tri-State reported 113 megawatts of member co-ops' local energy projects in its 2016 10-K.

But Tri-State officials didn't mention the recent decline of its member co-ops' renewable energy projects during the first public meeting of its 2019 Integrated Resource Planning process last week, and instead described how "that number has really grown from when the first project came online about ten years ago."

Tri-State also didn't mention the decline in a recent filing with the Colorado Public Utilities Commission.

In a progress report to its previous Integrated Resource Plan that Tri-State filed with the Colorado Public ​Utilities Commission in October 2018, Tri-State showed a graph that suggested member co-ops' local renewable energy projects continued to grow in 2018, despite the more recent data showing a decline.

Tri-State also said "It is expected that the number of these projects will continue to grow."

A report published last week by the Center for a New Energy Economy helps explain how the pricing changes Tri-State has made under Policy 115 have discouraged member co-ops from pursuing more local energy projects:

Bill Credit option: The local utility will be charged for the energy it doesn’t buy from Tri-State because of the project’s generation, but then credited back different amounts based on the month and the year. The average net charge for 2018 according to the schedule was approximately $37/MWh (based on Tri-State's blended wholesale electric rate of $75/ MWh minus an average credit of $38/MWh).

This charge is added to the cost of the utility’s generation project (i.e., if a solar project is developed at $45/MWh, it would cost the utility $82/MWh with the additional charge from TriState). The credit varies by month and by year, but the schedule of credits is set for 20 years. As the cost of power rises on the Tri-State system, the credit stays the same - so the net cost to the local distribution utility rises.

Since 2015 there have been three different versions of Policy 115, each increasing the costs to local distribution utilities that choose to generate their own power.

As an example, using the solar credit schedule for 2018 as a marker, the first version of the policy had an average credit of $64.42 (adding only $11/MWh to the cost of a solar project). The 2016 policy dropped the credit by 26% to $49 (adding $26/MWh to the solar cost). As noted above, the latest version drops the credit by another 22% adding $38/MWh to the cost of a solar project) - a full 41% drop in the credit from the 2015 version.
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In past years, the fees established in Tri-State Policy 115 did allow projects to save cooperatives some money. Under the current policy, projects are no longer economic — even with dramatic decreases in the cost of solar.
Tri-State argues that the charge back is necessary to cover fixed infrastructure costs that are not collected when a member cooperative produces their own power. However, the reduction in credits follow declines in the cost of solar and seems specifically designed to make solar projects non- economic. If the infrastructure costs were indeed fixed, it does not follow that the credit should decline with each new iteration of the policy.

Tri-State is holding its annual meeting this week, in which member co-ops are expected to change Tri-State's bylaws in order to allow more flexible contracts. Those changes ​could eventually allow member co-ops to pursue more local renewable energy projects again, depending on the details of any new membership classes that might be created.

At Tri-State's 2019 Integrated Resource Plan public meeting last week, one presentation included a map of the member co-ops that have pursued their own local energy projects under Policy 115.

​The map shows that most co-ops in Colorado and New Mexico have pursued projects, while none in Wyoming and Nebraska have. Most co-ops in Wyoming and Nebraska are much smaller than co-ops in Colorado and New Mexico, with fewer staff available to dedicate time negotiating energy projects with developers.

Tri-State's Integrated Resource Plan presentation on March 27 showed 21 co-ops, in blue, that have pursued local energy projects

Further Reading:

Center for the New Energy Economy report: Powering Cooperatives - A Primer on Colorado's Local Cooperative Utilities and Tri-State Generation & Transmission Association 

Tri-State 2019 Integrated Resource Plan website

Tri-State 2018 Annual Progress Report to its 2015 Integrated Resource Plan

Tri-State 2018 10-K

Tri-State expects member co-ops to support bylaw changes at annual meeting

Tri-State won’t allow co-op members to attend annual meeting