There is something new under the sun, and Entergy Arkansas wants in on it.
Cities, counties, schools and nonprofits are starting solar projects under Act 464, a change to the Arkansas Renewable Energy Development Act that lets nontaxed entities enter solar partnerships.
Arkansas Commerce Secretary Mike Preston praised the 2019 law last week as an economic development tool, noting that it allows governments, schools, churches and others to tap favorable net-metering rates and incentives that add up to an attractive ROI.
Now Entergy wants a niche in the new space, and to serve loyal customers.
So the utility, which has 700,000 meters on its power lines across Arkansas, is asking the state Public Service Commission to OK a solar power subscription that would let nontaxed customers buy lower-cost power from an 81-megawatt solar farm in Stuttgart and eventually from a 100-megawatt array near Lake Village. Both sun farms were built by NextEra Energy Resources of Juno Beach, Florida, which sells the power to Entergy. Customers would buy the blocks of power year to year, avoiding a long commitment while still getting some of the same cost savings.
“This is about Act 464, no question,” said Kurt Castleberry, Entergy Arkansas’ director of resource planning. “The act allowed third-party solar developers to pursue business with our customers. Of course we talk to these customers, so this also provided us an opportunity.”
For places like Jefferson County, which dedicated the state’s first fully county-owned solar array last week, Act 464 opened a path to cut costs without upfront charges; guaranteeing low-cost power for 25-30 years. Some towns and counties own their arrays; others purchase the power contractually.
Seal Solar of North Little Rock, which installed Jefferson County’s array as part of the county’s $2.3 million energy performance contract with Johnson Controls, called the project its 250th solar installation. “We see many more on the horizon, especially for government entities like Jefferson County,” Seal CEO Josh Davenport said Tuesday.
About two dozen similar public entity projects are completed or under way in Arkansas, including work for cities, counties, state agencies, colleges and public schools. Hospitals and churches are interested, and the city of Fayetteville is dedicating the state’s largest solar array on municipal land Sept. 6. That project is in conjunction with Ozarks Electric Cooperative and Today’s Power of Little Rock. Seal and Lightwave Solar of Tennessee are working with Johnson Controls, an Irish multinational with offices in Little Rock, to build a 2-megawatt project for Washington County.
All this is fodder for Castleberry and Michael Considine, Entergy Arkansas’ vice president of customer service.
They say solar energy is most economical when generated in bulk. Smaller sun farms, they argue, save money for entities that install them, but they aren’t the most efficient generators. “Unlike utility-scale solar resources … the net-metered solar installations [from vendors known in the industry as third-party companies] are not constructed based upon whether they are the most economic,” Castleberry said in his PSC testimony. Instead, he said, they benefit the individual customer taking advantage of credits for the power they generate, but not all Entergy customers.
Castleberry told Arkansas Business that giving solar producers a credit equal to the retail value of the excess power they produce is unfair for Entergy’s non-solar customers. He also outlined the investor-owned utility’s evolution on solar generation and inexpensive power’s long role in economic development.
“When we looked at solar eight or 10 years ago, it didn’t pass the laugh test,” he said. “But we keep looking, and five or six years ago there was an aha moment. All of a sudden it got very economic. So we come to work every single day thinking about keeping power costs down. Entergy wants customers to flourish. We want business customers to expand, and we want to be able to tout low rates to economic development prospects.”
These days, solar power is part of that pitch, Castleberry said. “If you have corporate objectives or are a business wanting to get a certain amount of solar power, we want to provide that for you.”
Heather Nelson, Seal’s COO and co-founder, said that her firm was digesting Entergy’s Solar Energy Purchase Option and what it means in competing for government and school clients. “It does look like they are trying to bring something to the market that competes at some level with the solar firms that are now in this space. The most distinct difference is, with what they’re proposing, customers couldn’t own it. This won’t be the path for customers who want ownership.”
Other solar executives, off the record, said they expect vendors to seek to intervene in the PSC case, opposing Entergy.
Alex Ray, director of business development for Johnson Controls in Arkansas, said the Jefferson County project installed new LED lighting and HVAC units, “and the judge and the Quorum Court never asked citizens to fork over a dollar out of the treasury, nor were there any bonds issued or taxes diverted.”
County Judge Gerald Robinson said taxpayers are guaranteed $3.8 million in savings over 20 years.
Entergy is calling its planned new program SEPO Option B. It would apply only to nontaxed entities, and is an addition to the Solar Energy Purchase Option the utility laid out for its taxpaying customers early this year. Castleberry says the program will help offset cost shifts to non-solar customers. Requiring Entergy to buy excess power produced by solar arrays at the same price as it sells electricity to retail customers allows solar producers to shirk their share of fixed costs for the electrical grid, he said.
“It is a fairness issue,” he said. “These costs are there for serving everyone when the sun doesn’t shine, or there’s an outage with an array, or for all the other reasons we’re there with our generators and our transformers and our wires to provide power. These costs remain regardless of how much electricity is used.”
The appropriate credit in net metering is still under review in another PSC case that has dragged on for several years.
After Act 464 passed this year, “mayors and school superintendents” started calling Entergy, saying they’d had offers from solar installation firms, Considine said. “So how does Entergy respond?”
Some customers liked the certainty of dealing with a familiar utility, he said. “They saw some things in the deals they were offered, and things that sort of scared them.”
Entergy’s block-purchase option, with its year-by-year contracts, includes provisions that ease cost-shifting, Castleberry said. “The length of the contract is a big thing,” Considine said, suggesting that some customers are wary of long commitments in a fast-changing industry. “Twenty-eight or 30 years is a long time to commit to doing anything. But there’s also the price where we’re selling this subscription,” which he said is based on a 5.345 cents-per-kilowatt/hour rate for power from the Stuttgart solar plant.
“I’m not cocky about it,” Considine said. “But it’s a superior product that beats anything else that’s out there, in my opinion, and it’s the scale at which we can do business.”