Entergy Arkansas intends to pay a little more than 5 cents per kilowatt-hour for electricity from a proposed solar farm near Stuttgart.
The amount was mentioned at a July 30 meeting of the Arkansas Public Service Commission and is one of the few details known about an agreement between Entergy and NextEra Energy Resources.
The commission is expected to decide by Sept. 30 whether Entergy Arkansas should enter a 20-year contract to buy electricity from NextEra.
In April, Entergy said it had reached a deal to buy power from NextEra, which plans to build an 81-megawatt solar energy farm on a 475-acre site about 7 miles southeast of Stuttgart. The facility will be known as Stuttgart Solar.
NextEra will spend more than $120 million to develop and build the solar farm, said Steven Stengel, a spokesman for Juno Beach, Fla.-based NextEra.
The commission must decide if the cost of the agreement is reasonable and prudent, if it is in the public interest, and if it will provide cost savings for Entergy’s customers.
The savings will be calculated as the difference between the contract price for the solar energy versus the market price, said John Bethel, executive director of the commission’s general staff.
The value of savings for ratepayers over the 20 years is projected to be $25 million, Entergy executive Matt Wolf said in pretrial testimony. But the benefits could range from as low as $3 million to as high as $91 million, Wolf said. Entergy customers will receive at least 75 percent of the savings.
Entergy has not disclosed details of the contract, so it’s difficult for energy experts not affiliated with Entergy, or the commission, to comment on the proposed deal.
Jordan Tinsley, an attorney who represents the Arkansas Electric Energy Consumers, a group of large electricity users, inadvertently disclosed at the commission meeting the amount Entergy agreed to pay.
The Public Service Commission allows utilities to file financial data in a case that is kept confidential from the public.
“At times [a utility] might disclose [details on cost] subject to a confidentiality agreement to the parties,” David Cruthirds, a Houston regulatory lawyer, said in a telephone interview. “[The utility] contends [disclosing prices] undermines their ability to negotiate other deals.
NextEra would want it confidential because they may want to sell power higher [to another company]. Entergy wouldn’t want to disclose it because that would set the price, and someone else may be willing to sell for less.”
That 5 cents per kilowatthour price is comparable to two other deals that NextEra, an affiliate of Florida Power & Light Co., announced recently.
Prices per kilowatt-hour for solar are “highly variable,” said Sarah Kurtz, a principal scientist at the U.S. Department of Energy’s National Renewable Energy Laboratory in Colorado.
“The [department] has set 6 cents per kilowatt-hour as their goal [for utilities to pay for solar energy] by 2020, and it generally looks like they may hit that,” Kurtz said. “But prices may more typically now be 8 to 10 cents per kilowatt-hour.”
The average retail price of electricity in the United States is 12 cents per kilowatt-hour, the Department of Energy says.
There have been several high-profile cases where 20-year contracts have sold at 5 cents per kilowatt-hour, said Gregory Wilson, director of the National Center for Photovoltaics at the National Renewable Energy Laboratory.
Wolf, testifying at the hearing, told of a contract the Tennessee Valley Authority negotiated with NextEra earlier this year on an 80-megawatt solar project, almost the same size as Stuttgart Solar. The Tennessee authority will pay about 6.1 cents per kilowatt-hour, Wolf said.
Tinsley noted that NextEra is receiving 4 cents per kilowatt-hour for solar energy for a plant in New Mexico.
Tinsley also said NV Energy of Las Vegas is paying 3.87 cents per kilowatt-hour for solar power, based on a recent report.
Those low rates aren’t surprising, Wolf told Tinsley, because Nevada and New Mexico solar farms would generate considerably more solar power than a plant in Arkansas.
“You can get a lower perunit cost [in the southwest United States],” Cruthirds said.
“A plant in Arkansas may run nine hours a day while one in Nevada may run for 11 hours a day. If they both cost the same to build — although the land may have different costs — you end up with a lower per-unit cost.”
The most intense sunlight in the United States ranges from west Texas to southern California, according to the National Renewable Energy Laboratory.
Wolf acknowledged that prices for solar power have been falling in the past year.
“I think there is no doubt that the reason this opportunity has presented itself is that there has been a combination of the decrease in prices and the tax incentives that are still there,” Wolf said.
One potential killer of the deal would be if federal tax credits aren’t renewed for such projects.
In August 2012, LM Wind Power of Little Rock laid off 234 full-time and part-time workers as orders declined because the tax credits had not been renewed.
The tax credits eventually were renewed before the end of 2012. LM Wind Power produces fiberglass windmill blades used for electricity generation.
Jim Robo, chairman of NextEra Energy, parent company of NextEra Energy Resources, said in a conference call in May that NextEra expects investment tax credits to drop from the current 30 percent to 10 percent by the end of 2016.
“We support that step down,” Robo said.
Next Era will not receive a cash reimbursement, but it will get a federal tax credit equivalent to 30 percent of the cost of the solar generating equipment that’s installed at the project, Stengel said.
Levelizing payments for Entergy Arkansas ratepayers for 20 years is not wise, Tinsley told the commission.
“This decision that [Entergy] wants the commission to make is going to bind Arkansas ratepayers for the next 20 years,” Tinsley said. “A lot can happen in 20 years.”
But the 20-year term was how NextEra priced its contract and Entergy had no control over it, Kurt Castleberry, Entergy’s director of resource planning and market operations, said in an email.
“Compared to other solar bids [Entergy] received in the 2014 [request for proposals], this [agreement] from Stuttgart Solar provided the highest level of savings for customers,” Castleberry said.
Entergy declined to disclose how many companies submitted proposals to build a solar farm in Arkansas.
With the Sept. 30 deadline, the commission and opponents of Entergy’s proposal were forced to make decisions on the plan within a few months, Tinsley said. The agreement was made in April, attorneys had less than three months to complete discovery and the commission has until the end of September to make a decision, Tinsley said.
The reason NextEra established the Sept. 30 deadline, Castleberry said, was to give it sufficient time to finish construction before the tax credits drop to 10 percent in 2017.
“If the value Entergy attributes to Stuttgart Solar turns out to be a bad guess, which it probably will, this power purchase agreement will not generate savings for Arkansas ratepayers,” Tinsley said at the hearing.