A wave of independently owned solar projects planned in Michigan is driven largely by contracts with Consumers Energy, which has long-term plans to significantly boost its solar portfolio.
The Michigan Public Service Commission reported this week that 57 new solar projects under development by independent producers have been approved since December.
Known as “qualifying facilities,” the projects are negotiated under contracts allowed by the Public Utility Regulatory Policies Act, or PURPA. The 1978 federal law requires utilities to purchase renewable energy from a developer at the “avoided cost,” or the amount it would cost the utility to generate the power itself.
Before a settlement agreement was reached last year, Consumers — and, in a separate case, DTE Energy — had a multi-year dispute over PURPA contracts and avoided costs.
The agreement reached last year in Consumers’ avoided cost case will lead to 584 megawatts of new solar, nearly tripling the state’s existing solar capacity in the coming year. Consumers now has 103 PURPA contracts while DTE Energy has 15, even though DTE is a larger electric utility.
Consumers’ contracts total 2,350 MW of power, while the utility reported in February that it had 5,008 MW of pending interconnection requests from developers.
“While not all pending interconnection projects are (qualifying facilities) and some are likely to drop out for various reasons (interconnection costs, site control and permitting issues, etc.), the amount of pending interconnection applications indicates significant growth in QF development
activity,” according to the MPSC report.
Over the past 40 years, PURPA contracts have mostly involved hydropower, biomass, cogeneration and landfill waste. However, solar energy is poised to make up a larger share of these contracts as costs decline.
Sweeping statewide energy reforms passed in 2016 required regulators to examine avoided costs amid market changes. Since state regulators’ last PURPA report in 2018, the MPSC has approved avoided costs for all seven Michigan investor-owned utilities.