Revenge of PURPA

By Paul Gipe

The much maligned Public Utility Regulatory Policies Act, PURPA for short, is back in the news. Not that it ever went away. PURPA has been the foundation stone upon which renewable electricity generation has been built in the United States.

However, for more than a decade PURPA has been superseded as a policy mechanism supporting renewable energy development as one state after another has implemented Renewable Portfolio Standards. The latter has gone by various names as proponents search for a more politically palatable term for mandating that utilities use renewable energy for a portion of their generation.

In April, Karlee Weinmann at the Institute for Local Self-Reliance posted a piece, Getting the Price Right for Local Wind and Solar, on the continuing fight with electric utilities over the price of renewables under PURPA.

This has been a very long fight. PURPA became law in 1978!

Now, PURPA may return to prominence with a vengeance.

In PURPA and Solar, Chadbourne & Parke’s Robert Shapiro advises that “PURPA is expected to overtake state renewable portfolio standards as the biggest driver for utility-scale PPAs in 2017 due to falling solar electricity prices.”

This phenomenon is not unique to solar photovoltaics. The same can be said for the falling price of wind energy as well.

E3 Analytics’ Toby Couture says this could be a turning point. “After decades of utilities trying to dilute it, suppress it, and even have it stricken from the books, PURPA is back with a vengeance as PV costs fall below avoided costs in a growing number of U.S. states,” says Couture. “This is a historic turn-around, and something that both Jimmy Carter and Jerry Brown can, and should, be proud of. The basic principle of requiring utilities to buy power from non-utility generators if they can beat utilities on price remains fundamentally sound.”

Couture has written extensively about renewable energy policy, PURPA, and feed-in tariffs. He was the principle author of the National Renewable Energy Laboratory’s groundbreaking report A Policymaker’s Guide to Feed-in Tariff Policy Design.

PURPA is sometimes considered the first feed-in tariff policy. Couture and other policy wonks have long argued that feed-in tariffs don’t necessarily require payment above avoided cost. The tariffs can and should reflect the cost of generation even when that cost is lower than the avoided cost under PURPA.

That day has come for at least wind and solar in some locations.

“Although it took almost four decades, PURPA’s Section 210 is finally poised to finish part of the work it was originally designed to do,” says Couture, namely, to put the U.S. utility sector on a path of reduced fossil-fuel reliance, reduce utilities’ monopoly power, and drive increased competition throughout the sector. This is a landmark for the U.S. renewables industry.”