Colorado OKs Bids from CSG Developers with Negative RECs

In a move supported by electric utilities but opposed by solar developers, the Colorado Public Utilities Commission has told Public Service Company of Colorado that with regard to the utility’s competitive solicitations for community solar gardens (CSGs) for 2017, 2018, and 2019 for purposes of compliance with the state’s renewable energy standard (RES), the company may accept bids that have negative prices for associated renewable energy credits (RECs). As in many states, Colorado had devised an RES program which mandates that a rising percentage of electricity sales must come from renewable resources. However, rather than purchase renewable energy directly, a utility can satisfy the standard by acquiring the RECs produced by a qualifying facility.

In Colorado, a number of those eligible renewable energy projects have taken the form of CSGs. Indeed, some have estimated that CSGs could account for as much as 500 megawatts of generation by 2020. While interest in CSGs has continued to grow, one problem with such rapid and widespread development of CSGs has been a drop in the value of related RECs.

Part of the decrease in REC prices can be attributed to the fact that, unlike most renewable portfolio plans in other states, Colorado’s RES has no minimum or floor price for RECs. Thus, as more and more CSGs enter their output into the market, the comparative value of their RECs falls, sometimes yielding RECs that are actually below their costs of production.

Of course, the utilities purchasing the RECs view that as a positive thing and a circumstance that inures to the benefit of ratepayers. Solar developers, on the other hand, find it alarming. They have voiced concern that allowing RECs to be priced so low as to be negative could lead to situations where the CSGs end up paying the utilities to take their RECs rather than being paid for the solar power they offer to the grid. They argued that such a scenario is inconsistent with the policy goals and objectives listed by the state legislature when it crafted the RES program.

In weighing the positions of CSG developers versus those of Public Service, the commission acknowledged that the state’s RES plan had been premised on several specific objectives, ranging from transitioning toward more reliance on environmentally beneficial renewables to enhancing opportunities for local economic development via CSGs to reductions in energy costs for enduse consumers. The commission likewise conceded that only that last aspect is advanced by allowing negative RECs to be bid into a utility’s CSG auctions.

Thus, while agreeing with Public Service that negative RECs can be viewed as compatible with the RES program in that they serve as a means of lowering costs for ratepayers, the commission at the same time found that there are competing public policy principles at play between the RES and CSG statutes. The commission ultimately concluded that a separate proceeding should be initiated through which to evaluate those different policy objectives and ascertain whether changes to the CSG bidding protocols should be enacted.

In the meantime, the commission cautioned that negative bid prices for RECs from CSG developers are in the public interest only to the extent that they result in lower energy costs for utility customers overall. The commission added that customers in the commercial rate class are the most likely to give rise to negative REC values since they already receive the lowest statutorily defined bill credits. Re Public Service Co. of Colorado, Proceeding No. 17D- 0082E, Decision No. C18-0149, Mar. 1, 2018 (Colo.P.U.C.).