Oregon: Oregon Pilot Solar Volumetric Incentive Rates & Payments Program

NOTE: The fourth round of the program opened on October 3, 2011. The next round will be open in April 2012. Subsequent re-openings will take place every six months until the capacity for the program is full. The rates listed below are for the fifth round of the program that opens on April 2, 2012.

In June 2009, Oregon established a pilot solar volumetric incentive rate and payment program* with legislation. Under this incentive program, systems are paid for the kilowatt-hours (kWh) generated over a 15 year period, at a rate set at the time a system is initially enrolled in the program. The Oregon Public Utility Commission (PUC) was left with the discretion to establish rates and rules by July 1, 2010. The PUC established rates and rules in May 2010. This program must be offered by the three investor-owned utilities in Oregon and will be administered by the utilities, though the PUC will periodically re-evaluate rates. The program costs are recoverable in utility rates and utility-owned systems are not allowed to receive the incentive.

The pilot program installation cap is limited to an aggregate cap of 25 megawatts (MW) of solar photovoltaics (PV), with a maximum system size cap of 500 kilowatts (kW). The aggregate program cap will be spread equally over four years, with 6.25 MW of capacity being eligible to receive the incentive each year. The aggregate cap is divided up by utility based on 2008 retail sales revenue. PGE has a cap of 14.9 MW, Pacific Power has a cap of 9.8 MW, and Idaho Power has a cap of 0.4 MW. Idaho Power's program is limited to residential installations that are smaller than 10 kW. Rates differ by system size and geographic zone. Small- and medium-scale systems participate in a program that is modeled after net metering and medium and larger-scale systems participate in a competitive bidding program. The net metering based program has a lottery-based method of reserving capacity for small and medium-scale systems.  Participating PV systems must be grid-connected, metered and meet all applicable codes and regulations. Systems must be "permanently installed" and must remain in service for the entire useful life.

Systems sized 100 kW or less can participate in the portion of the program based on net metering. Generating capacity of 20 MW of the aggregate cap is reserved for the net metering portion, with 12 MW available for residential and 8 MW available for small commercial systems. Capacity for medium-scale systems is divided equally between the net metering portion and competitive bidding portion of the program, with the process alternating between reservation periods.  These residential and small commercial systems are paid for the amount of electricity generated, up to the amount of electricity consumed. In essence, customers are paid for the amount of utility electric load consumption that is offset by on-site solar photovoltaic generation. Unlike typical feed-in tariffs, customers can consume the electricity generated on-site and receive a production incentive - or a volumetric incentive payment - for the amount of electricity generated and consumed. To remove a perverse incentive to increase electricity consumption to receive a greater payment, the system must be appropriately sized to meet average electricity consumption. The rates are determined by the PUC and are based on annual system cost and annual energy output, differentiated by geographic zones. The cost estimates are based on installation data from Energy Trust. The volumetric incentive rates are not the actual rates paid to the customer-generator; the actual rate paid is the volumetric incentive rate minus the retail rate. The volumetric incentive rates will be re-evaluated every six months and may be adjusted if necessary. The rates for the net metering program are as follows:

Systems sized larger than 100 kW can participate in the competitive bidding portion of this program. A total of 5 MW of the aggregate cap is reserved for the competitive bidding portion of the program. Utilities will issue a request for proposals once per year. At that time, systems can put in a bid to participate and winning bids will be selected based solely on price factors. The actual rate paid will be determined by bids received and will be set at the time of enrollment.

Systems receiving the incentive payment may have reduced eligibility for some other state incentives. Systems may either take the incentive payment or the state tax credit and Energy Trust rebate; systems are not eligible for the incentive payment and the tax credit and rebate. Enrollment in the pilot program will be closed when the 25 MW cap is reached, or on March 31, 2015, whichever is earlier.

History:

In July 2009, Oregon established a pilot volumetric incentive rate and payment program for solar photovoltaic (PV) systems with the passage of HB 3039. All electric companies must offer this incentive, though municipal electric utilities, public utility districts and electric co-operatives are excluded from the definition of electric companies, limiting this incentive to the three investor-owned utilities. The aggregate capacity for the pilot program is 25 megawatts (MW) alternating current (AC), with an individual system cap of 500 kilowatts (kW). The legislation specifies that at least 75% of the cap must come from small-scale systems, though the PUC may reduce this target if necessary. In March 2010, HB 3690 defined small-scale systems as 10 kW or less for "residential qualifying systems" and between 10 kW and 100 kW for "small commercial qualifying systems".

The legislation did not establish the incentive rate or rules for the pilot program; the legislation left discretion for adopting rules and rates to the PUC. HB 3691 (2010) specified that rules and rates must be set by July 1, 2010. HB 3039 stated that the rate could be determined by the utilities with the approved of the PUC. The PUC was also given the discretion to establish incentive rates. HB 3039 specified that renewable energy certificates (RECs) must be bundled with the electricity and transfer to the utility for compliance with Oregon's renewable portfolio standard, but HB 3690 stated that the incentive could be for electricity, RECs, or both. The incentive is paid for the kilowatt-hours (kWh) generated over a 15 year period, with the rate set at the time a system is initially enrolled in the program. After the 15 year contract is up, systems may continue to be paid for electricity generation, with the rate based on the "resource value". As defined by the legislation, the resource value is determined by the avoided cost of energy and the avoided cost of transmission and distribution.

*While certain legislative bills referenced the development of a "solar feed-in tariff", the rules and rates for this program were to be determined by the PUC. Due to concerns regarding FERC jurisdiction and the ability of the state to set rates for the feed-in tariff, the current pilot program differs from a typical "feed-in tariff".

**The actual rate paid to small- and medium-systems will be the volumetric incentive rate listed minus the retail rate, as these systems are participating in the net metering option and are being paid for offsetting consumption.