Georgia Allows Third Party Ownership (TPO) of Solar

Recently, Georgia Governor Nathan Deal signed into law House Bill 57, known as the Solar Power Free-Market Financing Act of 2015 (the Solar Power Act). The Solar Power Act, which both houses of the state’s General Assembly passed unanimously, allows homes and businesses to install solar technology under third party ownership (TPO). Although it sailed through the General Assembly, the Solar Power Act is the product of detailed negotiations and compromise between lawmakers, electric service providers, and consumers. The introduction of TPO through the Solar Power Act is expected to provide a significant boost to the residential and commercial solar markets in Georgia.

Before TPO

Before the Solar Power Act, TPO agreements were prohibited in Georgia by the 1973 Georgia Territorial Electric Service Act (commonly referred to as the Territorial Act) and the Georgia Cogeneration and Distributed Generation Act of 2001 (the 2001 Act). The Territorial Act prohibits multiple electric suppliers from servicing a single area. The 2001 Act allows connection of small-scale renewable energy installations, but only if they are owned and operated by the customer and used primarily to offset the customer’s electricity needs. The combined effect of the Territorial Act and the 2001 Act was to prevent TPO by requiring that home and business owners wishing to install solar panels pay up front for the cost of the solar technology.

Provisions of the Act

The Solar Power Act explicitly allows for TPO through the use of a “solar energy procurement agreement” which allows a “solar financing agent” to finance the installation of solar panels through a lease or other financing agreement. The term “solar energy procurement agreement” is defined broadly to include any financing agreements for the installation or operation of “solar technology” where the payments are based on the performance and output of the solar panels. The Solar Power Act defines “solar technology” as systems that generate electricity from ambient sunlight alone, are installed on the retail electric customer’s property, and are connected to the electric grid. The term “solar financing agent” encompasses anyone, including electric service providers, who lease, finance, or install solar technology.

Importantly, the Solar Power Act makes clear that neither customers nor solar financing agents become subject to regulation as electric service providers solely as a result of being parties to solar energy procurement agreements, provided they operate below the capacity limitations set forth in the Solar Power Act.

The Solar Power Act also sets certain limits on TPO that are applicable to both customers and electric service providers. First, the Act limits the applicability of TPO based on the size of the project. For residential customers, solar installations are limited to 10 kW of peak generating capacity. For commercial customers, that cap is set at 125 percent of the actual or expected maximum annual peak demand of the premises served by the installation.

The Solar Power Act also restricts the requirements that electric service providers can impose on installations smaller than 10 kW for residential customers and 100 kW for commercial customers. For installations below these thresholds, electric service providers can require that the electric customer or the solar financing agent provide all equipment necessary to meet applicable safety, power quality, and interconnection requirements. Once those requirements are met, the electric service provider cannot impose additional criteria. For installations larger than 10 kW residential or 100 kW commercial, the Solar Power Act allows electric service providers to impose additional requirements that are necessary to protect public safety, power quality, and system reliability. These requirements might include requiring additional safety standards, testing, or liability insurance which are specifically forbidden for installations that fall below the thresholds.

Looking Forward

With the passage of the Solar Power Act, Georgia becomes the 23rd state to allow TPO of solar installations. Georgia now ranks 15th nationally in its total installed solar capacity, with roughly 25 percent of that capacity coming on-line in 2014 alone. While most of the 2014 growth came in the form of large utility-scale installations, the introduction of TPO through the Solar Power Act should stimulate growth of smaller scale residential and commercial installations. Considering that TPO represented approximately 70 percent of total U.S. residential solar installations in 2014, the enactment of the Solar Power Act could result in a substantial expansion of Georgia’s solar market.

The author thanks Tim Nicholson for his significant contributions to this article.

Leave a Reply

Copyright © 2019, K&L Gates LLP. All Rights Reserved.