(c) photo: freedigitalphotos.net

The prosperity of solar developers depends largely on the so called “avoided cost” rate. As solar developers are mostly small power producers, they are usually not allowed to sell their power directly to customers. Instead, they have to sell it to big utilities like Progress Energy Carolinas. The prices utilities owe, are determined by the N.C. Utilities Commission and are supposed to represent the amount that utilities would have to spend on producing additional power on their one. These prices are therefore called “avoided costs”.

The nation wide declining of costs for natural gas recently motivated Progress Energy to request a reduction of the “avoided cost” rate by more than 20%. A lot of small solar developers expected the Commission to accede to that request and therefore filed a variety of project applications until December 1st of last year.

In response to this, in November 2012, Progress Energy asked the N.C. Utilities Commission to reduce the “avoided costs” retroactively as from December 1st, 2012. Even solar developers who applied for a new project before December 1st, 2012, that is due for approval in the next few months, should be concerned by these new price cuts.

The Commission refused Progress Energy’s request. It decided that Progress Energy is obligated to grant the current prices to all small solar developers who have applied for a project before December 1st, 2012.

The Commission’s ruling is welcomed by the small power producers as it ensures that planned projects stay profitable and therefore, can be built.