Utilities' Build-Transfer Deals Spur Renewable Projects

Electric utilities in the U.S. historically have been buyers and sellers, but not producers, of renewable energy. Largely due to tax and accounting constraints, vertically integrated, regulated utilities traditionally have entered into power purchase agreements to procure solar, wind and other renewable energy from independent power producers, rather than building such projects and including them in their rate base.

To many utilities, this has seemed like a lost opportunity, as they generally earn a return on the equity invested in power plants, transmission and distribution lines, but not on power purchased from others. Increasingly, however, dramatic reductions in the installed cost of solar panels and wind turbines, and the looming expiration of federal tax benefits for renewable energy, have led to a new openness to utility-owned generation.