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Article filed under Energy, Energy Self-Reliant States | Written by John Farrell | No Comments | Updated on Jul 13, 2011

The Power of Comprehensive Energy Policy

The content that follows was originally published on the Institute for Local Self-Reliance website at http://ilsr.org/power-comprehensive-energy-policy/

If Germany’s 16 federal states had each enacted their own renewable energy legislation, we’d have far less solar energy usage. I often tell people that Germany has 400 types of beer and one renewables law, while the situation in the United States is the other way around.

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Article filed under Energy, Energy Self-Reliant States | Written by John Farrell | No Comments | Updated on Jul 13, 2011

Could California Save 30% or More on Solar With German Policy?

The content that follows was originally published on the Institute for Local Self-Reliance website at http://ilsr.org/could-california-save-30-or-more-solar-german-policy-2/

The Golden State has covered over 50,000 roofs with solar PV in the past decade, but could it also save 30% or more on its current solar costs?  Renewable energy guru Paul Gipe wrote up a study last week that found that Californians pay much more per kilowatt-hour of solar power than Germans do (accounting for the difference in the solar resource). The following chart outlines the various ways Californians pay for solar, compared to the Germans (averaged over 20 years, per kilowatt-hour produced).

While the study doesn’t explore the rationale, here are a few possibilities:

  1. The inefficiency of federal tax credits artificially inflates the cost of U.S. solar.
  2. Big banks that offer financing for residential solar leasing routinely overstate the value of the systems, increasing taxpayer costs on otherwise cost-effective systems.
  3. The complexity and intricacy of the state and federal incentives (4 separate pots of money!) and the lack of guaranteed interconnection means higher risk and higher cost for U.S. solar projects.
  4. The inconsistency in local permitting standards that increases project overhead costs.

Ultimately, the combination of these market-dampening problems in the California market has hindered the cost savings that have hit the German market.  California solar installations of 25 kilowatts (kW) and 100 kW have a quoted price of $4.36 and $3.84 per Watt, respectively, according to the Clean Coalition.  This compares to $3.40 per Watt on average for already installed projects of 10-100 kW in Germany.   

Given a solar cost disadvantage that is present both in the value of incentives AND in the actual installed cost, renewable energy advocates in California should seriously question whether the current policy framework makes sense. The mish-mash of federal tax credits and state/utility rebates has not led to the same economies of scale and market maturity as Germany has accomplished with their CLEAN contract (a.k.a. feed-in tariff).  

Switching energy policies could save ratepayers billions. 

A 24-cent CLEAN contract price for California solar (to match the German contract) would replace the entire slate of existing solar incentives with an overall average cost 30% lower than the current combined incentives.  If 2011 is a banner year and the state sees 1 gigawatt (GW) of installed capacity, the savings to ratepayers of a CLEAN program (over 20 years) would be nearly $3 billion.

If the CLEAN price were adjusted down to assume that projects could use the federal tax credit, then California could set the contract price as low as 18.5 cents per kWh, 5 cents less than is currently paid by California ratepayers (although requiring projects to use tax credits has significant liabilities). 

Several states and municipal utilities (Vermont; Gainesville, FL; San Antonio, TX) have already shifted to this simple, comprehensive policy, with promising early results.  Californians should consider whether holding to an outdated and complicated energy policy is worth paying billions of dollars extra for solar power.

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Article filed under Energy, Energy Self-Reliant States | Written by John Farrell | 1 Comment | Updated on Jul 6, 2011

The Political and Technical Advantages of Distributed Generation

The content that follows was originally published on the Institute for Local Self-Reliance website at http://ilsr.org/political-and-technical-advantages-distributed-generation/

A serialized version of our new report, Democratizing the Electricity System, Part 3 of 5. Click here for: Part 1 (The Electric System: Inflection Point) Part 2 (The Economics of Distributed Generation) Download the report. The Political and Technical Advantages of Distributed Generation While technology has helped change the economics of electricity production (in favor… Continue reading

Article filed under Energy, Energy Self-Reliant States | Written by John Farrell | No Comments | Updated on Jul 5, 2011

Electricity Home Rule Could Mean Economic Boost of $1.5 Billion and 14,500 jobs for DC

The content that follows was originally published on the Institute for Local Self-Reliance website at http://ilsr.org/electricity-home-rule-could-mean-economic-boost-15-billion-and-14500-jobs-dc/

Update 8/11/11: While maximizing solar in DC shifts $267 million in electricity payments from the utility to local solar panels, the cumulative electricity cost savings over 25 years amounts to $1.6 billion for ratepayers by shifting to solar power.

For many years the citizens of Washington, DC, struggled for the basic right to elect their own leaders.  In 2011, they should use their political home rule to maximize the economic benefits of local renewable energy with “electricity home rule.”

Currently, residents and businesses in Washington spend over $1.5 billion dollars a year on electricity.  According to a study of DC’s energy dollars by the Institute for Local Self-Reliance, 90% of that amount (largely unchanged since the 1979 study) – $1.4 billion – leaves the city.  

With rooftop solar power, DC residents could keep more of those electricity dollars at home.

In its recently published atlas of state renewable energy potential, the Institute for Local Self-Reliance (ILSR) found that the District of Columbia could generate 19% of its electricity from rooftop solar PV systems.  That’s $267 million spent on electricity bills that could be kept locally. 

But maximizing local electricity generation with rooftop solar has enormous additional economic benefits.  To fill District roofs with solar panels, residents would need to install just over 1,800 megawatts (MW) of rooftop solar.  The National Renewable Energy Laboratory estimates that every megawatt of solar generates $240,000 in additional economic activity, making the economic value of maximizing solar energy self-reliance close to $432 million.  

It could go even higher.  

A previous NREL study of the value of local ownership of renewable (wind) energy found that it multiplied the economic benefits from 1.5 to 3.4 times.  If D.C. residents maximized local ownership of solar, it could have an economic value as high as $1.5 billion, equivalent to the District’s total electricity bill.

The 1,800 MW of solar would also generate jobs.  With a rule of thumb of 8 jobs per MW, according to a University of California, Berkeley, study of the jobs created from renewable energy development, the District could get as many as 14,500 jobs from maximizing its solar energy self-reliance.

The cost of going solar is minimal.  At current best prices for solar PV (around $3.50 per Watt installed) and with the benefit of the 30% federal Investment Tax Credit, solar PV can deliver electricity to the District for 16.1 cents per kilowatt-hour.  After seven years at current electricity inflation rates (3% per year), solar PV – with zero fuel cost or inflation – would be less expensive than retail grid electricity (currently 13.3 cents per kWh).  And unlike the $267 million currently sent out of the district for that electricity, all of it would be kept at home.

The solar power offers much more than just affordable electricity.  Recent studies have suggested that the actual value of solar power to the grid and environment far exceeds the value of the sun-powered electricity.  And ILSR’s recent report on Democratizing the Electricity System illustrates how solar power and other distributed renewable energy sources are the cornerstone of a transformation to a decentralized, more democratic energy system.

Citizens of DC should take the opportunity presented by their solar resource and pursue electricity home rule.

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Article filed under Energy, Energy Self-Reliant States | Written by John Farrell | No Comments | Updated on Jun 30, 2011

The Economics of Distributed Generation

The content that follows was originally published on the Institute for Local Self-Reliance website at http://ilsr.org/economics-distributed-generation/

A serialized version of our new report, Democratizing the Electricity System, Part 2 of 5.  Click here for Part 1 or here to download the report. The falling cost of distributed renewable generation has been one of the key drivers of the transformation of the U.S. electric grid. The following chart illustrates the cost of… Continue reading

Article filed under Energy, Energy Self-Reliant States | Written by John Farrell | No Comments | Updated on Jun 30, 2011

Arguing for Locally Produced Electricity in Rural Communities

The content that follows was originally published on the Institute for Local Self-Reliance website at http://ilsr.org/arguing-locally-produced-electricity-rural-communities/

Rural areas aren’t just for energy export.

 

Dylan Kruse (Sustainable Northwest) at 2011 Rural Assembly from Center for Rural Strategies on Vimeo.

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The points in this great presentation are echoed in a recent Böll Foundation report called Harvesting Clean Energy on Ontario Farms, which notes that some farmers in northern Germany make $2.5 million in a good year growing wheat. They make $15 million harvesting the wind.

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Article filed under Energy, Energy Self-Reliant States | Written by John Farrell | 1 Comment | Updated on Jun 28, 2011

New York City Should Meet Half Its Peak Demand with Rooftop Solar PV

The content that follows was originally published on the Institute for Local Self-Reliance website at http://ilsr.org/new-york-city-should-meet-half-its-peak-demand-rooftop-solar-pv/

The City University of New York (CUNY) released a solar map of New York City last week, allowing building owners in the city to determine the amount of solar power their roof could host.  The cumulative impact is enormous, with city rooftops capable of providing half the city’s peak power, and 14% of its annual electricity consumption.

The city should immediately maximize solar power development and start saving millions in electricity costs.

At $3.50 per Watt installed, and with the federal 30% investment tax credit (ITC), solar power in New York City can provide electricity at 16 cents per kilowatt-hour (kWh), a full 4 cents lower than the average residential electricity price (as reported by the National Renewable Energy Laboratory’s PV Watts program). 

Commercial installations that can also use the federal depreciation tax deduction could deliver electricity for nearly 12 cents per kWh, 40% lower than the average residential rate.

These prices are well within reach.  Already in the U.S., aggregate purchasing has driven down residential solar PV prices as low as $4.22 per Watt.  The average cost of rooftop solar PV installations in Germany is between $3.40 and $3.70 per Watt.  In our new report, Democratizing the Electricity System, we show that even small-scale solar is being built for under $4 per Watt in the U.S.

As it turns out, when it comes to solar self-reliance, New York City is a microcosm of the state (in solar potential if not comparative electricity price).  In our 2009 analysis, Energy Self-Reliant States, we found that New York’s statewide rooftop solar PV potential was 15% of its electricity consumption, almost identical to CUNY’s estimate of 14% of the city’s electricity use.

Whether immediately (NYC) or in the near future (NY state), it’s clear that rooftop solar PV is the route to greater energy self-reliance and electricity cost savings.

Update 7/7/11: Wow, ConEdison already has 8.5 MW of solar PV on its system, only 1,791.5 MW to go!

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Article filed under Energy, Energy Self-Reliant States | Written by John Farrell | 1 Comment | Updated on Jun 27, 2011

Pricing CLEAN Contracts – feed-in tariffs – for Solar PV in the U.S.

The content that follows was originally published on the Institute for Local Self-Reliance website at http://ilsr.org/pricing-clean-contracts-feed-tariffs-solar-pv-us/

The price of solar is dropping fast, opening new opportunities for community-scale renewable energy across the country.  But despite the improving economics and tremendously sunnier skies, the United States lags far behind Germany in installing new solar power.  What might happen if the U.S.  adopted Germany’s flagship “feed-in tariff” policy, responsible for 10 gigawatts of solar in just two years?  Let’s take a look at how such a program would be priced.

First, we’re marketing conscious in America, so we’ll call it something better, like a CLEAN contract, for Clean Local Energy Accessible Now. 

Then we’ll need to adjust the German prices in three ways:

  1. Convert euros to dollars
  2. Adjust for U.S. sunshine
  3. Adjust for federal tax incentives 

But before we dive in to the German solar program, let’s quickly look at the raw cost of producing solar electricity in the U.S. along with the major federal incentive.   The following map (click here for an interactive version) illustrates the so-called “levelized cost” of solar PV, the total cost of the system (minus the 30% federal tax credit) divided by its expected electricity production over 25 years, based on an installed cost of $3.50 per Watt (common in Germany, and possible for distributed solar PV in the U.S.):

Levelized Cost of Solar PV @ $3.50/W over 25 years – 30% ITC included

Prices have fallen so much, that they are comparable to or lower than retail electricity rates in selected states in the Southwest (with great sun) or Northeast (with high electricity rates).  The following map illustrates (click here for an interactive version):

Average Residential Retail Electricity Rate (Feb. 2011)

So, solar is narrowing the gap with retail grid electricity rates.

Now, back to the analysis of a U.S. CLEAN contract program.  We start with the rates the Germans pay for solar PV under their feed-in tariff.  The euro to dollar exchange rate is currently around 1 to 1.4, giving us the following starting rates for rooftop solar PV projects in U.S. dollars per kilowatt-hour:

< 30 kW

30-100 kW

> 100 kW

> 1000 kW

$0.405

$0.385

$0.365

$0.304

The Germans pay these rates to anyone who can put up a solar panel, per kilowatt-hour sent to the grid, for 20 years.  These rates may seem high, but we’re just getting started.

Next, we have to adjust these rates down to account for the significantly better sunshine in the U.S.  For illustration, Albany (NY) has 33% better sunshine than Munich (Germany), even though Munich is in the “sunny south” of Germany.  Los Angeles gets almost 70% better sunshine than Munich.  We’ll pick St. Louis, MO, for its central location and average U.S. solar resource.  The following table illustrates the dramatic drop in the price required to offer a modest return on investment for a rooftop solar project.

< 30 kW

30-100 kW

> 100 kW

> 1000 kW

$0.27

$0.26

$0.25

$0.21

As good as these values look, we’re still leaving money on the table.  Almost every solar PV project built in the U.S. will take advantage of the 30% tax credit (even if they have to let a third party skim off up to half its value).  With a full 30% discount, however, the prices for solar PV projects in St. Louis would drop as follows:

< 30 kW

30-100 kW

> 100 kW

> 1000 kW

$0.21

$0.20

$0.19

$0.16

The following map provides a look at the prices for a CLEAN contract for rooftop solar PV (< 30 kW) in each state, based on one of the state’s sunnier locations (click here for an interactive version).  Prices would be up to 25% lower for the largest PV projects (over 1 MW).

CLEAN Rate for < 30 kW Rooftop Solar PV @ $3.50/W – ITC only

In many cases, commercial developers of PV can claim accelerated depreciation in addition to the federal 30% tax credit.  With this additional discount (worth around 20% of the project cost), the cost of a CLEAN contract falls even further, as shown on the map (click here for an interactive version).  Once again, prices would be up to 25% lower for PV projects 1 MW and larger.

CLEAN Rate for < 30 kW Rooftop Solar PV @ $3.50/W – ITC and depreciation

There’s a danger to looking at CLEAN contract rates with federal incentives, for two reasons:

1) Many individuals and entities (e.g. schools, cities, nonprofits) can’t effectively use a tax credit incentive.  

2) Tax incentive programs expire or are killed by “budget hawks” (or ideologues) in Congress.  

The 30% federal investment tax credit for solar is in statute until 2016, but let’s assume for a moment that it expired or that we want to look at the CLEAN contract rates for projects not able to use any federal incentives for solar power.  We still assume an installed cost of $3.50 per Watt.  

CLEAN Rate for < 30 kW Rooftop Solar PV @ $3.50/W – no incentives (click here for an interactive version):

This chart is a more accurate representation of the state of solar economics (without incentives).  It’s also the price required for the most democratic solar incentive program, one that would not be prejudiced against participants who couldn’t effectively use the federal tax incentives.

In the end, a CLEAN program in the U.S. will likely be premised on the use of one or both federal tax incentives and pay much less than this last chart.  It will make sense for ratepayers, but will probably not have the same democratizing effect as Germany’s flagship program.

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Article filed under Energy, Energy Self-Reliant States | Written by John Farrell | No Comments | Updated on Jun 23, 2011

The Electric System: Inflection Point

The content that follows was originally published on the Institute for Local Self-Reliance website at http://ilsr.org/electric-system-inflection-point/

A serialized version of our new report, Democratizing the Electricity System, Part 1 of 5 The 20th century of electricity generation was characterized by ever larger and more distant central power plants.  But a 21st century technological dynamic offers the possibility of a dramatically different electricity future: millions of widely dispersed renewable energy plants and… Continue reading

Pearl St. in Boulder, CO
Article, ILSR Press Room, Resource filed under Energy, Energy Self-Reliant States | Written by ILSR Admin | No Comments | Updated on Jun 22, 2011

John Farrell talks distributed generation and local authority on Boulder, CO’s KGNU

The content that follows was originally published on the Institute for Local Self-Reliance website at http://ilsr.org/john-farrell-talks-distributed-generation-and-local-authority-boulder-cos-kgnu/

I was on the air with local attorney and renewable energy guru Susan Perkins, interviewed by host Duncan Campbell.  A great conversation about Boulder’s effort to municipalize in order to have more control over its electricity system and energy sources. Click for show listing (and hit the tiny, blue play button) or just download an… Continue reading