Energy Self Reliant States

18 Nov 2010

Community Solar Should Save Money, Not Just Trees

by John Farrell | Date: 18 Nov 2010 | posted in: Energy, Energy Self Reliant States | 0

IN this environmentally conscious college town, thousands of bicyclists commute each day through a carefully cultivated urban forest whose canopy shields riders and their homes from the harsh sun of this state’s Central Valley.

The intensity of that sunshine also makes Davis an attractive place to generate clean green energy from rooftop solar panels. And therein lies a conundrum. Tapping the power of the sun can also mean cutting down some of those trees.

Enter community solar. Individuals can invest in a nearby, common solar PV installation, saving kilowatt-hours and trees.

But the article provides some poor examples: the Sacremento Municipal Utility District’s Solar Shares and SunSmart in St. George, UT. In the case of the former, participants pay extra for their solar power. In the case of the latter, participants pay extra for solar and – worse – pay up front for 20 years of more expensive power.

In our recent report – Community Solar Power: Obstacles and Opportunities – we provide a case study of nine operational community solar projects – five of them provide a payback on investment rather than asking a premium price for clean power.

Community solar can save trees, but it can also save participants money.

17 Nov 2010

Why tax credits make lousy renewable energy policy

by John Farrell | Date: 17 Nov 2010 | posted in: Energy, Energy Self Reliant States | 0

For two years, solar and wind energy producers seeking federal incentives have been able to take cash grants in lieu of tax credits. The stimulus act program helped keep the renewable energy industry afloat as the credit crunch and economic downturn dried up the market for reselling tax credits to banks and other investors with large tax bills.

The cash grant program is set to sunset at the end of this year, but solar and wind energy advocates are hoping it will be extended, for good reason:

In fact, the tax credits were always an awkward tool, some argue. Rhone Resch, the head of the Solar Energy Industries Association, said that many of the companies doing the installations were not making a profit either, so these tax credits were sold as “tax equity,” a secondary market, at a loss of 30 to 50 cents on the dollar to the seller. [emphasis added]

The tax credits were worth 30% of a project’s value, so the transaction costs of reselling the credits meant that renewable energy projects without sufficient internal tax liability were 13 to 21% more expensive than projects that could use the credits themselves.

This is dumb policy. Ratepayers pay a higher price for renewable energy because incentives filter through the tax code instead of the general fund.

But the cash grant v. tax credit issue is just one symptom of a larger disease affecting American renewable energy policy. Transaction costs are increasing the cost of renewable energy in nearly every state with a renewable portfolio standard (RPS).

Under most state RPS policies, utilities put out requests for proposal to acquire renewable energy to meet the state mandates. These solicitations attract thousands of developers who all have to front their project development costs. But in California, for example, 90% of projects don’t make the utilities’ shortlist for the solicitation, stranding over $100 million in development costs.

Some of those projects may eventually get online, but most of that money is flushed because the U.S. prefers to let utilities act as gatekeepers to clean energy rather than open the market to any potential producer. It’s not the only way.

There’s a renewable energy policy that’s responsible for 75% of the world’s solar and half its wind power. It has the lowest transaction costs because there’s no fiddling with the tax code and no parasitic costs from auctions or solicitations. Instead, utilities are required to interconnect and take the power from any developed renewable energy project, and to provide a price sufficient to provide a reasonable return on investment (just like the utilities enjoy in rate regulated states).

The policy is funded entirely through the electricity system, so renewable energy doesn’t have to compete with other budget priorities.

It’s called a feed-in tariff.

The U.S. can extend the cash grant program, but it merely treats a symptom of the disease. A better policy awaits.

16 Nov 2010

Minnesota Wind Project Brings Local Control; SD PUC Commissioner Doesn’t Understand Economies of Scale

by John Farrell | Date: 16 Nov 2010 | posted in: Energy, Energy Self Reliant States | 0

A new 25 megawatt wind project in southwestern Minnesota will feature greater local ownership than most, using a model that Project Resources Corporation calls “Minnesota Windshare”. The project should be online by early 2011:

Construction crews this fall are assembling 11 turbines that will make up the $51 million Ridgewind project near Lake Wilson, about 20 miles east of Pipestone. The project also will come with a new endeavor for its developer, Minneapolis-based Project Resources Corp., that the company hopes will increase the economic influence wind projects can have on a community.

The PRC project will use the familiar “Minnesota Flip” model of wind project development, where a large equity investor provides the capital and holds majority ownership for 10-15 years, along with any landowner who hosts a turbine. The interesting twist is in the flip, where more community investors can come into the project when the equity investor departs. This WindShare program [pdf] could allow many people who don’t have land suitable for wind or significant capital to nevertheless participate in a wind power project.

The news story is featured in a South Dakota paper, the Argus Leader, which quotes a South Dakota Public Utilities Commissioner saying that the Minnesota-based PRC project won’t capture the economies of scale of a larger, 100 MW project in South Dakota.

“Frankly, the South Dakota model is better,” Johnson said. “If you take a large wind farm, you get economies of scale. You carve out a piece of that where local South Dakota investors can put their money into that,” he said.

Except that the data show wind power plant economies of scale are maximized for projects in the 5-20 MW range, not 100 MW and over.

16 Nov 2010

Like what you read here?

by John Farrell | Date: 16 Nov 2010 | posted in: Energy, Energy Self Reliant States | 0

What if you could support this site and help the Institute for Local Self-Reliance (ILSR) win up to $1,000 just by logging in and giving a few bucks? Tuesday, November 16th is Give to the Max Day – a donor will be randomly chosen every hour to have $1,000 added to their donation. The top two organizations with the highest number of donors will be eligible to win up to $20,000. Your donation – big or small – could have a huge impact for our ongoing work. We appreciate your support!

Click And Donate on Tuesday, November 16^th

15 Nov 2010

Modest Wind Farms Play Better With Expiring Cash Grants and Credit Crunch

by John Farrell | Date: 15 Nov 2010 | posted in: Energy, Energy Self Reliant States | 0

Federal tax credits for wind energy projects are due to start expiring at the end of this year, which means developers face the prospect of dishing up proposals for wind farms that can’t be financed, said White, president of Project Resources Corp., a Minneapolis company that does ‘community wind’ development.

The answer, he and others in the community wind industry say, is to go smaller. Smaller projects, which are a hallmark of most community wind projects, are easier to finance and easier to connect to the power grid, they say.

Ironically, the smaller projects (5-20 megawatts) are also the least expensive per kilowatt of capacity.

11 Nov 2010

Renewable Energy Economies of Scale are “Bullshit”

by John Farrell | Date: 11 Nov 2010 | posted in: Energy, Energy Self Reliant States | 0

I had a conversation with a wind developer yesterday and was talking about the difference between putting together large projects (over 80 MW) compared to distributed generation wind projects (80 MW and under). I mentioned that we have a deep interest in understanding the economies of scale of renewable energy projects and he replied, “economies of scale are bullshit.” He noted that large wind projects require significant development costs that smaller projects don’t encounter (including many more landowner negotiations and permits) and that installation and maintenance services are sufficiently widespread for any sized project to find services.

It’s not entirely true that bigger projects have no economies of scale, but these two charts illustrate the larger point: Most economies of scale in solar PV and wind power are captured at a relatively small size.

The first chart is from the California Solar Statistics website, and draws on data from over 70,000 solar PV installations in California since 2005.

Clearly, solar PV installations of 10 kW have captured more of the economies of scale for solar PV. Costs may fall slightly for much larger projects, but the smaller number of projects makes it hard to see trends (interesting note: there seem to be as many > 100 kW solar projects costing over $10 per Watt as there are under $8 per Watt).

The second chart comes from the 2009 Wind Technologies Market Report by Ryan Wiser and Mark Bolinger (which is a must-read).

The wind data is even more striking, with the lowest average project cost found in the projects with just a handful of turbines (5-20 MW of capacity), with costs steadily rising for larger projects. Certainly there’s an advantage to having more than one turbine, but less so for growing the project much larger than 10 turbines.

This data should inform renewable energy policy. If modest-scale, distributed renewable energy projects capture most (or all) economies of scale, then the opportunity to place these projects close to load may reduce the need for new, long-distance, high-voltage transmission lines. It means more renewable energy can come online faster and with fewer political battles.

These smaller-scale projects are also the appropriate size for local ownership (which provides twice the jobs and 1-3 times the economic impact of absentee ownership), allowing more the economic benefits of renewable energy development to accrue to the host community.

11 Nov 2010

ILSR Launches Energy Self Reliant States Website

by John Farrell | Date: 11 Nov 2010 | posted in: Energy, Energy Self Reliant States | 0

Building on the highly acclaimed 2009 report of the same name, the Institute for Local Self-Reliance has launched Energy Self-Reliant States, a new website to provide expert analysis and policy solutions for a decentralized renewable energy future.

Senior Researcher John Farrell is leading the project and has already published a variety of posts showcasing his original research. Visit EnergySelfReliantStates.org to learn more.

10 Nov 2010

Hawaii Feed-in Tariff Pays Less Than Net Metering for Solar PV (and that’s ok)

by John Farrell | Date: 10 Nov 2010 | posted in: Energy, Energy Self Reliant States | 0

On Monday we posted a news story about the launch of Hawaii’s feed-in tariff program, and in a review last night we found an interesting anomaly: the price paid for power for residential solar PV (projects smaller than 20 kW) is lower than the residential retail electricity price on most of the Hawaiian islands. On the most populous island, Oahu, the price paid under the feed-in tariff is three-tenths of a cent per kilowatt-hour (kWh) higher than the retail electricity price, but it’s as much as 11 cents per kWh lower on other islands including Maui, Molokai, Lanai, and the Big Island.

Why pay less than the actual retail electricity price?

First, Hawaii has a very strong solar resource. A typical rooftop crystalline silicon PV array could produce nearly 1,600 kWh AC per year for each kW of DC capacity. This is a capacity factor of over 18%.

Second, the state of Hawaii provides a personal tax credit for the lesser of 35% of the system cost or $5,000. This is on top of the federal 30% tax credit.

So what does a Hawaiian solar producer need to make a reasonable return on their solar PV investment (8%)? The following chart illustrates the prices needed for three different system costs.

While a typical individually contracted solar PV system will have a total cost of $8 per Watt or higher, group purchasing of solar PV systems (as discussed in this earlier post) has dropped installed costs down to as low as $4.78 per Watt in a group purchasing program in Los Angeles. At that upfront price, Hawaiians that go solar would only need $0.15 per kWh to make an 8% return on investment! Based on the actual FIT price of $0.21 per kWh, a Hawaiian group solar purchase could offer participants a 13% return on investment!

Note: You may wonder at the choice of installed costs for the chart. These are based on Solarbuzz’s solar price index and our previous analysis of distributed solar PV prices.

Note 2: I’m awaiting confirmation that the Hawaii tax credit is taken off the system cost, rather than cost after the federal tax credit. The FIT prices shown would rise by about 1.5 cents per kWh if the state tax credit is calculated on the system cost after the federal credit. Update: the federal tax credit does not reduce the basis for the Hawaii state tax credit.

9 Nov 2010

New Rooftop Solar Thermal System Focuses on Space Heating and Cooling

by John Farrell | Date: 9 Nov 2010 | posted in: Energy, Energy Self Reliant States | 0

Solar thermal has generally been two distinct worlds, rooftop solar hot water systems and utility-scale concentrating solar power plants.

No more.

A new rooftop solar collector can provide thermal energy rather than producing hot water or electricity for space heating and cooling. With inexpensive fresnel reflectors to concentrate sunlight, the Chromasun could prove an interesting way to use distributed solar thermal energy for more than just hot water.

The unit produces temperatures up to 220 Celsius and promises to use less roofspace than comparable systems using solar PV.

Now, what will it cost?

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